Friday, April 22, 2011

Truth about Taxes

I assumed that since taxes are progressive that the "fair share" of the rich was proportionally more than the fair share of the poor. But I now discover I was wrong.

Here's a post by Paul Krugman that sets me straight:
The claim that only rich people pay taxes is a zombie lie — something that keeps coming back no matter how many times it’s killed by evidence.

So, let’s try another shot to the head.

Yes, high-income people pay the bulk of the federal income tax. But that’s not the only tax! And while the income tax is quite progressive, the payroll tax — the other major federal tax — isn’t; and state and local taxes are strongly regressive.

Citizens for Tax Justice (pdf) has the goods: combining all taxes, federal, state, and local, we get this:

Click to Enlarge

The overall system is barely progressive at all.

And here’s the thing: the people peddling this stuff about those lucky duckies who don’t pay tax because their incomes are low know all this, because it has been pointed out many times. They are deliberately trying to deceive you.
I always assumed that the progressive income tax portion swamped the regressive payroll taxes. But I now stand corrected. It ends up that the tax burden in the US is shouldered by everyone.

But that strikes me as unfair. The person who makes more can afford more. They should be shouldering more of the burden of taxes. And to tax those in the lowest 20% for more than a fairly nominal amount strikes me as imposing too big a burden on families whose resources are already stretched to the limit.

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