The one-percenters and their lackeys often indignantly make the claim that since they are the ones who pay most of the taxes, they should be praised rather than vilified, since it is largely their tax dollars that enable the state to function. They point to the roughly 47% of the population who do not pay any federal income taxes as being essentially moochers, as if being so poor that you do not even qualify to pay income tax is somehow an ingenious dodge to live off the wealthy.
But this situation arises not because the current tax rates are unfairly tilted against the rich, but because of income inequality. As an extreme example to make my point (though it is becoming less extreme as time goes by), if only 1% of the population was wealthy enough to pay taxes and the remaining 99% was desperately poor, then the wealthy would be paying almost 100% of the taxes irrespective of the way the tax rates were distributed.
This claim that the rich shoulder a disproportionate tax burden also ignores the fact that the poor do pay payroll taxes (Social Security and Medicare) and that these are extremely regressive, with the net result that the poorer usually pay a greater share of their income as taxes than the rich. TPM provides a nice bar graph comparing Mitt Romney’s federal tax rate of about 13.9% on his $21 million income with the tax rates paid by people with ordinary income. If your family income is in the $40,000-$50,000 range, then you are already paying at a higher rate than Romney does.
When it comes to state taxes, Kevin Drum links to a study that calculates the ratio of the tax rates paid by the poorest 20% with that paid by the top 1% for each of the 50 states and the District of Columbia. The median value of this is two (Mississippi), meaning that the bottom 20% pay twice the tax rate of the top 1%. In the worst state (Washington) the tax rate on the poorest 20% is almost seven times that of the top 1%.
These calculations do not include sales taxes which are also highly regressive and thus further tilt the effective tax rates against the poor.
There is something to be said for a flat tax: the rich will appear at first blush to pay less, but in actual fact they’ll end up paying far more than they did.
In a perfect world, taxes would include as few deductions as possible, and juggling the deductions between spouses (married or common-law) shouldn’t give a couple any tax advantage. And it wouldn’t matter if your income was from a corporate paycheque, dividends or interest, the rate would be the same.
Mind you, in a perfect world, corporations wouldn’t have their income taxed at all -- it would be taxed when it got to the owners’ hands, in other words when REAL persons received the money. Keep the money invested in the company, expanding productivity and taking the fight to the competition, would be far better for the economy.
I challenge the rich to provide all of their workers with, at a bare minimum, living salaries. Salaries that will allow them to be at least above the poverty line.
With federal holidays, that means an hourly wage of, at an absolute minimum, $11.18 per hour…just to get to the poverty line. How about paying them $15 per hour at a minimum so they can a bit of room above the poverty line?
Unfortunately, that is exactly what a sales tax is (a flat tax). Although it may be better than what is actually occurring today, it definitely isn’t ideal.
The reason for a progressive tax system is that the richer people are, the more (greater percentage) of their income can be used to support the nation’s interest. A family of four making a total income of $50,000 doesn’t have a lot of extra money left over…nearly all of the income is going to food, shelter, clothing, etc (i.e. the basic necessities).
Contrast this with a family of four making a total of $500,000. Most of their money is spent on luxuries, not necessities.
So a flat tax of, say, 20% would leave the first family with only $40,000. At that point, there are some major decisions on what needs to be cut. Sit in old clothing for a good while longer, cut back on some higher price (but more nutrional) food, etc.
However, for the 2nd family, $400,000 only impacts a few luxuries. They are still living in a very nice house, eating excellent food, running around in the latest fashions. In other words, no real impact to their lives.
Back when Pharyngula was on SB I wrote a long critique of flat taxes. Naturally the search function won’t find it for me, so here’s the gist of it.
Many of us have heard of Robert Heinlein’s TANSTAAFL (There Ain’t No Such Thing As A Free Lunch). In a similar way, TANSTAABST (There Ain’t No Such Thing As A Big Simple Tax). The simple taxes, like poll taxes, are never big. The big taxes, which bring in a lot of revenue to the government, are never simple.
Let’s suppose two men each gross $80,000 per year and there’s a flat tax of 17% as Steven Forbes tried to sell. One man is a corporate executive who has no expenses involved with his job. He pays $13,600 in tax. The other man is a self-employed delivery driver. Let’s assume he pays $20,000 per year in fuel, maintenance, insurance, depreciation, and other expenses involved with his truck. He makes $60,000 net income. $13,600 is 22.67% of $60,000. So he’s going get his congresscritter to amend the tax law to allow him to deduct his expenses. So is every restaurant owner, commercial fisherman, farmer, rancher and small business owner. Very quickly the “flat tax” would become as complicated and convoluted as the present income tax. TANSTAABST.
What never seems to be mentioned is that those on the bottom DO pay taxes, but they’re often not called taxes. People making, say $8 an hour pay the same amount to get a driver’s license, car license plates, etc. Those fees (which are a tax by another name) aren’t weighted based on one’s income. Cleveland recently instituted a $9 per month fee for garbage pickup, which again, is not weighted by income. So, the people with the mansions overlooking Lake Erie pay $9, and the people living in low-income neighborhoods also pay $9.
Washington has no state income tax so I’m not sure where that figure comes from.