Free Markets, Free People

Tax Facts

Some tax facts from the Tax Foundation [pdf]to ponder while you work toward paying off the government’s first claim on your paycheck today.

Fact 1: Not everyone is doing that.

Today, 46 million tax filers have no income tax liability after taking advantage of all of the credits and deductions in the tax code—one-third of all tax filers. Obama’s tax polices, such as the “Making Work Pay” tax credit, will increase the number of non-payers to more than 63 million.

Or 63 million won’t , as Scott Hodge of the Tax Foundation says, have any “skin in the game”. Why should they care about tax policy or how tax money is spent?

Fact 2: Not all tax cuts/credits are good.

[T]he most politically popular tax cuts actually give the government more control over the economy rather than less. Even the credits enacted with the best of intentions—such as the $1,000 child credit, hybrid vehicle credit, or adoption credit—are bad tax policy because they attempt to induce people to make choices politicians think are right while rewarding select industries at the expense of others.

Or said another way, we again have government picking winners and losers, which few people would accept as something it should be doing. Politicians use their first claim on what you earn to reward you by not taking it if you do what they want. Is that your idea of the function of government?

Fact 3: High corporate taxes punish workers.

As the new study explains, there is a growing body of evidence that a large share of corporate taxes is really borne by workers—most of whom are not wealthy. Using statistical methods, the new study found that for every $1 rise in state and local corporate tax collections, real wages in that area fell by $2.50 five years later. The reverse is also true: wages rose by $2.50 for every $1 reduction in state and local corporate income taxes.

If wages are depressed in your particular state or locality, check out the corporate tax rate – as we’ve pointed out for years, corporations don’t pay taxes, they pass them on.

Fact 4: US corporate taxes are high.

Average OECD top corporate tax rate: 26.29 percent. Average U.S. top rate: 39.1 percent.

And of course after spending time demonizing corporations as rich and greedy, the present administration and Congress want to raise these taxes even higher. Then they’ll have another job summit and wonder why unemployment continues to get worse and wages are stagnant.

Fact 5: The rich actually pay more than their “fair share”.

Share of federal income tax paid by top 1 percent: 40.4 percent. Share paid by bottom 95 percent: 39.4 percent.

In fact, the rich pay more than 95% of the taxpayers out there – and the plan is to tap them for even more. Because, of course, they’re rich, and that automatically makes them “greedy”. Not in the plan is how the government will make up the revenue it plans on collecting with this new tax when the rich do what is necessary to protect what is theirs from the increased government looting.

Fact 6: Tax increases cost nearly twice the revenue raised.

“With every dollar of revenue, the proposed tax hikes cost the economy an extra 86 cents.”

Called “deadweight loss” high taxes distort the economy by artificially affecting decisions, such as:

…how much people choose to work by decreasing the financial reward to labor. High tax rates also may discourage savings, affect investment choices, and change the way households spend their money. For these reasons, economists recommend low tax rates and broad tax bases.

But that’s not at all what we now have – 63 million projected to be paying no taxes at all, corporate taxes higher than the OECD average and going higher and 1% of the population paying more in taxes than 95%?

If you can’t see what’s wrong with this picture and where it portends to leave us as we try to “recover” from the recession, then you’re being willfully blind. And, if some of this isn’t addressed and changed in the upcoming jobs summit, nothing is going to change to improve the employment situation. We have a tax structure that is anti-growth, anti-business and anti-liberty. The unfortunate thing is the present administration and Congress are working on legislation right now which will actually increase the tax burden exponentially and have projected trillion dollar budget deficits for the next 10 years.

How, given the above and the inevitable result of their unconscionable planned government spending spree (and taxes to support it) are we going to “grow” our way out of this?



9 Responses to Tax Facts

  • Fact 7: Politicians have successfully conflated the meanings of “rich/wealthy” and “high earners”. Thus, they can claim to “tax the rich” while the truly rich are not actually earning; they sock their funds into tax-exempt bonds and use other tax-evasion/reduction strategies.
    This protects the power of the wealthy and prevents “upstarts” from becoming wealthy/accumulating wealth for themselves and their families.
    Additionally, the people with the highest wealth building potential who have the most to offer society are disincentivized to create that wealth and improve the general human condition.

  • such as the $1,000 child credit…are bad tax policy because they attempt to induce people to make choices politicians think are right

    I don’t see how this is an argument relating to the child tax credit. Is anyone really deciding to have another child because they get a tax credit? If so, it seems a terrible financial trade-off since the child will cost much more than the 1K gained every year.

    Yet from the politician’s standpoint, gaining more children who survive to enter the workforce is a benefit since it is likely that the future adult will pay FICA, Medicare, and other taxes in excess of the 1K yearly credit.

  • The difficulty in understanding the logic of how Barry H.O.’s actions contradict his stated goals lies in our own mindset.
    If you assume BHO wants America to succeed and prosper in accordance with our 250  year history; you get a migraine trying.
    If, however, you look at BHO’s long historical associations with radical Marxism, things begin to make more sense.
    The Malfeasant Media covered this like a hero on a hand-grenade; to shield us from the truth.
    From his father to his mentors Cone, Wright, Ayers & Alinski, it all comes together, the point IS to wreck the economy and there-by, the country. So, when can we start impeachment proceedings?

  • No one has ever made a compelling argument to me why any one’s labor should be taxed at a higher rate than anyone else’s.  Its patently un-American for there to be multiple tax rates.

  • Makiw has an interesting post.  He notices the Democrats love the poor so much, they want to keep them poor.  The marginal cost of raising a poor person’s income from $15K to $30K is 100%.   That is pure genius.


  • re: corporate tax rate: effective tax rate (after all the deductions & credits) is, IIRC, smack in the middle of the OECD pack.

    • re: corporate tax rate: effective tax rate (after all the deductions & credits) is, IIRC, smack in the middle of the OECD pack.

      Business deductions are COGS and operating expenses, just like any other country.
      Are you assuming the pay taxes on GROSS REVENUE?

  • “after all the deductions & credits” = picking winners and losers, probably with large corp. who have lobbyists getting the bulk of the deals.

  • This article hit upon a very real problem with the tax changes brought about by Republicans in the last few decades.  I NEVER thought it was wise to let so many people get away without paying something in taxes.
    They quite simply have no incentive not to vote for higher taxes since they won’t be paying them.
    That is why I am in favor of getting rid of income taxes altogether and replacing them with sales taxes.  And not that ridiculous fair tax scam with it’s “rebate” scheme, but just a lot of really high sales taxes, including a high rate on fossil fuels.
    Then, at least the poor would be paying their fair share, as well as illegal aliens and criminals.
    Then, you might actually get a lot of stupid liberals wanting to know why congress is spending so much of their money and why the hell do they always want to raise the rates.