The Wall Street Journal Gets it Wrong Again

The editorial board of the Wall Street Journal is at it again. In today's lead editorial, the Journal noted that new numbers from the Congressional Budget Office show that the richest 1 percent of Americans together paid about 39 percent of all income taxes in 2005 (the latest year for which such data are available); the richest 5 percent paid almost 60 percent; the richest 10 percent, 70 percent. Americans with incomes below the median (half of all households) paid a total of 3 percent of all income taxes.

Hence, the Journal reasons, it would be unfair and foolhardy for anyone to suggest a higher marginal income tax on the rich.

Once again, the Journal distorts reality by ducking two important issues. The first is the total tax burden – including sales, property, and payroll taxes, as well as fees, tolls, so-called “sin” taxes (alcohol and tobacco) and lotteries. These are, by most measures, regressive in that they take a larger bite out of the earnings of lower-income households than they do upper-income households. (Those who continue to claim that Social Security is a progressive system fail to acknowledge that poor people don’t live as long as richer people; those who say “sin” taxes and lotteries aren’t compulsive and therefore shouldn’t really be considered regressive are living on another planet. Tragically, poorer Americans consume on a per capita basis more alcohol and tobacco and are lured into buying more lottery tickets than richer Americans.)

The second issue is that of individual, rather than group or class, responsibility. Whatever is deemed a “fair” rate of taxation presumably is “fair” relative to the rate an individual or household pays – not the total revenue generated from his or her economic class. The rich have become so very rich that even if they were paying a lower marginal income tax rate than they are, the revenues coming from the “richest 1 percent” or “richest 5 percent” would still constitute a large percentage of total revenues. The real question, from the standpoint of ethics or social responsibility, is what individuals or households pay. And there is no question that the marginal income tax rates of the very rich are very low by historic standards. Some of them are paying at a lower tax rate than working-class Americans. Does anyone seriously believe that a hedge fund manager, venture capitalist, or private-equity mogul paying at a 15 percent rate (because his earnings are considered capital gains rather than ordinary income) is paying a fair share?

Conservatives cannot have it both ways – embracing the idea of individual responsibility when it comes to the poor; forgetting it when it comes to the rich.