Fox hosts often complain that taxes on the wealthy are already too high and have consistently opposed any tax increases on the wealthiest Americans, even when a majority of Americans have favored such proposals several times in the past few years, in order to address the rising deficit.
Today, Fox & Friends took their opposition to raising taxes on the wealthy one step further by suggesting that middle and low-income earners are actually the ones should pay higher taxes. First, the co-hosts argued that the country's wealthiest Americans can't afford to pay any more:
DAVE BRIGGS (guest host): So do we pay their -- do the wealthy pay their fair share already? That's the big question. Now, when you look at the numbers, it appears that the wealthy already do pay their fair share, but I guess that's on the eye of the beholder. The top 1 percent already pays 38 percent of all income taxes in the United States, and you got to keep in mind, almost half of this country pays no income tax whatsoever. So for the president to say that Americans want higher taxes, well, again, half the country doesn't pay them. It's an easy thing to get away with.
GRETCHEN CARLSON (co-host): But what is fair? See, what's fair share? Obviously, those two words together are a good buzz word, and they probably, this administration has probably tested those words to see if they're effective with the American people. Yeah, most people would say, hey, things should be fair. But what does that mean when you factor in that 50 percent of the nation doesn't even pay federal income tax? Is that fair?
This graphic was aired while the co-hosts spoke:
Then co-host Steve Doocy went on to suggest that “if we're going to make things fairer, are people who currently don't pay taxes, will they have to pay something?” Yes -- he suggested that it would be “fairer” if middle-class and the poor paid more in taxes.
From the show (emphasis added):
DOOCY: Well, let's break it down a little more. So with that number right there, if we could take it full screen, you see the top 1 percent pays about 40 percent of all income taxes in this country. Top 1 percent. So 40 percent, but they earn only about 20 percent of the adjusted gross income. The income here in the country. Then the top 5 percent, they pay close to 60 percent of all income taxes, yet they earn just about 35 percent of the income. And the top 25 -- this is jaw dropping -- the top 25 percent of people in this country, you know, income-wise, they pay 86 percent of all income taxes. And so when the President of the United States says everybody's got to chip in, is he talking about all those people who don't pay taxes currently? Gretch is absolutely right -- 51 percent don't pay federal income tax. Sure, you might pay some different taxes, state taxes, payroll, Social Security, Medicare, stuff like that. But 51 percent don't pay federal taxes. Going forward, if we're going to make things fairer, are people who currently don't pay taxes, will they have to pay something?
CARLSON: A lot of people hoping the super committee [that will be formed as a result of the debt ceiling legislation], that they'll have tax reform, that would maybe look at a flatter tax and get rid of some of the loopholes, so that actually the tax dollars for the wealthy are actually coming in, instead of looking for ways not to try to pay it.
[...]
DOOCY: We need national defense, we need education, we need those things, but, you know, historically, the tax system in this country, the progressive income tax, has not been so fair.
Let's start with the claim that the top 1 percent of earners are already paying “their fair share.” Tax rates for the wealthiest Americans are actually the lowest they've been since 1931, with the exception of a brief period from 1988-1992. (Federal income taxes are actually the lowest they've been in about 60 years for all Americans.) As Bloomberg Businessweek pointed out in December 2010:
A bonanza of new and extended tax benefits could make it as easy as ever for the rich to stay that way.
[...]
The good news for the rich starts with income tax rates, which for top income groups would remain 35 percent, a rate enacted by former President George W. Bush in 2003. Except for a period from 1988 to 1992, the top tax rate has never been this low since 1931.
“Top rates are incredibly low from a historical perspective,” says Indiana University law professor Ajay Mehrotra. The most surprising thing, he says, is that rates have remained at this level even as the U.S. has been fighting two wars, in Afghanistan and Iraq. Historically, income taxes on the wealthy have spiked during wartime: The first income tax was initiated during the Civil War and then later repealed. The top rate on income hit 77 percent in 1918, during World War I, and 94 percent from 1944 to 1945, during World War II.
While it's accurate that the top 1 percent of earners do pay 38 percent of all federal income taxes, it also turns out that they own almost that much of the country's total wealth. In April 2010, the Wall Street Journal blog Wealth Report reported that the top 1 percent held 35.6 percent of all national wealth at the end of 2009. Given that, paying 38 percent of all federal income taxes does sound like at least “their fair share,” actually.
Now, let's move on to Doocy's idea that it would be “fairer” if “people who currently don't pay taxes ... have to pay something.” First of all, as Doocy himself acknowledges, almost all U.S. taxpayers pay “state taxes, payroll [taxes], Social Security, [and] Medicare,” as well as local and sales taxes.
But he's correct that about half of tax filers don't pay any federal income tax. So how much money do these non-paying filers earn? In a post on the New York Times blog Economix, Bruce Bartlett, a former aide to both Presidents Reagan and George H. W. Bush, broke down data from the Tax Policy Center with this chart:
In other words, the vast majority -- almost 83 percent of tax filers -- who didn't pay federal income tax were in the lowest 40 percent of earners, which means they earned less than $33,542 last year. Troublingly, Bartlett points out that there are “a not insignificant number of those who are clearly well off” who are also not paying any federal income tax, likely due to capital gains tax laws that are favorable to wealthy investors:
Surprisingly, a not insignificant number of those who are clearly well off are also among the “lucky duckies.” There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level.
It is not because of the earned-income tax credit or the child credit that the ultra-wealthy are paying no federal income taxes.
One reason, undoubtedly, is that capital gains are a huge percentage of their income and they may have losses from previous years to offset any realized gains this year. Perhaps some chose to invest all their wealth in tax-free municipal bonds.
But most of the people Doocy suggests should pay higher taxes earn less than $33,542 a year. As Bartlett explains, the earned-income tax credit, which is responsible for the high number of non-filers, was enacted and expanded by Republicans, who viewed it as a way to help the poor without raising the minimum wage:
[T]he growth of the non-income-taxpaying population is largely a result of Republican tax policies. The earned-income tax credit is the main reason those with low incomes are largely exempted from federal income taxes. Originated by Gerald Ford, it was expanded by both Ronald Reagan and George H.W. Bush as a better way to help the working poor than raising the minimum wage, which they believed would increase unemployment.
It's frankly not fairer to suggest the poorest Americans have their taxes increased. The poor are already spending a huge percentage of their incomes on basic necessities. According to a December 2010 report by the Center for Economic and Policy Research (CEPR), low-income households spend 16.2 percent of income on food, while the average family spends about 13 percent. And Habitat for Humanity found that in 2008, a staggering 16 percent of Americans spent more than half of their incomes on housing.
So, what's the outcome of our tax policies? How have low, middle, and high-income families fared over the past few decades? Here's a chart from the CEPR chart that shows whose after-tax income has grown the most:
From 1979-2006, the lowest two quintiles saw their incomes increase by 11 and 18 percent. That's the group that Doocy thinks should pay higher income taxes. But the top 1 percent, who the co-hosts think already pay “their fair share,” saw their incomes increase by 256 percent.
No wonder economists, liberal and conservative alike, and the American public agree that the deficit can't be erased through spending cuts alone, and that revenues will need to be increased. But none of them seem to be calling for those revenues to come from the poorest Americans. It's easy to see why.