One of the current debates in Congress is whether or not to let “George Bush’s tax cuts for the rich” expire.  Well, first of all, “tax cuts for the rich” is not an accurate description of the law.  What is not generally mentioned is the fact that many of the “rich” are what is known as “S” Corporations.  These are small businesses that are generally responsible for growing the economy by hiring new people.  Because the total business income is reported on a personal income form, the person filing the form will look “rich” to the uninformed observer.  What needs to be considered are the expenses against that income and the fact that this is business income and not someone’s personal income.  If the tax cuts on these corporations are allowed to expire, people will lose their jobs and fewer people will be hired.  That is not necessarily what you want to happen in a recession.

Anyway, just for the record, let’s look at who pays taxes.  The information that follows is taken from an article posted at Americans For Tax Reform yesterday.

• As of 2006, the tax burden of the top 1 percent of taxpayers exceeds the tax burden of the bottom 95 percent combined.  Moreover, according to the National Taxpayers Union, households in the top 5% by income have been paying about 60% of the federal income tax bill for years.
• As the New York Times reports, “the Top 5 percent in income earners–those households earning $210,000 or more–account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve date by Moody’s Analytics.  That means the purchasing decisions of the rich have an outsize effect on economic data.”
• In 2009, approximately 47 percent of U.S. households paid no federal income taxes.  While 2009 had fewer households owing taxes than other years due to some allegedly temporary tax breaks and a lagging economy, the Tax Foundation reports that close to 40 percent of households owe no federal income taxes in an average year.  According to the IRS, 67 percent of Single Head of Household returns in 2005 had no tax liability whatsoever.
• The proportion of American tax returns that incur no tax liability increased by 59 percent between 1989 and 2007, the latest year for which full analysis is available.

The thing to remember here is that the income tax is based on wages and salaries earned–not on accumulated wealth.  Any increase in taxes is going to hit the middle class before it impacts anyone else.  The very rich will find tax shelters to get around new taxes, and those of us in the middle class will pick up the slack.  One of the characteristics of a socialist country is a very wealthy upper class, a very poor lower class, and an almost non-existent middle class.  That is the direction our tax code is headed in.