Ive been meaning to post on this for quite some time, but never got around to it. However, it looks like Chris Hayes seems to have already done essentially what I was going to do:
As Chris Hays points out, the fact that the richest 10% pay over 70% of income taxes doesn't necessarily suggest the rich are over-taxed. He mentions other taxes that are not factored into the analysis (but misses the Corporate Tax).
However, he mentions that another cause of this income tax phenomenon could also be income inequality. His simple model makes this point rather well. I will use another more dramatic model later in this post. However, it seems that Chris also had another argument to make: The US is "Inequalistan."
Now for my model. Let's take a fictitious 2 person country where one poor person makes $10 a day while the other rich person makes $950 a day. Let us also say there is a regressive-style tax rate where the rich person pays only 10% of their income in taxes while the poor person pays 50%.
The poor person would contribute $5 to daily income tax revenue.
The rich person would contribute $95 to daily income tax revenue.
Since total daily income taxes would equal $100, that means the rich person would contribute 95% of income tax revenue, despite the fact that they are taxed at a much lower rate than the poor person! Do you think the rich person could make the case he is over-taxed by saying he is responsible for 95% of the tax revenue?
Unlike Hayes, I was not trying to make the last point that my fictitious country is actually any real country. My point was to show that the rich paying the lion's share of income taxes does not necessarily mean the rich are over-taxed. I did this with a simple counter example, extreme enough to make the point painfully obvious. Now we may never see any example this extreme in real life. However, this example does point out that one should not come to abrupt conclusions about statistics where the outcome is affected by more than one variable.
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