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Bill Knight on Taxes
Wed January 11, 2012
Bill Knight - January 12
Occupy Peoria protestors were starting to assemble on Main Street one Saturday in October, when I was reading a magazine, eating an omelet and drinking coffee at a nearby café. A dad at an adjacent table looked out the window at the dozens of demonstrators, turned to his daughter, and said, “What are they complaining about? Half of the country pays no taxes at all!”
Not wanting to ruin a Bradley University’s Parents Weekend visit, I said nothing, wolfed down the eggs, drained the coffee, and crossed the street to join the rally (noticing as I left that the student was rolling her eyes and shaking her head).
The parent’s remark is an old story. And a false one.
At a Congressional hearing this summer, U.S. Sen. Charles Grassley (R-Iowa) put it another way, saying, “According to the Joint Committee on Taxation, 49 percent of households are paying 100 percent of taxes coming in to the federal government.”
Such blanket statements – repeated by the right-wing – mistakenly generalize that people who don't pay income taxes because their incomes are low or nonexistent aren’t taxed. That’s obviously hogwash. Poor people pay sales taxes, payroll taxes for Social Security and Medicare, gas taxes, state and local taxes and even property taxes (directly if they’ve escaped foreclosure or indirectly if they’ve escaped homelessness and pay rent to landlords).
The misleading assertion probably stems from a 2009 finding by the Joint Committee on Taxation that 51 percent of households owed no federal income tax, according to the Center on Budget and Policy Priorities’ Brian Highsmith and Chuck Marr, who added that that number also was inflated by special, recession-related factors.
They wrote, “The 51 percent figure is an anomaly that reflects the unique circumstances of 2009, when the recession greatly swelled the number of Americans with low incomes and when temporary tax cuts created by the 2009 Recovery Act were in effect. These developments removed millions of Americans from the federal income tax rolls. Both of these temporary tax measures have since expired.”
In a typical year, they added, “35 to 40 percent of households pay no federal income tax. When all federal, state and local taxes are taken into account, the bottom fifth of households paid 16.3 percent of their incomes in taxes, on average, in 2010. The second-poorest fifth paid 20.7 percent.”
Only about 14 percent of Americans pay neither federal income taxes nor payroll taxes – almost all of whom are people “who are elderly, unable to work due to a serious disability, or students.”
Another tax-related claim that mostly goes unchallenged by elected officials and corporate media is that Big Business is burdened with higher taxes. As recently repeated in Illinois by the powerful and profitable Chicago Mercantile Exchange and other corporations – which bullied the General Assembly into granting millions in tax breaks to prevent a move to another state – corporate taxes are excessive, they say.
However, measured in terms of the share of Gross Domestic Product (GDP), the United States has the lowest corporate tax burden of any nation in the Organization for Economic Cooperation and Development (OECD). While the nominal tax rate may seem high – 35 percent – that fails to consider loopholes, which make the effective tax rate much lower, about 27 percent. That’s about average for OECD member countries.
Pulitzer Prize-winning reporter David Cay Johnston, now a columnist for Tax Analysts (at Tax.com) says it’s even lower for influential, profitable corporations. He said, “In 2008, for example, the top 1/10th of 1 percent of corporations paid an effective tax rate of 14.7 percent of their profits, while the next 8,269 corporations with assets between $250 million and $2.5 billion paid 15.2 percent.”
Lastly, the U.S. Chamber of Commerce and its mouthpieces in the Republican Party and conservative media such as Fox and the Wall Street Journal repeat the claim that the United States overall – including corporations, citizens and all taxpayers – has high taxes. But, again, as measured as total tax revenue as a share of GDP, the average tax burden for countries that are members of the OECD in 2008 was 44.8 percent. The United States? 26.1 percent.
American taxpayers pay less, as a share of GDP, than Austria, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, Spain, Sweden and Switzerland.
Bruce Bartlett – an independent-minded Republican who worked in both the Ronald Reagan and George H.W. Bush administrations and also for GOP Congressmen Jack Kemp and Ron Paul – says that today’s U.S. federal tax burden – again, measured as a share of GDP – is 14.8 percent, the lowest it’s been in decades.
Bottom line: Extremist Republicans are pandering to the rich and attacking the rest of us by making misleading or false claims about taxes. But more and more regular people are increasingly realizing that it’s illogical as well as unfair to ask sacrifices only from those least able to afford it just because they have the least political power.
Occupy reality, GOP.
Bill Knight is a freelance writer who teaches at Western Illinois University. The opinions expressed are not necessarily those of WIU or Tri States Public Radio