Complaints Aside, Most Face Lower Tax Burden Than in 1980

Discussion in 'Politics' started by Free Thinker, Nov 30, 2012.

  1. But in fact, most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.

    Households earning more than $200,000 benefited from the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.

    Lower-income households, however, saved little or nothing. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.

    The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the last 30 years. State and local taxes, meanwhile, increased for most Americans. Those taxes generally take a larger share of income from those who make less, so the increases offset more and more of the federal savings at lower levels of income.

    In a half-dozen states, including Connecticut, Florida and New Jersey, the increases were large enough to offset the federal savings for most households, not just the poorer ones.

    Now an era of tax cuts may be reaching its end. The federal government depends increasingly on borrowed money to pay its bills, and many state and local governments are similarly confronting the reality that they are spending more money than they collect. In Washington, debates about tax cuts have yielded to debates about who should pay more.

    President Obama campaigned for re-election on a promise to take a larger share of taxable income above roughly $250,000 a year. The White House is now negotiating with Congressional Republicans, who instead want to raise some money by reducing tax deductions. Federal spending cuts also are at issue.

    If a deal is not struck by year’s end, a wide range of federal tax cuts passed since 2000 will expire and taxes will rise for roughly 90 percent of Americans, according to the independent Tax Policy Center. For lower-income households, taxation would spike well above 1980 levels. Upper-income households would lose some but not all of the benefits of tax cuts over the last three decades.

    Public debate over taxes has typically focused on the federal income tax, but that now accounts for less than a third of the total tax revenues collected by federal, state and local governments. To analyze the total burden, The Times created a model, in consultation with experts, which estimated total tax bills for each taxpayer in each year from 1980, when the election of President Ronald Reagan opened an era of tax cutting, up to 2010, the most recent year for which relevant data is available.

    The analysis shows that the overall burden of taxation declined as a share of income in the 1980s, rose to a new peak in the 1990s and fell again in the 2000s. Tax rates at most income levels were lower in 2010 than at any point during the 1980s.

    Governments still collected the same share of total income in 2010 as in 1980 — 31 cents from every dollar — because people with higher incomes pay taxes at higher rates, and household incomes rose over the last three decades, particularly at the top.
  2. Ricter


    It's time for a new WPA.
  3. I agree although there is already a shortage of labor in some parts of the country.
  4. Ricter


    I'm sure you know I mean it not just for the jobs.
  5. It makes so much sense to put people to work now, fixing things now, before our infrastructure kills more people and becomes more costly to fix. No welfare, only solid work with pay.
  6. jem


    the whole key to that article and what I sense will turn out to be the key point is they based their New York times analysis on adjusting the incomes for inflation. I would like to know the inflation adjustment they used.

    but... nevertheless you article points out the oppressive tax situation, either way.

    from your article...

    The trend can be seen by comparing three examples:

    ¶A household making $350,000 in 2010, roughly the cutoff for the top 1 percent, on average paid 42.1 percent of its income in taxes, compared with 49 percent for a household with the same inflation-adjusted income in 1980 — a savings of about $24,100.

    ¶A household making $52,000 in 2010, roughly the median income, on average paid 27.7 percent of its income in taxes, compared with 30.5 percent in 1980, saving $1,500.

    ¶A household making $22,000 in 2010 — roughly the federal poverty line for a family of four — on average paid 19.4 percent in taxes, compared with 20.2 percent, saving $200.

    Jared Bernstein, who served as chief economist to Vice President Joseph R. Biden Jr., said the Times analysis highlighted the need to raise taxes on the affluent and cut taxes for the poor. He cautioned that the middle class most likely would need to pay more, too.

    “When you look at these numbers, you understand why we’re not collecting the revenue we need to support the spending we want,” said Mr. Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a liberal research group. “We’ve really gutted the system.”

    But Douglas Holtz-Eakin, a prominent conservative economist, said the changes in taxation over the last three decades reflected a conscious and successful strategy to encourage economic growth that should be reinforced, not reversed.

    Mr. Holtz-Eakin, a former director of the Congressional Budget Office who is the president of the American Action Forum, said government should reduce deficits primarily through spending cuts, particularly to Medicare and Medicaid, the health programs that are the largest source of projected increases in the federal debt.

    “We can’t grow our way out of it, and we can’t tax our way out of it,” he said of the government’s fiscal predicament. “We have a spending problem, period.”