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No Surprise: Rich Paid Less in Taxes Under Bush

by Adam Price |
February 3, 2009
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San Jose, CA - On Jan. 29 the IRS released a report on the country’s 400 richest taxpayers in 2006. The report found that this group paid only 17.2% of their adjusted gross income in federal income taxes, despite making an average of more than $263 million each that year. This was the lowest rate for the entire time (15 years) that there are records.

This tiny group of rich Americans didn’t have to work, with almost two-thirds of their income coming from capital gains (sales of stocks, bonds, land, etc. at a higher price) and dividends (a share of corporate profits paid to owners of stocks). The Bush administration cut the tax rate on this income to only 15%. This is the same rate that workers with taxable income of $7,550 to $30,650 had to pay!

The actual tax rate paid by the highest incomes was even lower. The IRS’s ‘adjusted gross income’ doesn’t include income that mainly goes to the wealthy, such as interest from state and local government bonds. In addition, working people have to pay a 6.2% social security tax, which is not applied to capital gains, dividends or interest income at all!

Of these 400 highest income taxpayers, only 139 paid the Alternative Minimum Tax (AMT), which is supposed to force this group to pay more taxes. Rather than reducing the AMT, which is what the Democrats want, or eliminating the AMT, supported by Republicans, we need to tax the rich more!

To begin with, we need to roll back the Bush tax breaks for the rich by making dividends and capital gains subject to the same tax rate as income earned through work. We also need to have Social Security taxes apply to all income, not just wages and salaries, and not just income below $106,800, as is the case now.

To be fair, we need the rich to pay a higher rate of taxes, not just the same as working people. Sales taxes, except on luxury items, should be reduced or eliminated since these fall the hardest on working people. Income taxes for the rich and corporations should be raised and the loopholes that benefit them closed. We also need a progressive tax on wealth, including estates.

But even with more progressive taxes, the rich will still be rich, and will have the money keep both the Republican and the Democratic politicians in their pockets. The rich don’t earn their income from working harder or smarter - look at the $20 billion paid out by Wall Street to the bankers who have bankrupted their companies and the economy. The rich are rich because they are capitalists - they own the businesses, banks and buildings. Working people have only our ability to labor, both manual and mental, to sell. A more equal economy can only come about in a socialist system, where land and the places where goods and services are produced are owned collectively or by a government that is run by the working class.