Are the rich paying their fair share?

This specific analysis is for California, but applies to any state which has relies heavily on sales and property taxes, such as Alabama and Georgia.

http://www.latimes.com/business/la-fi-hiltzik12-2009oct12,0,4419598.column?track=rss

Are the rich paying their fair share?
By Michael Hiltzik
October 12, 2009

When it comes to the state budget and state taxes, everybody knows the following facts:

People earning $75,000 or less pay little or no taxes now.

The same people use 99.9% of state social programs.

Ergo, millions of residents of this state are getting something for nothing, and the rest pay for their freeloading.

Of course I'm kidding. These are popular myths (I owe the formulation above to a reader's e-mail), not facts. Yet, like a cracked windshield, they have the power to distort almost everything we see when we turn our attention to state spending and taxation.

We can quickly dispose of the notion that low-income residents pay little or no state taxes. They get an income tax exemption, it's true, but they pay, proportionally, a greater share of their earnings on sales taxes. And many also pay property taxes even if they don't own a home -- a portion of their rent goes to cover the taxes their landlord pays.

In 2007, the nonpartisan California Budget Project observed, the bottom fifth of taxpayers -- those earning less than about $18,000 -- paid about 11.7% of family income in state and local taxes. By contrast, the top 1%, earning $430,000 or more, paid only about 7.1% on average, counting the deduction of state and local taxes many could take from their federal tax bill.

The popular view of state government is that it does little beyond spooning out welfare payments and free healthcare to the poor. For the wealthy, this is a useful burlesque of the truth, for it rationalizes "flattening" state taxes, giving them a tax cut and everyone else an increase -- as was proposed by the recent state tax reform commission.

It's rare that anyone examines the assumptions about who really benefits from state government and by how much, even though the exercise might help us judge whether the wealthy really are taxed more than their fair share, as is so often claimed. Who knows? Maybe they're the freeloaders.

Indeed, the evidence is that everybody benefits from state services, and the wealthier you are the more you profit. In that light, shifting the tax burden down the income scale looks more unfair, dishonest, even -- dare we say it? -- immoral.

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