Friday, October 21, 2011

A Chart Is Worth a Thousand Words

I came across several charts over the last few days that do a nice job of illustrating several tax policy issues. First, let’s look at the repeated point that somewhere near 50% of Americans don’t pay federal income taxes (though this fact is often muddled by the careless or specious omission of the words “income” or “federal” from the claim; see my previous post Do Republicans Want to Raise Taxes on the Poor and Elderly? for more on this). Anyway, take a look at this chart (from Talking Points Memo):

There are a few important things to note here. First, note the decline in the percentage of revenue from corporate taxes. Then look both at the increasing percentage that payroll taxes account for. Now remember, payroll taxes are only paid on income derived from things like wages. Thus, there isn’t a payroll tax on the sale of a stock or a corporation or on dividends from owning a corporation. That is one of the reasons that billionaires like Warren Buffet may pay a smaller overall percentage of their income in taxes than do middle class working Americans. So, when you hear someone talk about the large percentage of Americans who don’t pay federal income tax, keep this chart in mind and remember that many of those people are still paying federal payroll taxes which account for nearly 40% of the federal government’s revenues.

To go with the foregoing chart, take a look at these charts from Misconceptions and Realities About Who Pays Taxes by the Center on Budget and Policy Priorities (incidentally, I’ve been privileged to attend several presentations by the CBPP on tax policy; these people really know their stuff and do a great job presenting their information in a meaningful and understandable way):

So when you hear someone (i.e., a Republican presidential candidate) talk about people paying their fair share, you should ask yourself which of these groups should have their taxes raised. I think that a massive tax increase on people who can’t afford to feed their families would be a great idea. Maybe a big tax increase for the homeless, too.

When you hear a candidate or elected official discussing tax policy and their refusal to raise taxes on income above $1,000,000 you might ask about some of the information from these charts. And just for yucks, you might ask that candidate or official to explain how marginal tax rates work; the more I hear from politicians the more convinced I’ve become that many (if not most) don’t really understand this core concept of our tax structure.

Finally, more for laughs than anything else, below is a chart prepared by the CBPP to show how Herman Cain’s 9-9-9 plan would impact the taxes paid by Americans of different income levels. Be prepared to start scrolling…

If I’m in that top 0.1%, Herman Cain would be my candidate! But if I’m in the bottom 80%… um, not so much.

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