A Matter of Percentages

According to this CNN piece, McCain is claiming that 40% of Americans don't pay any taxes at all. As a result of this astounding fact, he claims, the only way this 40% can benefit from Obama's tax cutting is to receive checks from the government (paid for, of course, by the hard-done-by super-rich).

I see two scenarios here and I've contacted FactCheck in the hopes of finding out which (if either) is true.

I can cheerfully accept the 40% if we include infants, small children, retirees, the homeless, full-time students, stay-at-home moms (and dads!), the unemployed and other non-wage-earning groups. If we're talking about specific individuals who pay no tax, 40% doesn't seem all that out of whack. And the large majority of those are living off taxed money. There is a tax-paying breadwinner in the family who will pay less taxes under the Obama plan.

What would really depress me would be to find out that 40% of American households earn so little that they pay no taxes at all. First and foremost, it would imply that 40% of American households are living below the poverty line because surely that is the point where someone is considered to be earning enough to contribute to the country's well-being. Er, this is America, no? Forty percent?

This could be true, of course. And I'm hoping that FactCheck will come through with the goods. But I came upon some disturbing info yesterday that, considered in the light of this 40% thing, is pretty scandalous. In 1980, the top 10% of Americans earned 33% of all the country's earnings. After Ronald Reagan introduced "trickle-down economics" this grew to 40% by 2000. Wait for it, it gets worse. By 2004, it grew to 60%. At that time, the top 1% was pulling in 40% of the income. Who knows where the percentages are now. It will be another 3 or 4 years before anyone gets them out. But think of it this way. The average person in the top 1% is earning 90 times the average earnings of the bottom 90%.

In other words, if we doubled income taxes on just the richest 100,000 people, we could eliminate taxation on everyone else in the country and be no worse off as a nation. Actually we'd be a lot better off because everyone else would have lots of money in their pockets to pay off debt and stimulate the economy. We'd need less social programs because we'd have a lot less people who needed them. We might even get people being able to save for their own retirement.

It's also arguable that that 1% would not be noticeably worse off - they might have to put off buying that extra Lear jet for another month but I expect they'd get by.