Wealthy don’t pay a fair share

I keep hearing the same story about the wealthy paying most of the taxes and how it is a misrepresentation to say that there is an unfair tax burden on the middle class. It is true that wealthy people like Mitt Romney pay millions of dollars more in taxes than the average middle-class taxpayer, but he is paying income taxes at a 15 percent rate, when a single, hard-working taxpayer is paying at a rate of at least 25 percent on money earned above $34,500.

The problem is that stock market income, dividends and capital gains are taxed at a flat 15 percent no matter how much income is received, while people working for a living are taxed with a progressive rate that tops out at 35 percent. More than 13,000 people for the year 2009 reported at least $10 million in income on their tax returns; most of that income was from investments and was taxed at 15 percent.

Yes, 15 percent of $10 million is more dollars than 25 percent of $50,000, but is that fair? To be fair we must also look at the payroll tax that pays for Social Security and Medicare. Of the total revenue the U.S. government receives, 41 percent comes from individual income taxes and 40 percent from the payroll tax.

The payroll tax, which is matched by the employer, normally is 7.65 percent of an employee’s pay check (FICA) up to $110,000 in a single year. Once an employee earns $110,000, no further FICA deductions are taken from the pay check; this limit is known as the cap.

There is no payroll tax on investment income. Of total revenue received by our government, nearly an equal amount comes from the payroll tax as the individual income tax, but the wealthy pay a disproportionately small part of the payroll tax, a tax that falls mostly on the hard-working middle class.

Using dollars to argue the wealthy 1 percent are being treated fairly in our tax system distorts the overall picture. A single working person earning more than $34,500 is paying at least 10 percent more proportionally in income taxes and 7.65 percent in payroll taxes than the wealthiest 1 percent, who are living off their investment income.