Jim Huntzinger | On November 25, 2020

IRS Building – Washington, D.C. Resized/Cropped, CC BY-SA 2.0

While recessions, particularly the Great Recession, have proven to be financially crippling to both the top percent and bottom percent of citizens, the former is usually able to recover much quickly—and at a higher rate as well.[1] This relates directly back to my article, A Simple Math Model and the Numbers.

The lower income levels suffer more. For example, if a family with an income of $50,000 has a decrease of about 10 percent; this leaves them with total capital of $45,000 and impacts their living expenses and savings potential much harder than a family with an income of $500,000 having a decrease of even twice as much, at approximately 20 percent. The latter would still be at a higher bottom line despite losing a greater percentage. This is not meant to promote any type of intervention whatsoever. It is simply highlighting two situations with different financial positions. Also, historically, the top percent income earners are usually able to recover quicker due to a typically quicker recovery of their loss of capital gains.

The upper income earners pay an extortionate share of the tax revenue collected by the Federal Government. In 2011 “[t]he top 50 percent of all taxpayers paid 97 Percent of all income taxes; the top 5 percent paid 57 percent of all income taxes; and the top 1 percent paid 35 percent of all income taxes.”[2] By 2012 these figures had increased slightly as well. The IRS reports that even though income increased for individuals, their percent of total income tax burden, as a percent of total income tax share paid, increased even further. In this same year, the top 50 percent of income earners accounted for 88.9 percent of total income earned (adjusted gross income), while paying an astounding 97.2 percent of the total income tax. The income categories were as follows:

• The top 10 percent of income earners accounted for 47.9 percent of total income earned (adjusted gross income), while paying an astounding 70.2 percent of the total income tax.
• The top 5 percent of income earners accounted for 36.8 percent of total income earned (adjusted gross income), while paying an astounding 58.9 percent of the total income tax.
• The top 2 percent of income earners accounted for 27.1 percent of total income earned (adjusted gross income), while paying an astounding 46.5 percent of the total income tax.
• The top 1 percent of income earners accounted for 21.9 percent of total income earned (adjusted gross income), while paying an astounding 38.1 percent of the total income tax.
• The top 0.01 percent of income earners accounted for 5.5 percent of total income earned (adjusted gross income), while paying an astounding 8.3 percent of the total income tax.[3]

This is an astonishingly skewed progressive tax scheme; especially considering that collectivist-statists constantly and continually spout rhetoric that “rich should pay their fair share.” Wealthier Americans are paying much more than their “fair share.”

Our liberty, per the Declaration of Independence, is lost; as in the unalienable right to one’s property. Such a tax scheme has also been destructive economically; as if the government knows how, when, and where to spend a citizen’s wealth better than the citizen.

Michael Tanner of the Caito Institute presented in 2014 that “Benefits and Services Received Per $1 in Taxes Paid,” are massively skewed. He stated income earners in the bottom quintile received and benefited $6.82 for every $1 of taxes paid, while those in the top quintile, the wealthiest 20 percent, received only $0.31 per $1 of taxes paid – a significant deficit. This data also equated to households in the top quintile receiving $21,515 of services and benefits while paying taxes of $69,704; and the bottom quintile receiving benefits and services of $29,015 while only contributing $4,251.[4]

Obviously our current system (and system for the past century) rejects property rights, which is a foundational right acknowledged at the Founding of America in the Declaration of Independence.

Originally published on Townhall Finance.

Jim Huntzinger

Jim Huntzinger began his career as a manufacturing engineer with Aisin Seiki (a Toyota Group company and manufacturer of automotive components) when they transplanted to North America to support Toyota. Over his career he has also researched at length the evolution of manufacturing in the United States with an emphasis on lean’s influence and development. In addition to his research on TWI, he has extensively researched the history of Ford’s Highland Park plant and its direct tie to Toyota’s business model and methods of operation.

Huntzinger is the President and Founder of Lean Frontiers and a graduate from Purdue University with a B.S. in Mechanical Engineering Technology and received a M.S. in Engineering Management from the Milwaukee School of Engineering. He authored the book, Lean Cost Management: Accounting for Lean by Establishing Flow, was a contributing author to Lean Accounting: Best Practices for Sustainable Integration.