No one likes to pay taxes, so tax day typically attracts a range of right-wing Republicans, kooks, and demagogues, all of whom tell us how awful we have it. Here's a short citizen's guide (that is, a citizen's guide that's short rather than a guide for short citizens) responding to the predictable charges:
1. "Americans pay too much in taxes." Wrong: The United States has the lowest taxes of all developed nations.
2. "The rich pay too much! The top ten percent of income earners pay over 72 percent of all income taxes!" Misleading: The main reason the rich pay such a large percent is they've become so much richer than the bottom 90 percent in recent years. If you look at what they pay as individuals -- the percent of their incomes over and above the highest rate below them -- you'll see a steady decline over the years. When Republican Dwight Eisenhower was president, the marginal rate on the highest earners was 91 percent (after deductions and tax credits, closer to 50 percent); by 1980 it was still up there, at 70 percent (an effective rate of closer to 45 percent); under Bill Clinton, it was 38 percent (an effective rate closer to 28 percent).
Look at the after-tax earnings of families and you'll see what's really going on. Between 1980 and 2000, the after-tax earnings of families at the top rose more than 150 percent, while the after-tax earnings of families in the middle rose about 10 percent. The Bush tax cuts of 2001 and 2003 raised the after-tax incomes of most Americans by a bit over 1 percent -- but raised the after-tax incomes of millionaires by 4.4 percent.
3. "The bottom 60 percent pay only 3.3 percent of the taxes!" Misleading again. Most Americans are paying more in sales taxes than they ever have. Property taxes have also been rising at a steady clip. And Social Security taxes have also risen (thanks to the Greenspan Commission), while earnings over about $100,000 aren't subject to Social Security taxes. So-called "sin" taxes (mostly beer and cigarettes) have also skyrocketed. All of these taxes take a bigger bite out of the paychecks of people with lower incomes than they do people with higher incomes.
4. "Obama is raising your taxes!" Wrong. Obama is cutting taxes for 95 percent of Americans, by about $400 per person a year -- not a whopping tax cut, to be sure, but not a tax increase by any stretch. Only the top 2 percent will have a tax increase, but even this tax increase is modest. Basically, they go back to the rates they were paying under Bill Clinton (their deductions will be limited to 28 percent, which is only fair). And they won't start paying this until 2011 anyway.
5. "The huge debts we're wracking up will cause your taxes to rise!" Wrong again. When it comes to the national debt, as I've said before, the relevant statistic is the ratio of debt to the gross domestic product. The only sure way to bring that debt down and make it manageable in future years is to get the economy growing again -- which requires that, in the short term, the government spend a lot of money (because consumers and businesses won't). In the long term, the biggest source of concern is rising health-care costs. And that's something Obama and Congress are aiming to tackle.
6. "We have a patriotic duty to stand up against Washington taxes!" Just the opposite. We have a patriotic duty to pay taxes. As multi-billionaire Warren Buffett put it, "If you stick me down in the middle of Bangladesh or Peru or someplace, you'll find out how much this talent is going to product in the wrong kind of soil. I will be struggling thirty years later." President Teddy Roosevelt made the case in 1906 when he argued in favor of continuing the inheritance tax. "The man of great wealth owes a particular obligation to the state because he derives special advantages from the mere existence of government."
An acquaintance from law school, now a partner in one of Washington's biggest and wealthiest law firms, explained to me one day over lunch how he and his partners use tax rules to create offsetting taxable gains and losses, and then allocate the gains to the firm's foreign partners who don't pay taxes in the United States. That way, they keep the losses here and shelter their income abroad. I noticed he had an American flag lapel pin. "You're supporting our troops," I said, referring to his pin. "Yup," he replied, entirely missing my point.
True patriotism isn't cheap. It's about taking on a fair share of the burden of keeping America going.
