Happy Tax Day!
Taxes are one of the most politicized and misunderstood parts of our country. Both parties and the media are awash in tall tales and myths about taxes, so here are some little known but absolutely true facts to help clear things up:
- Fox News says “47 percent of Americans don’t pay any taxes”. McCain and Palin said the same thing during the 2008 campaign. Bush’s spokesperson said “50 percent of the country gets benefits without paying for them”. Nonsense. The poor pay a higher percentage of their income for taxes than anyone. They may pay less in federal income taxes, but they pay more in payroll (Social Security) taxes, state and local taxes, gas tax, sales tax, utility taxes, etc.
- Rand Paul says “the wealthy do pay most of the taxes in this country” claiming that the rich pay 38% of taxes. But again, he is including only federal income taxes, which is one-fifth of the taxes we pay. Our other major federal tax, payroll taxes, are capped at $106,800 of income, and so are actually regressive taxes where the poor pay a significantly higher share.
- The federal income tax rate on the richest Americans may be 38%, but that doesn’t take into account tax shelters and loopholes that let the rich avoid paying taxes. The richest Americans actually have a lower effective tax rate (17%) than the middle class and even the poor (22.5%). And many of the richest pay no income taxes at all, like hedge-fund manager John Paulson, who made $9 billion in two years but paid zero in taxes on it. In more than one year Donald Trump has paid zero in federal income taxes.
- The same thing is true of corporate taxes. The next time you hear someone claim that corporations pay higher taxes in the US than in other countries, remind them that while the official tax rate is higher, all those loopholes and tax shelters allow many corporations to pay zero in US taxes. The majority of multinational corporations pay no US taxes. Just recently, GE not only didn’t pay any federal taxes, we gave them money.
- Republicans claim to hate taxes, but it looks like they love taxes on anyone except the rich. Reagan signed into law 11 tax increases against the poor and middle class, but called them “revenue enhancers”. Bush Sr. broke his ironclad promise to never raise taxes on anyone by raising taxes on children (seriously). Just four months ago, Republicans raised taxes on the least rich one-third of Americans by repealing Obama’s “Making Work Pay Credit” while at the same time demanding that tax cuts for the rich be extended. They also changed Social Security taxes, raising them for the poorest Americans while lowering them for the richest.
UPDATE: Michele Bachmann repeated the claim that the top 1% pay 40% of all federal taxes; PolitiFact rated her statement False for the same reasons given above.