Too big to fail?

In yet another “so goes Britain, so goes America” moment this morning, we have this item via Instapundit and the London Telegraph.

Top 1pc of workers pay quarter of all income tax

A quarter of all of Britain’s income tax revenues this year will be paid by just one per cent of earners, according to official data.

The figure is in sharp contrast to 1978, an era associated with supertaxes, when the top one per cent paid 11 per cent of all the tax revenues.

Experts suggested the projections, published by HM Revenue and Customs, was evidence of how the rich had got richer over the last three decades, while the tax burden on them had increased substantially in recent years.

The new top rate of 50p income tax rate came into force in April 2010, landing a small number of people with the highest rate of income tax since 1988.

I realize that I’m only on my second cup of coffee but this article, combined with a recent post of mine regarding the tax burden in the US and recent budget discussions sparked these questions:

  • Why is it that the global left never sees spending as a problem, it is always a shortage in tax revenue?
  • Do those on the left see taxation as a means to generate revenue for government operation or a way to “equalize” income and redistribute wealth?

Notice also that our top 1% pay over 38% of the income taxes vs. the UK’s 25%.

Taxed enough already?

Taxes and pseudo-taxes (user fees) are the only way that the government makes money, basically a fixed income when a given level of population, employment and economic activity are considered. The budget (or a continuing resolution) is the definition of the amount of spending. If the income is relatively fixed and the budget spending exceeds revenue, that creates a deficit.

A lack of revenue does cause issues in an economic downturn but what do businesses and households do when times get tough? We cut back – the budget shrinks to match the level of income- we cut back, we postpone, we curtail borrowing. What does government do? They start borrowing and spending even more (Keynesians believe that government can spend with impunity and that generates economic activity), they just assume that they must keep spending.

It just seems insane to me that government can’t follow the same rules that a household does. The Other McCain has a note about Obama’s laughable budget released today.

They must be “too big to fail”.

As far as revenue, you have heard these and undoubtedly others that are worse:

  • “The rich should pay more”
  • “The rich should pay their fair share”
  • “We can’t give tax cuts to the upper 2% of earners.”
  • “The Bush tax cuts are going to cost the government $300 billion.”

Never mind that the “rich” already pay almost all of the income taxes anyway and since they are the greatest consumers, also pay the lion’s share of the consumption based taxes.

2008 Tax Data
Percentiles Ranked by AGI AGI Threshold on Percentiles Percentage of Federal Personal Income Tax Paid
Top 1% $380,354 38.02
Top 5% $159,619 58.72
Top 10% $113,799 69.94
Top 25% $67,280 86.34
Top 50% $33,048 97.3
Bottom 50% <$33,048 2.7
Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service (www.irs.gov)

Never a question about spending, it is always about the “rich” not paying enough. So I ask you, is it really about covering the government cost or is it just “income envy” and a tool to redistribute income?

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