ProPublica obtained the tax returns of the richest Americans and discovered what every informed person already knew: They don’t pay as much in income taxes as some people would like them to. This is being called a great scandal by many Democrats and liberal journalists.

Meanwhile, that these returns were almost surely leaked by someone at the IRS seems not to bother a lot of the same people. There’s no way ProPublica got this information from dozens of high-priced accountants and attorneys. Barring the possibility that this was a computer hack — which itself would be a monumental scandal — this is outrageous. Weaponizing the IRS for political purposes is not just a crime, it is a long-term political disaster.

But I want to focus on the fake scandal.

Billionaires often pay little in income taxes because billionaires don’t typically make their money from a salary. Billionaires exist for the most part because they own assets — stocks, businesses, commodities, property, etc. — and the paper value of those assets amounts to the bulk of their wealth. And in America, we do not tax wealth.

Nor should we.

Let’s say you collect baseball cards. On paper, your collection is worth a bundle. But its real value is only realized when you sell it. Do you think the IRS should tax you every year for what your collection could be worth if you sold it? Do you want the IRS to tax you for the value of your wedding ring — not at purchase, but forever — even if you’re never going to sell it?

The same principle applies to other unrealized gains. If your stock portfolio increases in value, you get taxed on your gains when you sell.

ProPublica ignores all this. “We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period,” they explain. “We’re going to call this their true tax rate.”

Except it’s not a true tax rate.

First, this suggests that the only taxes they’ve paid are income taxes, when in reality they’ve paid a slew of other taxes: capital gains, property, sales, etc. Second, wealth is not income.

About a decade ago, it was a hot talking point on the right to complain that some 47 percent of Americans had no “skin in the game” because they didn’t pay income taxes. This got reduced to a lot of bad rhetoric about “makers and takers.” Liberals (rightly) shot back that the same Americans paid a lot in payroll and other taxes. Why is conflating “taxation” with “income taxes” wrong for some Americans but speaking truth to power for others?

By the way, according to the Tax Foundation, in 2018 the top 1 percent of American earners paid more in income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).

Also, it’s worth remembering that the tax laws have been written in ways to encourage things such as business investment, economic growth and charitable giving. I’d prefer a flatter, simpler tax code that eliminated a lot of this stuff. But when people complain that the tax code favors corporations and the wealthy, they’re ignoring the fact that it was written to advance all sorts of policies they like. Want corporations to invest in green energy? Don’t whine when they use tax incentives to do just that. Want billionaires to fund charities or invest in new job-creating businesses? Fine, but then don’t freak out about “loopholes” that allow them to reduce their tax bill. These are features, not bugs.

Of course, reasonable people can argue for changing those features, but that would have costs, too.

The underlying premise of the people complaining the loudest about all of this is inherently unreasonable. For instance, politicians like Sens. Bernie Sanders and Elizabeth Warren often claim that if billionaires and millionaires simply ponied up a fraction of their wealth, we could have socialized medicine and a Green New Deal.

No, we couldn’t. You could confiscate all of the wealth of the top one percent — seize their bank accounts and stock portfolios, kick them out of their homes, sell all their stuff at auction — and it wouldn’t come close to paying for it all.

But let’s pretend it would work. What next? Everyone tries to minimize their tax burdens. Eliminate the incentives for people to get rich, or to invest, or to hire, and — ta dah! — people will stop doing those things. Maybe not all of them. But enough of them to make us all poorer.

Jonah Goldberg is editor-in-chief of The Dispatch and the host of The Remnant podcast. His Twitter handle is @JonahDispatch.

(20) comments

francesca_easa

I don't make a whole lot, but I don't have an issue with people who take financial risks and then earn alot because of it. I appreciate the businesses that wealthy people start, the charities that survive because of it, and the folks who can give $100 tips at a meal. Why aren't we asking our government to cut back on their spending?

MD1756

Just think, except for a short time around the Civil War, the federal government didn't tax income until 1913. Maybe we should go back to higher taxes on tobacco and alcohol to pay for most everything. Maybe we should also start taxing children and population growth.

stjohn42

He lost me where he said we should not be taxing the wealth of billionaires. Once your pile is past 9 digits, it is essentially self-sustaining whether you pay attention to it or not. There is no reason to keep this money tied up in a place where it benefits no one and is not even useful to the owner, except as a status symbol. Even the wealthy generally agree with this.

Hayduke2

Our current tax rate is actually regressive toward the top end - the more you make, the less you pay as a percentage of your income. Seems the author of this article overlooks this point. Return to the tax rates of several decades ago - still had the uber wealthy but they paid more in taxes, which could certainly benefit the majority of tax payers in terms of education spending, infrastructure, health benefits for the military, etc.

wran

I looked at Liz Warren's and Joe Biden's tax returns they posted on line last year. They had much more income than me. I found that on lesser income I did pay a higher percentage of taxes than they did. Also found that I had a higher percentage of charitable contributions than either of them. And, they deducted their contributions and I did not. Also saw that Warren did not pay her taxes on time. She and her husband had a very large about of taxes due that were not withheld or paid with quarterly payments. Taxes are supposed to be paid on an ongoing current basis, not at the end of the year. I had that issue once because of some misculations and bad estimates of income and received a very nasty letter from the IRS warning me that I was required to pay my taxes on a current basis, monthly or quarterly.

shiftless88

For starters, contributions to religious orgs should not be deductible. Second, I am guessing that their income is weird and goes quickly up and down. If you get some sort of windfall so your tax is suddenly much higher, it is common to pay off quarterly. We did this once and got no nastygram.

veritas

Good point. Warren and Biden are Democrat politicians and, therefore, their income is weird and consequently innocuous in terms of their tax returns. It's the lyin'. cheatin' , thievin'' conservatives we gotta look out for.

shiftless88

Weird that this is what you took away from this. My point is that it is not unusual to have a year or two where there is a big change and you have to use payments. And, as you likely have noticed, some of the most prominent billionaires are democrats.

duffy5x

Tax churches.

threecents

Also, nobody is talking about taking away all the assets of the top 1%. We just want their loopholes to go away and some more equity in this country, so that there is not quite such an obscene wealth gap.

Aslan19

@3cents, so what you are saying is that you are jealous that some people have more than you do and therefore they should pay more so that you can have it. If you want more, then work harder, give up some luxuries and save. Stop trying to steal from other people.

.

Hayduke2

Man, that sure is a twist of what three was saying. You are just another button pusher.

threecents

Asian, To the contrary, I am very comfortable and have everything I need and more.

threecents

Ridiculous column. For example Jeff Bezos is one of the biggest earners in the world - whether salary, stocks, property, etc - all of which are taxable as income - and in two recent years has not paid any income tax. If you don't see that as a problem, then we have different philosophies.

veritas

Different philosophies... Bingo!

threecents

Yes, mine is about more fairness and equity, and yours is against those.

veritas

We all know you are a very good person, three. And those of us who disagree with you are very evil indeed. Keep up the good work. [wink]

MD1756

If you want fairness and equity, people with children should pay more in taxes not less. I'd settle for them paying the same income tax rate as I do.

threecents

Veri, Yes, we agree.

shiftless88

What a string of lies and straw men! Wow, Jonah, normally you seem pretty reasonable. You mis-characterize the arguments of people with whom you disagree, and you ignore their real arguments (deductions, reduced tax rate on areas of income that they DO get like capital gains, and so on). Especially noting the tax breaks conferred on private jet owners in the 2017 Republican giveaway.

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