Goldmark: Look harder at tax unfairness

Two weeks ago I wrote about the unfairness of the federal income tax system, saying we had to change it so the richest among us carry their fair share.

I have now seen numbers that suggest I significantly understated exactly how unfair the present system is.

Figures compiled by James Stewart, a columnist for The New York Times, indicate that the 400 richest people in the United States paid 18.1 percent of their adjusted gross income in federal tax, a lower rate than was paid by taxpayers in the $200,000 to $500,000 income bracket. And of these 400 richest, 101 paid less than 15 percent. And 30 of them paid less than 10 percent. Some of these folks make Mitt Romney look like he's practicing affirmative action on taxes.

These figures reflect only the federal income tax. If we were to add the burden of payroll taxes (Social Security and Medicare), which also falls disproportionately on lower and middle income taxpayers, the present system emerges as even more unfair.

The biggest reason the superrich pay a lower proportion of their income in taxes than you and I do is because, compared with most Americans, less of their income comes from wages and more from investments. Somewhere along the way Congress wandered off the path of common sense and lowered the tax rate on dividends, interest, capital gains and "carried interest" (profits from private equity or hedge funds) -- all gains from holding or trading stocks, bonds, other investments and bank accounts; and Congress lowered it below the rates paid by many middle-class people who live primarily on salary or hourly wages. The reasoning for doing this was and remains murky, but the question of who benefits is clear as day.

I return to this topic for two reasons. First, as long as this divisive issue is unsettled, it becomes just one more reason why we are polarized and paralyzed when we need to be united and determined if we're going to right the economic ship of state.

Second, the increased attention to this question suggests it may become a pivotal issue in the presidential campaign.

Tax fairness was not a major issue in the election of fall 2008. The recession had struck and we had just fallen deep into the economic swamp. The two candidates waged their campaign on the economy in platitudes, with both John McCain and Barack Obama pledging, more or less, to do everything and help everyone.

Today, eight months before Election Day 2012, the tax fairness issue is one where the incumbent president has lined up squarely on the sensible and, polls indicate, popular side -- higher taxes on the wealthy. And the Republican field, where the candidates dart in and out of the lead like those rubber alligators you hit with a mallet at the penny arcade, sometimes wavers and sometimes lines up on the irrational and unpopular side of this issue.

If we raised taxes on those making $1 million or more to at least the level paid by those in the upper-tax brackets on earned income, it would raise a pretty penny -- between $50 billion and $100 billion a year, depending on how it were done.

This alone would not generate enough money to solve all our economic problems. There are other things we must do to close the deficit, invest in the future, and lower our ratio of debt to gross domestic product.

But we'll never get a broad consensus on these tougher steps unless we share commonsense confidence in the tax system that underlies the entire revenue side of the ledger our country lives by. And we will never get shared, commonsense confidence in our tax system if a large majority of us think it is flawed and unfair in favor of those who already have the most.