Monday, August 19, 2013

"Fair" taxes

When Governor Mitt Romney was running for President in 2012, he had his infamous 47% moment.  If you don't remember, basically Governor Romney stated that 47% of Americans are takers instead of makers.  They like to take government handouts, they don't pay taxes, etc. Governor Romney did not actually apologize for these comments and his supporters loved him for it.  His supporters wanted Governor Romney to embrace this idea.  You know why?

Because President Barack Obama was talking about redistributing wealth and making the tax code more progressive.  His supporters already think that the tax system is progressive enough.  They like to point statistics found in things like the Wall Street Journal. There, op-ed writers like to complain about taxes targeting the wealthy and it's killing America.  They'll point out the most wrongly used statistic circulating currently.  Op-ed writers, like T.J. Rodgers, will say things like, "the top 1% of American taxpayers earned 20% of all income and paid 36% of all taxes.  The top 5% earned 36% of all income and paid 58% of all taxes."  Statistics similar to this are misused so often, that it exhausts me.  The reason that is such a problem is because Rodgers is saying ALL taxes when he pretty clearly means is personal federal income tax.

So what's the problem with using the federal income tax?  About 76 million Americans paid no federal income tax in 2011 and that number fell in 2013 according to the Tax Policy Center.  Obviously, they're moochers.  Or, wait.  About half of the 76 million Americans are those who have incomes so low, that standard income tax provisions-personal exemptions for taxpayers and dependents and the standard deduction, that there is nothing left to be taxed.  22% of them receive senior tax benefits, the extra standard deduction for seniors.  15.2% receive tax credits for children and the working poor.  That includes the child tax credit and the earned income tax credit. The rest of them did not owe taxes because of education credits, itemized deductions, or reduced rates on capital gains and dividends.

But, it's not as if these people don't pay taxes.  When they go to the grocery store or a restaurant, it's not as if taxes are taken out of the bill.  Or they don't get taxes taken out of their paychecks.  Oh. Are there more taxes besides federal income tax?  Why, yes there is.

The Citizens for Tax Justice calculated how much each income group pays of ALL the taxes that are owed in America. The top 1% earned 21% of total income.  They paid 21.6% of ALL taxes.  The next 4% in income earn 14.3% of total income and pay 15.5% in total taxes.  The next 5% earn 10.1% and paid 11.0% of total taxes.  So that covers the top 10% of income earners.

The next 10% earn 14.2% of total income and pay 15% of all taxes.  The next 20% earn 18.7% of all income and pay 19% of all taxes.  The next 20% earn 11.4% of all income and pay 10.3% of all taxes.  The next 20% earn 7% of all income and pay 5.3% income.  The bottom 20% earn 3.4% of all income and pay 2.1% of total taxes.

What would be a more fair way to tax the citizens of the country?  I'm not really sure.  I don't think anyone really has that answer.  But if you look at total income, it looks decently fair.  But it's not as if it is completely fair or progressive.  The federal income tax is progressive but it seems as if the rest of our tax system is regressive in order for these results to happen.


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