Ron Paul’s Call to End Income Tax

In the run-up to the tit-for-tat race for presidency, Ron Paul, who remains a distant fifth in the Republican camp, badly needs a topic to stir up to boost his profile. His latest target: income tax.

In a speech last week in Manchester, New Hampshire, Senator Paul called for an abolition of the Constitutional amendment that established the federal income tax.

According to the Republican presidential candidate, people should be able to keep 100 percent of the remuneration of their labor. Income tax, however, only allows the government to control its citizen, as are does draft, prohibition on drugs, seat belt laws and other regulations.

"Something very significant is happening in this country today. The paradigm is shifting away from government controlling our lives by force," the New Hampshire Union Leader quoted him as saying, "People are sick and tired of what's happening and want to control (their) own lives."

The cure Mr. Paul has offered - a scrap of income tax, to allow Americans to live a freer life probably won’t work out at all. He should have learned more about the role of tax in allocating resources and bridging the rich and poor gap.

We might start from looking at the tax burden among different income groups. Our source is the annual report of Internal Revenue Service, the government body responsible for tax collection and enforcement.

In general, tax rates on those with high incomes are far greater than for other Americans. Top 1 percent salary makers pay about 25 percent of their income in federal income taxes, compared with less than 5 percent for half of the population at the bottom end.

The Bush administration’s tax cuts in 2005 substantially reduced tax rates for people in every income group. Indeed, those at the bottom had the largest relief in their tax burden.

If we compare average tax rates in 2000 to 2005, the rate for the top one percent with largest income fell 16 percent, from 27.45% to 23.13%.

On the other hand, the middle-income “top 26-50 percent” group, for example have enjoyed a more radical cut in tax rate by 25 percent from 9.28 percent to 6.93 percent.

While those at the bottom used to pay little, they are now paying even less, due to policies launched by the administration of both Clinton and Bush. And their burden could get further lessened if we take into consideration the tens of billions of dollars sent to lower-income families as a result of the earned income tax credit.

Like everyone else, I would love to pay less tax and preferably none at all. But Mr. Paul should definitely have done more maths about how the current system managed to transfer wealth from the rich to the poor before he raise any solution.