Our tax system is a necessary mechanism, but is being misused

July 7, 2026

Taxes are one thing that many of us think about, and worry about. We understand that taxation is the primary way of financing government functions at all levels. And that by taxing citizens and businesses governments fund public services, infrastructure, and operations. The primary kinds of taxation are income taxes, sales taxes, and property taxes. 

Under the best of circumstances, governments will work to keep their financial needs as low as possible, while providing essential services, and little else. It’s no secret that such a scenario is not common in our country, although some states are moving in that direction.

Taxation is a broad topic with an array of features that generate interest. One of those is the sorts of tax systems we have here in the United States. 

One system for taxing earnings is progressive taxation, which is quite common. The term “progressive” means to move forward toward some target or goal — except in the case of political “progressives,” which is a faction with the goal of moving the country backward.

In taxation, a progressive tax is one that has higher rates as you go up the ladder of earnings. The more you make, the higher the rate of tax you are charged.

For example, in the U.S. the lowest 50 percent of taxpayers paid a rate of 4 percent. Moving up the earnings ladder, those in the 50 - 25 percent range paid 8 percent. Those in the 25 - 10 percent range paid 10 percent; the 10 - 5 percent range paid 14 percent; the 5 - 1 percent range paid 18 percent, and the top 1 percent of earners paid 26 percent.

The theory behind this is that the more money you make, the better able you are to pay more, while those at the lower levels cannot afford high taxes, and in the case of the lowest earners, any taxes. And while those with more money will pay more taxes under a progressive system, they would also pay more under a flat tax, where everyone pays the same rate. 

The tax system in the U.S. has been rated number 1: the most progressive tax system among the 33 developed countries. This, incidentally, is not a feather in our cap.

The political Left keeps shouting “tax the rich.” Well, just how much tax revenue does each group pay? In 2023, the top 1 percent of earners paid 38.4 percent of total tax revenue; the top 5 percent paid 59.3 percent of revenue; the top 10 percent paid 70.5 percent of revenue; and the bottom 50 percent paid only 3.3 percent of tax revenue.

And, half of all taxpayers actually paid 97 percent of all federal income taxes.

Will it matter at all to the progressive Left that the highest earning 1 percent paid well more than a third of all tax revenue? Or, that the top 5 percent paid well more than half of it? Do those figures justify the idea of the rich paying their fair share? Not to the progressive Left.

There are proposals in some states — including Washington, Minnesota, Massachusetts, New York and California — to impose a wealth tax on the rich folks in addition to their regular tax rate. And there is the possibility of an increase in the amount the wealthy will have to pay for their Medicare and Social Security.

Massachusetts has imposed a 4 percent surtax on income over $1 million, and Washington is considering a 10 percent surtax on the same amount. California is considering a one-time tax of 5 percent on wealth above $1billion. Then there is the question of whether California will stick with just one time.

What these states may not realize is that it is not difficult for wealthy residents and businesses to pack up and move to a red state, if existing taxes, increases in taxes, or a bad business climate make life difficult for them. And some businesses have done this.

California, New York, Illinois, Massachusetts and New Jersey lead the nation in how many businesses have moved out. And Texas, Florida, North Carolina, Tennessee and Arizona are very happy to have accepted these companies and the jobs they brought to their states.

Governments ought to be thinking about how to keep taxes down for everyone. But they are more concerned with expanding their operations, often for things they should not do, and of course, taxes are how to finance those things.

They also apparently do not understand the benefits of what the wealthy would do with the money they could keep if tax rates were lower. They support local and other businesses when they buy houses, cars, clothes, furniture and other things. They invest in businesses. They support charitable organizations at levels that exceed the amount they can claim as deductions on their tax return. 

In its 250-year history, the U.S. government has moved well beyond the limits our brilliant Founders set for it. Those limits include what the government ought to do, and how much control it exerts over the people.

We should all hope that the efforts to eliminate some of the excesses is successful, and that we do move back to that original format.

Our tax system, and what is the “fair share” for the rich?

