Dayton Daily News...
Both sides dig in on tax debate
By Ken McCall and Randy Tucker 
October 13, 2011 

Beyond the rhetoric, stats show the highest earners get income from sources taxed at a lower rate. 

Progressive tax rates were designed to ensure that the wealthiest Americans pay more in federal taxes than lower- and middle-income workers. 

With a maximum rate of 35 percent on wages, the more you earn the more you pay. 

But there’s a catch: Many wealthy taxpayers get most of their income from investments, which are taxed at the 15 percent capital gains rate while the highest rates apply to only a fraction of their wealth. 

Tax deals for the wealthy were among the main gripes of about 12 Occupy Dayton protesters gathered Tuesday at Courthouse Square downtown. Since Saturday, more than 800 area residents have joined the protest, organizers said, mirroring the Occupy Wall Street effort in New York. 

“Where are the jobs?’’ asked Parris Hobbs, an Occupy Dayton organizer and personal banker. “I’m not anti-business, but too much wealth is concentrated in the hands of the wealthy in this country, and it’s not trickling down.’’ 

Matt Mayer, president of the right-leaning Buckeye Institute for Public Policy Solutions in Columbus, said protests against wealthy taxpayers are misguided and uninformed. 

Mayer said that on average, wealthy taxpayers carry a disproportionate share of the overall tax burden and pay a greater percentage of their wealth in taxes than lower- and middle-income workers. 

The Associated Press recently reported that households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes this year, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank. Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes. 

“The data doesn’t support them (protesters),’’ Mayer said. “There’s a massive disconnect between what they think is the system and how the system actually works.’’ 

How the system works is at the heart of the national debate about the wisdom of tax increases on anybody, including the super-wealthy. While conservatives argue that increasing taxes on the wealthy penalizes job creators, others point to inequities in the current tax code because of how income is earned by those in different tax brackets. 

It’s hard to pin down where the inequities might lie in Ohio because the Internal Revenue Service only reports state income tax data for returns up to $200,000, and those at $200,000 and above. It doesn’t break out results for those reporting income of $1 million or more, where most capital gains are concentrated. Still, the state data shows that the wealthier the taxpayer the more likely they are to have less of their income in salary and wages and more of it counted as capital gains. 

In Ohio, only 57 percent of the income reported by taxpayers in the $200,000-and-above bracket came from salary and wages in 2009, based on a Dayton Daily News analysis of the latest IRS figures available. 

By contrast, about 80 percent of all income reported in tax brackets of less than $200,000 was derived from salary and wages in 2009. Not all of the remainder is taxed as capital gains, but the majority of capital gains taxes is concentrated in the hands of upper-income earners. 

While comparable state data is not available, fewer than 0.1 percent of Americans earning $1 million or more controlled more than half of all capital gains reported to the IRS, according to Sarah Webber, who teaches federal income taxation at University of Dayton. Webber thinks a focus on capital gains should be a part of an overhaul. 

Stephen Wamhoff, legislative director of the nonprofit, nonpartisan Washington D.C.-based Citizens for Tax Justice, said his organization backs policies that would follow the Buffett Rule — named after billionaire investor Warren Buffet, who said his secretary pays a higher tax rate than him. “The Buffett Rule is not any specific proposal at this point,” Wamhoff said. “But we do agree that one of the things that tax reform should accomplish is to reduce or eliminate these situations where a person with income over a million dollars may end up paying a smaller percentage of their income in federal taxes than a middle-income person.” 

Rob Scott, president of Dayton Tea Party, said the Occupy movement is short-sighted. “They’re throwing our job creators under the bus,” Scott said. “Seventy percent of all job creation in this nation has come from the small business sector. If you’re going to tax, you’re just stifling the little bit of job creation that we actually have had ... .” 

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