Tax Day Facts
7 Charts That Put Tax Day In Perspective
It’s that time of year again. Now that your
taxes have (hopefully) been filed, we won’t blame you if you want to go back to
not thinking about them until this time again next year. But before you do, take
a few minutes to learn some important facts about our tax system.
1. Here’s where your 2013 tax dollars
will go:
Nearly two-thirds of Americans’ 2013 tax
dollars go directly toward major government spending programs for Social
Security, Medicare and Medicaid, and national defense. Safety net programs
account for 12 percent of spending. Education, which is mostly paid for through
state and local taxes, accounts for just 1 percent of the federal budget.
2. Corporations and the wealthiest Americans are paying less
taxes than previous decades.
Since the middle of the 20th century, the share
of federal tax revenue from corporate taxes has fallen dramatically. Meanwhile,
the share coming from the payroll tax (mostly Social Security and Medicare
taxes) has increased dramatically. And now, the taxable estate of a deceased
person must be more than 5.25 million dollars to even qualify for the estate
tax.
3. Tax rates are among the lowest they
have ever been.
Federal taxes are near historic lows for all
but the top one percent of earners. But that isn’t stopping some media
outlets from focusing on how the wealthiest are experiencing “sticker
shock” this tax season.
4. Americans are paying a lot less in
taxes than the rest of the developed world.
Including both federal and state government tax
receipts, the United States takes less tax revenue as a share of its GDP than
many other developed countries in the Organisation for Economic Co-operation and
Development. The United States ranks 31st overall.
5. Mitt Romney’s “47 percent” is
wrong.
According to the Tax Policy Center, only 14.4
percent of people pay neither income taxes nor payroll taxes, and the large
majority of those are elderly retirees. Just over four in ten Americans don’t
pay federal income taxes because they either are retired or because their income
is low enough to owe no taxes after credits and deductions are accounted
for.
6. The wealthiest pay the most taxes
because they earn the most.
Taking into account federal, state, and local
taxes, the share of taxes paid largely reflect share of income. As income
inequality continues to widen to historic levels, the share of taxes paid by the
wealthiest Americans has also risen. Which is to say: the fact that the richest
one percent pays almost a quarter of all taxes doesn’t mean that taxes are too
high, it means that the 1 percent are making a bigger and bigger share of all
income.
7. State and local taxes
disproportionately hurt low-income families.
As the chart above shows, while federal taxes
are generally progressive, taxing higher earners a larger share of their income,
state and local taxes hurt lower-income families more. The poorest 20 percent of
families pay almost double the share of their income to state and local taxes as
the richest one percent.
BOTTOM LINE: We need to have
resources to get some really important things done — take care of our elderly,
protect our borders, build our roads and bridges, and prepare our children for
the future. In order to build an economy that works for everyone, we need to
make sure that all Americans are contributing their fair share.
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