James Pethokoukis

Superblogger Barry Ritholtz of The Big Picture takes issue with my claim that America’s wealthy have a high tax burden since they pay such a huge share of U.S. taxes. A bit from his email to me (in his own inimitable style):

All you have proven is that the Rich pay most of the taxes. Duh. But you have failed to demonstrate the rich have a “high tax burden” — indeed, you actually say ABSOLUTELY NOTHING ABOUT THEIR TAX BURDEN. Paying a lot of taxes — even most of the taxes — is not the same as a high tax burden.
You have mentioned that 2010 taxes are higher than 2004 taxes. You stated 1% pay alot of taxes. Again, probably true, but fails to demonstrate your claim.

When you discuss “A high tax burden” you are making a qualitative statement. The tax burden is onerous, difficult, challenging. Its painful, disruptive, counter-productive.

OK, I am intrigued by your claim. So prove it to me.
I think you have raised a very fascinating and fundamental issue — but have not created a convincing case for it.
(It’s easy to sway innumerate nitwits, but I assure that is not what my driver’s license states). My question ultimate boils down to this: Is the tax burden on the rich that high?

Me: The post referenced earlier states a few things: 1) there is research that shows combined taxes on the rich are at the point when higher rates will bring in lower tax revenues; 2) to balance the budget, tax rates on the rich would have to skyrocket; and 3) the top 1 percent of tax returns pay 40 percent of all income taxes (as of 2007.)

Certainly I think if you put all that together it makes the case that forcing the rich pay higher taxes is a self defeating way to restore fiscal solvency. Indeed, there is also research that shows cutting spending is a better way to balance the  budget than raising taxes. (It is less harmful to economic growth.) Moreover, the track record of countries cutting debt though austerity is not good.

This is actually quite astonishing. A “staff discussion draft” from the Federal Trade Commission recommends ways the government can save journalism.  First, it lists a number of ways Washington can subsidize the media (to the tune of $35 billion a year):

– Establish a “journalism” division of AmeriCorps.

– Increase funding for the Corporation for Public Broadcasting.

– Establish a National Fund for Local News.

– Provide a tax credit to news organizations for every journalist they employ.

– Establish Citizenship News Vouchers (lets you direct money from tax return).

And here is where the money would come from, which I will quote directly:

Tax on broadcast spectrum. They argue “commercial radio and television broadcasters are given monopoly rights to extremely lucrative spectrum at no charge,” and this is a massive public subsidy. They therefore suggest the revenues generated by that spectrum be taxed at a rate of 7 percent, which should result in a fund of between $3 and $6 billion. In exchange, commercial broadcasters would be relieved of any obligations to engage in “public-interest programming,” which the broadcasters claim costs them $10 billion annually.

Tax on consumer electronics. A 5 percent tax on consumer electronics would generate approximately $4 billion annually.

Spectrum auction tax. They suggest there be a tax on the auction sales prices for commercial communication spectrum, with the proceeds going to the public-media fund.

Advertising taxes. They note a considerable amount of our broadcast spectrum has been turned over to disseminating commercial advertisements, and a 2 percent sales tax on advertising would generate approximately $5 to $6 billion annually. In addition, they suggest that changing the tax write-off of all advertising as a business expense in a single year to a write-off over a 5-year period would generate an additional $2 billion per year.

ISP-cell phone tax. They suggest consumers could pay a small tax on their monthly ISP-cell phone bills to fund content they access on their digital services. A tax of 3 percent on the monthly fees would generate $6 billion annually. They note, however, this is the least desirable approach because demand for these services is “elastic” and even a slight rise in price could result in people dropping the service.

Me: In this must-read  NYPost article, Jeff Jarvis calls the electronics tax an “iPad tax.” Besides of all the issues this raises concerning government influencing the media, I find it hard to believe voters would be willing to subsidize a broken business model.