⚡ Get All Content for 20% Off ⚡

Let's Get It Right About Tax Burden And 'Fair Share' To here many pundits talk, business owners and the wealthy aren't paying enough in taxes. The numbers show the opposite is true.

By Ryan Shea

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Bloomberg

Recent data on taxes should put to rest all the false rhetoric that is fueling class warfare in this country and unfairly targeting independent businesses.

First, let's talk about the argument that taxes should rise to ensure that the richest Americans are paying their so-called fair share. According to the latest data, released Wednesday by the Tax Foundation, the top 50 percent of taxpayers pay 97 percent of all income taxes. That's right, just half the country pays just about all the taxes, to the tune of just over $1 trillion dollars.

It gets worse as you go up the income ladder. The top 5 percent pay 57 percent of all taxes, while the top 1 percent pay 35 percent.

Related: Why American Affluence Should Be Celebrated, Not Condemned

What do those numbers tell you? They tell you that, if there is an unfairness in how taxes are distributed, it is that the rich carry most of the burden. Does that mean we should tax the poor? Of course not. But, if policymakers insist on continuing to raise taxes on the highest earners only, they are unfairly targeting the one group that they've relied on for their revenue all along.

Second, there is the argument that the very rich continue to get richer, while the rest of the country gets poorer.

According to the latest data from the IRS, crunched by the Tax Foundation, incomes for all groups -- except for the richest - rose. The economy in 2011 added about 1.6 million new tax filers. Incomes and taxes paid rose for every income group, except for the very wealthiest, defined as those making above $1.7 million a year.

So, everyone, except the wealthiest, saw incomes rise. People are getting richer, and the richest are essentially staying flat. That bodes well for people worried about growing income inequality. To use a clich?, this rising tide is lifting all boats.

These numbers are especially important for independent business owners. Many file pass-through taxes as partnerships, sole proprietorships and limited liability companies. As a result, the income they file on their tax returns looks like they are rolling in money, when in fact those profits belong to the business itself.

Related: The Outrageously Sill Argument Against Uber's Surge Pricing

Rather than "fair share," many of these types of businesses pay an inordinate tax rate. A study this summer by Quantria Strategies LLC showed these kinds of companies - which form the bedrock of American independent business - now pay a top marginal tax rate of 44.7 percent, well above the 35 percent that applies to standard corporations.

What is most frustrating is the constant, negative drumbeat we hear about wealth creation in this nation. For some reason, there are certain quarters that demonize people who have become - or are becoming - successful. Rising income should be celebrated. It's what we all want, for everyone, no matter where they sit currently on the economic scale. It is why we work hard, why we innovate, why we sometimes quit our jobs to turn our concepts into corporations.

Instead, though, we hear about how the rich need to do more, how companies need to pay more, and how wealth should somehow be redistributed, in the interest of fairness.

Wrong. Wealth should be supported at all levels, from the minimum-wage worker who can rise to a better-paying job to the CEO who makes that happen by reinvesting his profits into growing his business so that it can create opportunities for its own employees. That doesn't happen without the accumulation of profit and wealth. Taxing that more only gives employers less money to reinvest.

The good news is that rising incomes mean business must be getting better, despite uncertainty many continue to feel about the impact of the ongoing rollout of Obamacare. The bad news is that the government continues to exact its pound of flesh, and is taking more. For example, according to the Tax Foundation, the average tax rate for the top 50 percent of filers rose from 13.05 percent to 13.76 percent.

The wealthiest individuals and many independent companies in this country continue to pay the lion's share of taxes. The numbers don't lie. That's why policymakers who want to spur economic growth would be better served by easing that burden to help stimulate growth and increase profitability that can be shared across our economic spectrum. An independent business with higher profits can invest in technology and hire workers. That creates jobs, not government programs paid for by businesses and individuals already over-taxed that have thus far failed to move our economic needle.

Related: Why Tech Valuations Can't Be Too High or Too Low

Ryan Shea

CEO, Entrepreneur Media, Inc.

Ryan Shea is CEO of Entrepreneur Media Inc., the parent company of Entrepreneur.com and Entrepreneur Magazine.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

The Remote Side Hustle a 43-Year-Old Musician Works on for 1 Hour a Day Earns Nearly $3,000 a Month: 'All From the Comfort of Home'

Sam Ziegler wanted to supplement his income as a professional drummer — then his tech skills and desire to help people came together.

Business News

Costco CFO Reveals Uncertain Fate of $1.50 Hot Dog and Soda Combo

CFO Richard Galanti reveals that the price will stay the same — but only "for a while."

Business News

The Most Unexpectedly Popular Side Hustle of the Decade Has Low Startup Costs and High Markups

A new report shows that vending machines are a popular investment — and the industry is set to grow up to $3 billion by 2031.

Marketing

Ever Wonder Why Certain Websites Rank Higher Than Yours? This SEO Expert Reveals The Secret to Dominating Search Results

It's often the smart use of SEO, now supercharged with AI, particularly in keyword optimization.

Business News

AI Is Impacting Jobs. Here Are the Gigs Affected the Most, According to an Analysis of 5 Million Upwork Postings

The researcher said in the report that freelance jobs were analyzed first because that market will likely see AI's immediate impact.

Leadership

Former Interrogator Shares 5 Behaviors Liars Exhibit and How to Handle Them

Five deceptive behaviors to look for and how to respond to those behaviors when you encounter them.