Originally posted on Talking Points Memo
I see you're not a supporter of the tea parties. The issue includes spending and debt as much as taxes. The CBO estimates the administration's proposed budget will add over $9 trillion to the national debt by 2019 (see link below). Our children and grandchildren will inherit this debt. How can our country support this level of spending and debt? And isn't it fundamentally irresponsible to dump this debt on future generations?
http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf
It's never happened before and there's no reason to believe it will happen this time. The politicians do not have the will to spend responsibly. The losers are our children and grandchildren. The administration's proposed budget - with trillion dollar deficits as far as the eye can see - is grossly irresponsible. It needs to be scaled back significantly.
I was very happy to see that you were on President Obama's transition team. I enjoy your TV appearances and enjoyed your post. Keep up the great work. This was an outstanding post. I almost went to Berkeley for Undergrad, but my parents thought the school was too liberal. Now, while I am still a fiscal conservative and registered Republican, I tend to vote for Democrats – especially ones with such a tremendous set of advisors – including our outstanding President. I have mentioned the information you have presented in your post on several occasions (prior to your post) to my more conservative friends. Thanks for reinforcing the message.
Actually, President Obama is cutting taxes for 45 percent of Americans. The remaining 50% (of the 95% cited), owing no federal taxes at all, are just getting more free money because the tax cut has been legally defined as a "refundable" tax cut.
But don't blame President Obama for this - in this he's just following in other illustrious footsteps. For example (I'm sorry I do not have the exact numbers, but) wasn't President Bush's free federal hand out to non-taxpayers larger than the current one?
Do you assume the numbskulls who are protesting at these teabag rallies are not paying the taxes they are required?
And earlier, you soft-peddle the teabaggie complaints like half the people don't pay any federal tax, and that fully 60 percent of our combined taxpayers only manage to pay 3.3% of the federal tax. Don't you want all these people to be patriotic, too?
Or are you ok with them contributing only to their local governments through local, property, and sales taxes? Does that make them at least "patriotic" to their home towns?
I feel like a concerned friend or parent that tries to talk their tone deaf friend or child out of auditioning for American Idol to avoid the embarassment of potentially showing up on a video compilation of the worst candidates in the history of the show. It is a delicate conversation because you do not want to offend them but you do want to help them to be able to see the world more clearly. If everyone else can see that they do not have any talent, how is it that they cannot see the same thing? It is a puzzling question. Yet, it is the same question that I have for you: if everyone else can see that you are ignorant (i.e., you have not made an honest attempt to educate yourself based on objective criteria so that you can come to an informed decision based on the evidence), why can't you see that about yourself? For example, your comment about the 60% that pay 3.3% of federal taxes clearly shows that you fail to understand the basic point being made: pay taxes with what? Based on your posts, I am fairly confident that you fit within the 95% that will benefit from Obama's plan, yet you argue against your own self-interest. To me, there is only one explanation for such contradictory behavior: RACISM (the continuation of which requires the fundamental ignorance of white people such as yourself. Ignorance is bliss, right?)
- Dang, and here I was hoping no one had seen my audition.
"your comment about the 60% that pay 3.3% of federal taxes clearly shows that you fail to understand the basic point being made: pay taxes with what? "
- Are you, like another recent poster asserted, somehow under the impression that 60% of the US is at the poverty level?
"Based on your posts, I am fairly confident that you fit within the 95% that will benefit from Obama's plan, yet you argue against your own self-interest. To me, there is only one explanation for such contradictory behavior: RACISM (the continuation of which requires the fundamental ignorance of white people such as yourself. Ignorance is bliss, right?)"
- Well, you're wrong as to your first point quoted above, and I sure as heck can't see how you leap from my complaints about taxation straight into accusations of racism. Instead, why not try to rebut? Demonizing those you disagree with is, respectfully, quite an ignorant approach.
- But thanks so much for engaging me in conversation for no other reason, it appears, than to lable me an ignorant racist.
Actually I had thought that "teabagging" meant something else, which is usually done in privacy between consenting adults.
"Support Our Troops: Pay Your Taxes!"
So which is it, are you a fiscal conservative who believes we are spending too much on the safety net so that when people lose their jobs because of this economic downturn they shouldn't lose their homes, or are you a defense and national security conservative complaining that military spending is not high enough?