Tuesday, April 10, 2012

Virtually Everyone Pays Federal Taxes: It's Really True.

It really is too bad that this has to be spelled out yet again, and that nevertheless the myth will perpetuate.  Taxprof links to The Hamilton Project, The Truth about Taxes: Just About Everyone Pays Them:
A popular myth swirling around Washington, DC, and throughout the media these days is that many Americans do not pay taxes, and are therefore free-riding off of our society without contributing themselves. This has even been referred to by some as a “new orthodoxy.”  The origin of this misconception is the observation that only about 54 percent of American households paid federal income taxes during recession-affected 2011.  But that statistic is misleading because it provides an incomplete picture of the overall tax burden on American families, and because it incorporates individuals who naturally shouldn’t be paying taxes because of their age or economic circumstances due to the Recession. A closer look reveals that nearly all Americans do, in fact, pay taxes.
They have a few charts and graphs but its this sub-heading that catches my eye:

"Other Forms of Taxes Also Count"

Yes, indeed.  There is a federal income tax that is called the federal income tax, and it is true that not everyone has to pay it, such as when they earn very small amounts of income (or, perversely, very large amounts of income...that's a different story).  Then there is another federal income tax that is called the social security tax.  Yes, it's a tax, and it's imposed federally as a percentage of income...it's a federal income tax.    The part imposed on companies is called an excise tax.  But that part on individuals?  Its a Federal.  Income. Tax.  Somehow it matters not how many times or ways we say it, people will still insist that only that tax that's actually called the federal income tax "counts" as paid, so a person who only pays the social security tax and not the income tax is a freeloader, while the person who only pays the capital gains tax and neither the FIT or the SST is not.  Never mind the other federal excise taxes, these are simply and routinely ignored because they are not "federal income taxes."

Rhetoric strikes again, and again.  Roosevelt may have been right to preserve the social security safety net by linking it to its own earmarked tax, but we too often see how this has become a sleight of hand that effectively undermines a great deal of thinking about tax policy.

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