A real ‘inconvenient truth’ (about taxes)

I rarely write for my company's newspapers and had no intention of doing so during this year's presidential campaign, but after watching last week's debate I was compelled to put some facts into print so our readers can make an informed decision in this election.

Given the dearth of facts in the current debate, this may not be my only foray into writing for publication.

I want to make sure I make the proper disclosures about who I support in this presidential campaign. I am the finance co-chair for Arkansas for the John McCain campaign and an ardent free-market capitalist. I believe social issues are best left to individuals, and while I have strong beliefs about them, I will not interject them into my choice of a candidate.

Economics and taxes, on the other hand, are not subject to interpretation. Supply and demand curves are real and they work. This column is an attempt to put facts in front of you, particularly as they relate to taxes and the "fairness" of our tax code.

Sen. Barack Obama is proposing tax increases for small businesses and the top 5 percent of taxpaying Americans. He says that he will give 95 percent of Americans a tax cut. He and Sen. Joe Biden say it is fair and the "patriotic duty" of the top 5 percent to pay more.

Again, full disclosure, I am in the top 5 percent, and probably the top 1 percent.

But the facts as to who pays taxes paint a different picture and, for whatever reason, Sen. McCain will not use them. The tables accompanying this column (below) really say it all.

These statistics are from the U.S. Treasury Department, and they reveal a startling and seldom talked about fact. In 2005, the top 1 percent of wage earners in this country paid 39 percent of the income taxes collected, while the top 5 percent paid 60 percent. That's right, 60 percent of all income taxes were paid by the same people on whom Sens. Obama and Biden want to raise taxes. What is more, the percentage paid by this group has increased since the so-called Bush tax cuts took effect. This is a real inconvenient truth for the Obama campaign.

In 2006, the lower 50 percent of wage earners had 12.5 percent of the income and paid 3 percent of federal income taxes. The 2006 statistics also reveal that the top 5 percent of U.S. taxpayers paid $616 billion in federal income taxes, which was more than the $408.1 billion paid by the remaining 95 percent of taxpayers. Our system could hardly be weighted to make the wealthy pay even more, yet that is precisely what Sen. Obama proposes.

I will reluctantly accept (for now) that in our society the top wage earners will pay more (as a percentage) in taxes, but if Sen. Obama wants to raise taxes, he should say so. As The Wall Street Journal has been reporting, you cannot give a tax cut to people who do not pay taxes. Sen. Obama's plan is a redistribution of income from those who pay taxes to those who do not. It is nothing more than the granddaddy of all welfare plans, and voters need to know that.

For Sens. Obama and Biden to couch this issue as one of fairness and a "patriotic duty" is an attempt to deceive the American public as to the facts.

I am not afraid of Sen. Obama becoming president because I believe him to be a bad person. Rather, I am concerned about his policies and their effect on our economy, both in the short and long term. Higher tax rates will discourage investment and capital formation, and that is not good for anyone.

Warren A. Stephens (warren@reviewjournal.com) is president and chief executive officer of Stephens Inc., one of the largest investment companies off Wall Street and an owner of Stephens Media, which publishes the Review-Journal and newspapers in nine states.