Dan Mitchell Explaining Why “Taxing the Rich” Is a Precursor for Going after the Middle Class

Published on Apr 13, 2012 by danmitchellcato

_________

How can Washington D. C. get enough money to balance the budget and not cut spending. The answer is that everyone’s taxes must go up. Don’t let anyone fool you. There is not enough money to just tax the rich. Instead, entitlements need to be reform and real spending cuts need to be made.

CBO on Income and Tax Distribution

Posted by Chris Edwards

The Washington establishment loves talking about the “distribution” of income and taxes. The CBO has issued a new report on the topic that will no doubt keep the discussion rolling on.

The mindset of many people in government is encapsulated by this sentence in the CBO report: “Market income is very unevenly distributed.” But anyone with a decent appreciation of America’s economy knows that market income is in fact earned in a decentralized fashion by 140 million people and 25 million businesses spread across this vast land. It is not ”distributed” from a big vault in the capital by central-planning czars with a god-given preemptive right to decide how much everyone gets.

Yes, the huge subsidies that the federal government hands out each year are “distributed.” But CBO statisticians seem to be so used to thinking about the entire economy as a giant government-created pie that they say market income is also distributed.

That said, the CBO report has some interesting statistics to consider. Most important are calculations of average federal tax rates, which are total federal taxes paid as a share of income. The chart shows average tax rates by quintiles, which each contain one fifth of U.S. households grouped by income level. The households at the top are hit with the largest burdens by far. Elsewhere, I’ve discussed who some of these high-earning households are and the damage done by nailing them with such high taxes. (For example, see here and here).