Last night on the program I had Charlie Rangel on to discuss a whole host of issues including taxes. I asked him to answer the following question: Out of every dollar earned by someone in New York City, how much of that dollar should someone be allowed to keep? Rangel is good, and never really answered the question. But amidst all of that, he managed to come out with a statement that is quite alarming if he believes it to be true:
"If you really take a look at the rich people that we have in this country, most of them don't pay any taxes at all."
I hope that Rangel was just using hyperbole to make an ill-conceived point on fairness. The fact is that the vast majority of rich people in this country pay taxes in some form whether it be on income or capital gains. Let’s just focus on rich millionaires and billionaires for a minute. IRS data from 2009 finds that there were 1,470 millionaires or billionaires who paid no taxes that year. As shocking as that number may be, it represents less than 1% of the tax returns claiming a million dollars or more. So 99% of millionaires and billionaires are paying taxes. According to the Tax Policy Center, most of them are even paying at a higher effective rate of 29.1% compared to a 15% effective tax rate for households earning between $50,000 and $75,000. If we want to expand the “rich” definition further, around 35,000 people earning over $200,000 a year paid zero income taxes in 2009. This still represents less than 1% of the income tax filing population.
I am not saying that it is right that these people are not paying taxes, even using legal means, but I find it outrageous for the head of the House Ways and Means Committee to say that most rich people don’t pay any taxes at all.