For the past few days, the headlines have been dominated by what is considered by many to be the groundbreaking exposure of tax evasion by the world’s billionaire class. However, the reality is much less sensational.
The report, published by ProPublica, was hailed as a “bombshell” which, on closer inspection, leads to an unswerving conclusion: wealthy Americans pay far more than their fair share of taxes, not less.
Progressive lawmakers and advocates have lamented the perceived inequalities of the American tax system for years, claiming that the front runners pay far less taxes than they should. But ProPublica’s report skews the truth of tax law to get its arguments public. The reality is that wealthy Americans are paying their fair share, more than the bottom half of the country’s taxpayers. This is confirmed in the graph below, produced by the National Taxpayers Union Foundation (NTUF), which analyzes the 2018 tax year data.
If you look at the NTUF analysis, you can clearly see that for the 2018 tax year, the top one percent of taxpayers paid more than 40 percent of total federal income taxes, despite generating just under 21 percent of total adjusted gross income (AGI).
According to the analysis, the top five percent of the workforce had about 36.5 percent of AGI in the same tax year, but paid over 60 percent of total federal income taxes.
On the other hand, the bottom 50 percent of earners had an AGI share of 11.6 percent, but only paid just under three percent of federal income tax.
Even so, ProPublica and other sources have come up with a new calculation that matches the narrative they’ve subscribed to: that everyone gets around the top percent of federal income tax.
The nonprofit decides to correlate wealth growth over the course of a year with taxable income versus taxes paid in that tax year. They call this the “true tax rate” although of course it’s just plain nonsense.
The American tax system works in such a way that realized profits are taxed, not unrealized profits. Most billionaires at the top of the wealth pyramid have many assets in illiquid media: stocks, real estate, retirement accounts, etc. Like any other American, any increase in the value of those assets will not be taxed until the assets are sold.
The reasoning behind such a policy is sound. Having money in a share, for example, will not benefit the holder until he sells it. At this point, the capital gains on that stock will be taxed.
The same goes for land, a home, car, retirement plan, or any other type of investment that can increase in value. The fact is, no one has to pay tax on an increase in value until it actually turns into income.
This is not tax evasion; It’s simple how the country’s tax system works, and for good reason.
ProPublica’s fraudulent and misguided campaign to convince the American electorate that billionaires are not paying their fair share of taxes has been thoroughly exposed. Perhaps that explains why the outlet said it wanted to hire tax professionals to join their team after they posted their fake report.
Do you know about tax law?
Asset management?
The IRS?
Accounting?
We could use your help with our future reporting. https://t.co/RLVuOHrrgM
– ProPublica (@propublica) June 9, 2021