January 21, 2025

Looking a bit deeper into the tax situation in the United States, the subject of the rich “paying their fair share” is a common point of discussion. It is especially popular with those who want to score points with voters by attacking the rich.

In his farewell address to the nation last week, and at other times, President Joe Biden made claims that are misleading or in need of context.

For example, he claimed that billionaires “paid an average of 8.2 percent in federal taxes.” Without further explanation, that figure is certifiably false. The truth is that under the current tax code, the top 1 percent of taxpayers pay an effective tax rate roughly three times that amount, about 25 percent on the income the government counts.

Whether Biden doesn’t actually know any better, or whether he just doesn’t care about the facts, is an open question. And, there is the theory that he just reads what he is given by the White House staff.

In general, Democrats think the lower income earners pay too much in taxes, and the wealthy pay too little. They are in support of an overhaul to the tax code and the tax system. They believe the country needs a tax code that rewards work and creates wealth for more people, which is certainly a positive goal. But they think we currently have a tax code that “hoards wealth for those who already have it,” and that we cannot afford to have tax cuts for the wealthiest Americans.

The Biden-Harris administration had proposed the following changes to the tax code:
* Raising the top income tax rate on the top 1 percent of earners from 37 percent to 39.6 percent
* Increasing the corporate income tax rate
* Taxing capital gains and dividends at ordinary income tax rates
* Increasing refundable tax credits for individuals

In response to the administration’s proposals, the Tax Foundation had estimated that the major tax increase proposals in the FY 2025 budget would reduce economic output by 1.6 percent, and reduce employment by 666,000 full-time jobs. Vice President and presidential candidate Kamala Harris had previously proposed to take the tax increases further, which would have made the economic losses even greater.

A look at the tax situation on The Balance website published last September cited these facts about the tax system in 2021:
* Most of the government’s federal income tax revenue comes from the nation’s top income earners. 
* In 2021, the top 1 percent of earners paid 45.8 percent of income taxes.
* The top 5 percent of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66 percent of the national total. 
* If you include the top 10 percent — everyone who made at least $169,800 — that figure rises to $1.7 trillion, or 76 percent of the total.
* The top 50 percent of earners contributed 97.7 percent of federal income tax revenue.

The unpopular and unfairly demonized “rich” carry the tax load for the rest of us. The top 10 percent of earners pay three-fourths of the tax revenue, much more than the relatively miniscule amount that some of the Democrat politicians would have everyone believe was the truth. And, the bottom 50 percent of earners contributed just 2.3 percent of income tax revenue.

It seems likely that given this information, any reasonable person would discount the old saw that the rich are not paying their fair share, with the wealthiest 1 percent paying nearly half of all income tax revenue.

There are seven different tax rates that an individual taxpayer, or taxpayers filing jointly, may pay, based upon their earnings: 10 percent; 12 percent; 22 percent; 24 percent; 32 percent; 35 percent; and 37 percent.

And taxes are collectable from a long list of income areas:
* Wages, salaries, and employee benefits
* Rental income
* Goods or services sold or bartered
* Royalties (e.g. from copyrights and patents)
* Business entities
* Capital gains (e.g. stocks and bonds)
* Digital assets (e.g. cryptocurrency)
* Government benefits (e.g. unemployment, Social Security)
* Tax refunds, reimbursements, and rebates
* Court awards and damages
* Gambling winnings
* Prizes and awards

Yes, we Americans — the citizens of the land of the free and the home of the brave — need to support our government’s functions. But Americans also deserve to keep as much of the money they work for as possible. And the government has a solemn duty to operate as efficiently and inexpensively as possible.

Our government is not living up to its economic responsibility. Those elected by the people, and the others who are hired to work in government, are there to serve the best interests of the American people. But they seem unconcerned about that duty. Rather than seek ways to economize, they seek expansion, which is both costly and infringes on the freedoms our Founders worked so hard to create for us.

We must hope that President Donald Trump’s incoming administration focuses on this duty, and that the opposition party is willing to help them.