Friday, May 28, 2010

So who pays taxes?

This is a serious question, one to which the Republicans provide un-serious answers. For example, "the top 1% of taxpayers paid 19% of all income taxes in 1980, and paid 39% of all income taxes in 2004". Uhm, okay. The top 10% of taxpayers also make 50% of the income, as shown on this graph of income:

But what about the top 1% you say? Well, here's what their income did between 1980 and 2004: It doubled from 8% of national income to over 15% of national income. Here's the timeline from 1980 to 1998, it keeps going up after that:

So if their share of the national income doubled, you'd expect their share of national income tax paid to have doubled. Case closed.

So, what about actual effective tax rates? Have those increased from 1980 to 2004, as the dishonest rightie implied with his misleading cherry-picked statistic? Well, according to his very own link at the CBO, the effective tax rate for the top 1% in 2004 was 19.1%. What was the effective tax rate for the top 1% in 1980? Well, according to that bleeding heart liberal Rush Limbaugh in his book See, I Told You So, the effective tax rate for the top 1% in 1980 was, err.... 29.9%.

In short: The top 1% are keeping more of their money today than in 1980! Yet another right-wing lie debunked by that notorious liberal Rush Limbaugh. (Rush Limbaugh, See, I Told You So,(New York: Simon & Schuster, 1993), p. 127). They're keeping *much* more -- 10% more -- of their income. In short, don't cry for the wealthy and the taxes they pay... they're doing much better today than they were in 1980.

Now, the main complaint I have with focusing upon income taxes is that, since we have a progressive income tax, it naturally over-states the taxes paid by the wealthy, and under-states the taxes paid by the working class. The big deal here is that the wealthy don't pay a significant percentage of their income as payroll taxes, while the janitor making $8.95/hour pays 7.65% of his income as payroll taxes (and his employer kicks in another 7.65%). That is, focusing strictly upon income taxes "disappears" the 7.65% tax taken out of that janitor's pocket, just as it "disappears" the 8% of his income that disappears into sales taxes and "disappears" the 1% or so of his income that disappears into property taxes on his rented apartment (which he can't deduct from his income tax the way the "homeowner" -- renter of property from bank -- can). So what is the effective *overall* tax rate today -- combined local, state, and federal taxes -- and how does it compare to the past? Well, keep tuned for yet more in this episode of, "the penguin spanks the tighty righty"...

-- Badtux the Snarky Penguin

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