Wednesday, May 12, 2010

U.S. is "overtaxed"?

Not quite... the average American paid only 9.2% of his income in taxes last year. That's *all* taxes -- sales, income, state, local, the works. And it's not just because income has fallen, taxes have fallen even faster than incomes. As you'd expect, with a somewhat-progressive tax code that gives a break to people lower on the income scale, but the huge tax cuts passed by the Obama administration have a part to play in that too.

I expect to hear right-wing zealots praise the Obama administration's tax cuts... uhm... never?

In the meantime, based on this data it's clear what the solution to the deficit is: Raise taxes. We have the lowest real tax rates since 1950, and lower taxes overall than every other major economy on the planet. But raise taxes on who? Not you, not me, that guy behind the tree over there, surely. But who is that guy behind the tree? Wait, is there even a tree? Hmm....

-- Badtux the Snarky Penguin


  1. I would like to see how this 9.2% average tax rate breaks down by income level.

  2. Do note that this is not including payroll taxes (Social Security and Medicare) as "taxes". They're counted as "insurance premiums" instead because supposedly these are insurance premiums to allow you to receive retirement and health insurance benefits when you retire. You add those in, things go way up -- to around 24%, actually. Which *still* makes the USA the least-taxed major economy on the planet. Less-taxed than Japan. Less-taxed than South Korea. Less-taxed than any of the European nations. Only developing nations like India have lower taxes, the problem then being that you have to live in India with all the problems that come with lower taxes -- government officials paid via bribes rather than via salaries, lack of reasonable roads and highways, uncertain electrical power availability, a housing stock that is dangerous and unsafe due to lack of government standards and government inspectors, high crime because there are no effective police forces in many areas due to lack of tax money to pay them, etc.

    Hmm... sounds like what America is becoming, now that I think about it...

    - Badtux the Undertaxed Penguin

  3. The reality is, our overall tax structure is damned close to level. The payroll tax - call it an insurance premium if you like, but that is playing word games - starts with the very first dollar, and cuts off some damned where. It's regressive as hell.

    As are sales taxes, BTW.

    Our tax structure is nowhere near progressive enough.

    Part of why WASF,

  4. badtux,

    Excuse me, but the only way you can get 24 percent tax burden including payroll taxes is to add 15 percent to the 9.2 figure.

    But SS + Medicare taxes amount to about 7 percent for most workers -- unless you are counting the amount the companies pay as part of the individual's payment. If we accepted the theory that, if SS weren't there, the companies would all raise everyone's pay by the given amount, this would be valid -- but, based on 40 years of experience with American corporatism, I doubt it.

    Second, since payroll taxes are regressive, even this doesn't work.

    I suggest that the real figure is a lot closer to 18 than 24.

  5. Yes, I am counting the amount that the employer pays as a tax, because, well, it *is* a tax. The fact that it's a hidden tax doesn't make it any less of a tax. And yes, I know that if this hidden tax were eliminated, employers would pay their workers not a whit more, but that's another issue.

    My general point wasn't to get bogged down in specific details of tax policy, but, rather, to point out that, err, the United States is *NOT* overtaxed, even if you *do* include the employer part of the employer tax the average American is taxed less than anybody else in the developed world. Only in third-world hellholes are people taxed less. That's where low taxes gets ya, yo.

    - Badtux the Taxing Penguin

  6. Thanks for the clarification.

    I agree that it's pointless, in support of your main point (that we are not overtaxed), it's better to overestimate rather than fight about precise amounts.

    However, this goes back to a previous post of yours (see, I'm not just a drive-by reader, attracted by the music). Namely, since half the payroll taxes (er, "insurance premiums") are paid by the "guy behind the tree" (or at least "the man"), are they really taxes?

    Because I think it's inarguable that the taxes that other people pay don't count, in the eyes of the vast majority. BTW, I'm one of those lucky self-employed folks who pays 15.4 percent, minus the deduction of half that from my income (which, by the way, makes this tax still more regressive than a flat tax -- the lower your marginal rate, the less this deduction is worth).

    I'll take my answers off the air, and pay my taxes, if not cheerfully, then with a sense of duty fulfilled.


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