That's what this is about: Is it fair that a receptionist of a billionaire should pay a higher tax rate than his or her billionaire boss?
The way the tax code is set up today isn't even a flat tax-- its a regressive system that hits the middle class the hardest and rich the lightest.
Why? Most rich people make their income through long term capital gains and dividends, which are taxed at only 15%.
As Chad Aldeman over at The Quick and the Ed, points out:
Contrary to concerns about socialism or a government takeover, the richest Americans, those earning an average of $345 million in 2007, paid about 16.5 percent in federal income taxes.
As you can see Aldeman's graph, the actual or effective tax rate on the wealthiest 400 americans has nose dived since Clinton slashed capital gains taxes in the 90s and Bush cut them again in 2003:
As Warren Buffett has pointed out many times, he pays a much lower tax rate than his receptionist. In fact, Buffett also challenged the top 400 income earners in the U.S. to a bet:
I’ll bet a million dollars against any member of the Forbes 400 who challenges me that the average (federal tax rate including income and payroll taxes) for the Forbes 400 will be less than the average of their receptionists.
So far, not a single one of these gazillionaires has taken Buffett up on his bet.