The top U.S. 1% are paying more than their fair share: Mark Altieri

AVON LAKE, Ohio -- 'There Ain't No Such Thing as a Free Lunch' -- Milton Friedman That quote from the late economist Milton Friedman is the title of his 1975 book that led to his being awarded the Nobel Prize in Economics in 1976. 'There Ain't No Such Thing as a Free Lunch' demonstrated that resources always have an opportunity cost -- that is, someone ultimately pays for everything. As we are inundated by certain politicians demanding that the rich 'pay their fair share,' backed by Sen. Bernie Sanders' 'The Fighting Oligarchy Tour,' I thought a fact check would be appropriate. I have pointed out in prior commentaries that the top 1% of income taxpayers in our country generally pay income taxes at a rate reflecting twice their level of income. Typically, close to half of all U.S. income taxes paid are paid by them. I have also previously referenced Organization for Economic Cooperation and Development (OECD) countries – the more advanced economies (the U.S. and our major trading partners). Mark Altieri is a Professor Emeritus of accounting at Kent State University. What does irrefutable OECD data show on taxation of the top 1% of taxpayers in the United States versus European countries? When factoring in when the highest rates of taxation initially kick in, such data show that the United States has one of the most progressive (highest) personal income tax rates on our top 1%. They pay significantly higher amounts than almost all, or in recent years all, of the OECD countries. How about average working people? On multiple recent trips to Europe, I made a point to talk to average people about the level of taxation and cost of benefits they are responsible for, and boy did I get an earful. In Europe, there is a universal tax called a value-added tax that does not exist in our country. Think of VAT as being a national sales tax somewhat akin to our state sales taxes. VAT is a tax on consumption, which, as with all consumption taxes, falls disproportionately harder on lower-income people. VAT is levied on every stage in production of goods ultimately consumed by Europeans. Our average state sales taxes are significantly less than the VAT burden in almost all OECD jurisdictions. The OECD uses a measurement called the Tax Wedge to measure the burden on average earners. The Tax Wedge calculates the total burden of personal income taxes plus employee social security contributions plus employer social security contributions, minus any cash benefits received, expressed as a percentage of total labor costs. Again, we see a stark difference, with average U.S. individuals bearing one of the lowest combined burdens in the OECD (24th out of 34 top OECD countries). When posing my questions on this to average people on my recent European trips, all of them groused about their overall burden for their cradle-to-grave benefits, frequently approaching half of their compensation. But lower-income people in Europe generally have cradle-to-grave healthcare. There was acknowledgement of the availability of healthcare but widespread complaints, nonetheless, particularly regarding overall quality and scheduling for specialists (think of Canada's system). We don't have universal healthcare but a large percentage of regularly working individuals in the U.S. have good employer-provided healthcare; lower-income folks have Medicaid; and the elderly have Medicare. As future President John Adams said centuries ago, 'Facts are stubborn things.' I believe we have a fair and superior system among OECD countries. And remember, there ain't no such thing as a free lunch. Altieri is Professor Emeritus of Accounting at Kent State University, and special tax counsel to the law firm of Wickens, Herzer and Panza in Avon, Ohio. He writes from Avon Lake. Have something to say about this topic? * Send a letter to the editor, which will be considered for print publication. * Email general questions about our editorial board or comments or corrections on this opinion column to Elizabeth Sullivan, director of opinion, at esullivan@cleveland.com.