Sunday, July 22 , 2018, 1:47 pm | Fair 77º

 
 
 

Tom Donohue: The Truth About Taxes and What Will and Won’t Work

We need reform that simplifies the code, lowers individual and corporate rates, and makes U.S. companies more competitive

The tax debate is heating up — and so is the rhetoric surrounding it.

President Barack Obama recently delivered an impassioned speech calling for tax code “fairness,” arguing “wealthy” Americans aren’t paying their fair share. He also maintained that Warren Buffett paid a lower tax rate than his secretary and proposed the “Buffett Rule” to prevent that from happening.

But does the president’s rhetoric match reality? Is he telling the same story that the data tell? If we’re going to have a productive conversation about fundamental tax reform — and we need to — let’s get the facts right.

First, who pays what? An analysis by the IRS shows that for 2008, the most recent data available, the top 1 percent of households paid 38 percent of total federal income taxes while earning 20 percent of total income. The top 25 percent paid 86 percent while earning 67.4 percent of income. The top 50 percent paid 97 percent with an income share of 87.3 percent. And Americans in the bottom 50 percent paid only 3 percent and often got money back from the government in the form of credits.

What about that Buffett Rule? According to IRS data, Americans earning upward of $1 million had an average income tax rate of 23.3 percent in 2008. By contrast, those earning $30,000 to $50,000 paid an average income rate of 7.2 percent.

Those are the facts. Here’s another: When you want less of something, tax it.

So the president is suggesting we tax investment, successful small businesses (who often file as individuals, which makes them “wealthy” in the eyes of the administration), and our most productive and important industries, such as oil and gas. Do we really want less investment, fewer small businesses, and fewer successful industries? Is that the right way to create jobs and grow our economy?

We do agree with the president on some things. We believe in reforming the current complex system — not through endless tinkering around the edges, but through fundamental reform that simplifies the code, lowers individual and corporate rates, and makes American companies more competitive. We also agree with what he said a year ago: “Raising taxes in the middle of a recession is exactly what we don’t want to do.” While we’re technically not in a recession, for most Americans, it sure feels like we are.

Without question, we need to modernize our arcane tax code to help stabilize the economy, spur growth and create jobs. But if we’re going to be serious about tax reform — and we must be — let’s be honest about the facts and realistic about what will and won’t work.

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce.

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