The Tax Foundation bills itself as non-partisan. (Make your own judgement on the accuracy of that assertion.) The following is from their most recent blog by the president, Scott A. Hodge. I apologize for its length, but I felt it important to quote all of Hodge's article to avoid the appearance of quote mining.
We are proud of the fact that we have been advocating the same principles of sound tax policy for the past 74 years. We believe that taxes should be neutral to economic decision making; they should be simple, transparent, and stable; and they should promote economic growth.
“But shouldn’t taxes be fair too?” I was asked recently.
Hmm, well, that’s a trickier one. You see, “fairness” tends to be in the eye of the beholder.
While I agree with the various principles in the first paragraph, the question and its answer betray an agenda. Hodge intends to insert his private definition of fairness.
Billionaire Warren Buffett believes it’s unfair that he pays 15 percent on his vast capital gains and dividend income while his secretary pays the normal income tax rate on her salary. I guess it hasn’t occurred to Buffett that taxing corporate income twice – once as profits and a second time as dividends – is unfair
It is illegitimate--I would even say dishonest--to add the apples of the corporate tax rate to the oranges of the tax on dividends and capital gains. To do so implies that the shareholder bears the entire burden of the corporate income tax. Experts estimate that the employees bear 45-75% of that burden. (Even Hodge mentions this figure in another article.) Let us assume 60%. We can conclude that the company's end customers bear part of the burden--let us split the difference at 20%. So, the investor pays only 20%, not the 100% that is implied by adding the dividend or capital gains tax to the corporate tax. It seems that Buffet was right all along.
I would agree that the profits are taxed more than once, and that this is illogical. But it's not investors that are hurt. The workers bear the pain, and the investors reap the gain. The real remedy, IMHO, is to abolish the corporate income tax.
Hodge goes on to reveal his partisan bias:
President Obama, like many liberals, believes that the tax code should be used to correct income inequality. To them, a fair tax code is one that has progressively high tax rates on upper-income taxpayers and redistributes income to the poor through tax credits.
But now that 51 percent of American households pay no federal income taxes, is it fair that they enjoy the benefits of government but pay nothing for its costs? And is it fair that millions of those nonpayers still get a cash refund check from the IRS in the form of a “refundable tax credit”?
Hodge conveniently omits any mention of the payroll tax, which extracts a real 14.2% of every dollar the low income worker earns. The 51% figure, while accurate, is an artifact of the current recession; in 2007 the figure was less than 40%. I don't defend the refundable tax credit--I think there are better ways--but let's at least be honest. It's true that payroll taxes are not technically "federal income taxes", but they are imposed by the federal government, they are imposed on income, and they are taxes. Hodge would like to pretend that their purpose somehow justifies ignoring them. Unfortunately, the worker cannot ignore them.
He continues:
Speaking of fair share, taxpayers making over $200,000 now pay 50 percent (half) of all income taxes even though they earn 26 percent of all income. In other words, their share of the tax burden is twice their share of the nation’s income. Is that fair?
This last question simply assumes that a progressive tax rate is inherently unfair.
The flat tax will fix all this, argues our friend Steve Moore in a recent Wall Street Journal editorial titled “Flat is the New Fair.” He quotes Dick Armey as saying that Obama’s mantra that “billionaires should pay the same tax rate as janitors” may be the catalyst to sweeping tax reform.
I hope Armey is right.
Over the next 12 months, let’s work together to make tax reform a defining issue in the presidential election and a top legislative issue in 2013.
"Flat is the new fair"? Taking money from the poor and giving it to the rich is a new concept in fairness? If there is any doubt as to Hodge's Republican agenda, this should lay that doubt to rest.