October 24, 2013
The Tax Foundation has a difficult mission.
research organization attempts to educate Americans about the tribute they must
send to politicians and bureaucrats. It’s a vexing and thankless task, because government
prefers that citizens be confused about the taxes they pay. Arcane terminology,
dodgy numbers, and relentless blather about “fair share” and “working families”
discourage Joe Sixpack and Jane Diet Coke from expending mental candlepower on
a topic meant for “experts.” It’s best, many conclude, to obey and pay.
foundation’s newest publication slices through the jabberwocky, and presents the
essential facts on federal taxation in a few dozen graphs. If there is to be a
“grand bargain” on fiscal policy sometime in the near future, it’s important
that as many citizens as possible read Putting
a Face on America’s Tax Returns: A Chart Book. Herewith, several of the
document’s key takeaways:
• If you earn more money, you pay more
In 2011, filers
who reported incomes above $200,000 supplied 55 percent of all income-tax revenue. At the extreme apex, the “top
1 percent” bore an average burden of 23 percent, almost twice the average rate for everybody. The super-earning cohort’s portion
of income tax paid has climbed in recent decades, rising from 25.8 percent in
1985 to 37.4 percent in 2010. While the top 1 percent claim 18 percent of all pre-tax
income, once the IRS is finished, the share tumbles to 11 percent.
rich?” We already do.
• Washington is an income-redistribution
educrats, but the national government is not a constitutionally constrained
enactor of the public’s collective wisdom; it is a mechanism for grabbing from
one group to reassign to another. The foundation’s money stat: “Families
earning under roughly $17,000 pay less than $3,000 in total federal taxes, but
receive more than $24,000 in federal spending benefits of all kinds.” At the
other end, the top quintile of tax filers (those making $120,000 and over) gets
a terrible thumping -- paying nearly $87,000 in income taxes, while reaping
barely $21,000 in goodies. The full bill for Washington’s spread-the-wealth-around
scheme is $1.5 trillion.
America, the land of heartless capitalism.
• Corporate loopholes? They’re
It’s true that
Big Business hires phalanxes of government-relations
professionals to etch giveaways into the tax code. The process is sleazy,
and wasteful -- pursuing customers, not politicians, should be the goal. But compared
to the deductions, exceptions, and credits granted to individual citizens, the corporate
community is an also-ran. The perk for pensions and 401(k) plans alone is greater than all business-targeted
preferences. Charitable giving, mortgage interest for owner-occupied homes, Social
Security income, employer-provided health coverage -- 91 percent of the value
of “tax expenditures” accrues to individuals.
the loophole lobby? Look in the mirror.
• Rich and poor move up and down the
income scale -- frequently.
that the rich perpetually grow richer and the poor ceaselessly become poorer is
useful for securing votes. But it’s nonsense. An IRS analysis of taxpayers
between 1999 and 2007 revealed remarkable fluidity between quintiles.
Furthermore, millionaires are not “some monolithic group that can be taxed at
will.” The number of seven-figure tax returns “fluctuates wildly each year,
largely due to changes in the business cycle. Indeed, between 2002 and 2007,
the number of millionaire tax returns more than doubled to a record 392,220.
However, thanks to the recession, the number of millionaire tax returns fell by
40 percent between 2007 and 2009, or more than 155,000.” A foundation study of
high earners between 1999 and 2007 found that “just 6 percent … remained millionaires in all nine years.”
between Paris Hilton
and Tom Joad exists only in
the minds of dopey
entertainers and bubble-headed
• “Business” isn’t what it used to be.
“corporation” and “company” evoke images of sprawling factories, looming skyscrapers,
and mammoth office parks. However, “since 2005, the total amount of net
business income claimed on individual returns has exceeded the net income
claimed by the traditional C corporations that issue publicly-traded stock.” Apple,
Wal-Mart, Citigroup, and General Electric are giving way to sole
proprietorships, LLCs, partnerships, and S Corporations. These smaller entities
pay income, rather than corporate, taxes.
individuals, and increasingly, you’re taxing businesses.
book of charts may not explore every cranny of the tax debate, but it hits the
highlights. Putting a Face on America’s
Tax Returns is required reading for anyone interested in, and/or working
for, a simpler, sounder, lighter federal tax burden.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
# # # # #