A Real Inconvenient Truth (About Taxes)

The following was written by Warren Stephens, the president of the company I work for. It made me proud. We published it in the Herald Democrat, the newspaper for which I am an editor, Oct. 15. I hope he writes more. He is spot on.

I have never written a column in one of our newspapers and really had no intention of doing so, but after watching the debate last Tuesday night I feel compelled to put some facts to paper so that readers can make an informed decision about this election. Given the dearth of facts in the current debate, this may not be my only foray into writing for publication! I want to make sure I make the proper disclosures about who I support in this Presidential Campaign. I am the co-finance chair for Arkansas for the McCain Campaign and an ardent free market capitalist. I believe social issues are best left to individuals and while I have strong beliefs about them, I will not interject them into my choice of a candidate. Economics and taxes, on the other hand, are NOT subject to interpretation. Supply and demand curves are real and they work. This column is an attempt to put facts in front of you, particularly as they relate to taxes and the “fairness” of our tax code.

Senator Obama is proposing tax increase for small businesses and the top 5% of tax paying Americans. He says that he will give 95% of Americans a tax cut and he and Senator Biden say it is fair and the “patriotic duty” of the top 5% to pay more. Again, full disclosure, I am in the top 5% and probably the top 1%. The facts, as to who pays taxes, paint a different picture and, for whatever reason, Senator McCain will not use them. The tables below really say it all:
_______Share of total_________
Top 1% Income Taxes Paid
1990 14% 25%
2000 21% 37%
2005 21% 39%

________Share of total________
Top 5% Income Taxes Paid
1990 27% 44%
2000 35% 56%
2005 36% 60%
Source: Treasury Department, October 2007

These statistics are from the U.S. Treasury Department and they reveal a startling and seldom talked about FACT. The top 1% of wage earners in this country pay 39% of the income taxes paid, while the top 5% pay 60%. That's right, 60% of all income taxes are paid by the same people on whom Senators Obama and Biden want to RAISE taxes. What is more, the percentage paid by this group has increased since the so-called Bush tax cuts. This is a real inconvenient truth for the Obama Campaign.

In 2006, the lower 50 % of wage earners had 12.5% of the income and paid 3.0% of federal income taxes. The 2006 statistics also reveal that the top 5% of U.S. taxpayers paid $616 billion in federal income taxes which was MORE than the remaining 95% of taxpayers' total of $408.1 billion. Our system could hardly be more weighted to having the wealthy pay more, yet that is precisely what Senator Obama proposes. I will reluctantly accept (for now) that in our society the top wage earners will pay more (in percentage terms) in taxes, but if Senator Obama wants to raise taxes, he should say so. As The Wall Street Journal has been saying, you cannot give a tax cut to people who do not pay taxes. Senator Obama's plan is a redistribution of income from those that pay taxes to those that do not. It is nothing more than the granddaddy of all welfare plans and voters need to know it. For Senators Obama and Biden to couch this issue as one of fairness and a “patriotic duty” is an attempt to deceive the American public as to the facts.

I am not afraid of Senator Obama becoming President because he is a bad person. Rather I am concerned about his policies and their effect on our economy both in the short and long term. Higher tax rates will discourage investment and capital formation and that is not good for anyone.