Thursday, December 14, 2006


Response to tax liars

Posters have repeatedly tried to tell me that they are paying 50% of their income in taxes. Here is the real story, from the Brookings Institute Key things to note: the median taxpayer is paying about 18.5% in all federal taxes, but of that, almost 11% is payroll tax (which means that the table includes the employer's portion of that tax in the calculation). Since payroll taxes are returned to people as Social Security/Disability, Medicare, and unemployment, that means that the typical taxpayer is paying only about 8% in what are actually taxes. Also, the very wealthiest people pay on average 32.4%, much of which is from the corporate income tax. It's certainly possible to pay lots of taxes. If you do, get a better accountant. A summary is here.
Thing is, I'm going to look at my pay stub, which shows me the original pay, deducts all the various wibbles, and gives me a final amount. It's all well and good to say I "get some of this back" in the form of Social Security, disability, medicaid, yadda yadda, BUT -- THIS IS NOT TRUE UNTIL I USE THEM. Not only that, but use them for some considerable time, the more the better. And if I die tomorrow, then my actual taxed rate goes BOOM right to what I see on my paycheck. Every month.

*That* is what people are going to gripe about. A fancy chart doesn't do any good. Hell, I know exactly what you're getting at, but it just doesn't reflect what my monthly pay stub says.

Which is a problem.

If it makes any difference at all, I'm about as liberal and green as you can get, so this isn't a strictly righty-tighty whine. I don't even believe that SS will be around when I'm old enough to collect, so factor that one in.
What you see in the table are the facts. As the saying goes, you are entitled to your opinions, but not to your own facts.

You don't get back money on your insurance premium until your house burns down-- but you pay the premium, I trust. Social Security has been around longer than many of the companies on the stock exchanges, and has paid on time, year after year, war or peace, flood or fire. You're welcome to your opinion as to whether Social Security will survive. It seems like a remarkably uninformed one to me.

No one likes taxes. The best government is the one that taxes the least... and gets done what its people need and want. People would do a lot better to stop worrying about taxes and start fighting for higher wages.
It's very difficult to get from the general tables to a statement that covers all taxpayers. A bigger problem with the chart, though, is that it doesn't include state and local taxes.

Throw those in and some taxpayers could be close to paying 50%. But I suspect the people you refer to are expressing an emotional truth that doesn't use math to make the calculation.
Tables for state and local taxes are also available, charlieq. To take one example, here are some slightly dated figures. A middle class California family paid 8.5% in state and local taxes as of 1995. A middle class NY family paid 13.5%. CBO probably has more recent ones, but the CTJ tables will do for an order of magnitude estimate. That means that the typical family is paying 7% in federal taxes, 9.4% in state taxes, and 11% in insurance (SS, disability, Medicare, unemployment), for a grand total of 27.4. The typical European pays a bunch more, but gets health care, child care, and other benefits.

So, yes, it's possible to pay half one's income in taxes. It's just not possible to do so if (a) one knows the tax system and avoids certain well-known traps, and (b) if one is really middle class. A lot of people are doing much better than they imagine, but a $250,000 income is not middle class.

The emotional reality is that people know they are working harder and not living any better. The tax system is easy to scapegoat, because no one likes paying taxes. But all we have gotten from the anti-tax movement is huge federal deficits, exploding health care costs, and declining schools.

Time for us all to wise up.
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