Tuesday, June 21, 2005

Bogus "Non-Taxpayers" Figures

Dear Andrew Sullivan,

Nathan Newman's point here is correct. Any statistic about "income taxes" that excludes payroll taxes is inherently bogus.

(Didn't we go through all this already, at the time of the ludicrous Wall Street Journal complaints about low-income "lucky duckies" who didn't pay federal income tax? You're smarter than that.)

Yes, there is a technical distinction between federal "income taxes" and "payroll taxes"--a distinction which Republicans exploit for class-war purposes, since rich people pay relatively more of the first and relatively less of the second. But this is a propaganda sleight-of-hand. "Payroll taxes" are federal taxes levied on income, which is what most people mean by "income taxes" in everyday speech. These are really two kinds of income tax.

(Ever since 2000, the well-known left-wing radical John McCain has suggested that federal tax cuts should include payroll tax cuts, and should focus less exclusively on the kinds of taxes that are predominantly paid by the wealthy. Oddly enough, his suggestions have been ignored--not argued against or refuted, but ignored. If one had a cynical cast of mind, one might suspect there is a pattern here.)

If we include payroll taxes, the main shrinkage in tax liability has been up at the higher end of the income distribution.

Yours for reality-based discourse,
Jeff Weintraub

June 20, 2005

Bogus "Non-Taxpayers" Figures

A number of conservative bloggers are upset with numbers from the Tax Foundation which shows upwards to 40% of Americans are in families not paying income tax. It's ironic they are upset about this, since some of the increase is due to the only decent part of Bush's tax cuts, namely the tax credits for children.

But what is deceptive about the numbers is that many of these "non-taxpayers" are paying quite hefty payroll taxes. A few of the very poorest working families have Earned Income Tax Credits that cancel out their income tax obligations, but that is a far smaller number than the Tax Foundation's worries about those "outside the income tax system."

It's funny-- where is their report about those living off of capital gains and dividends who are scarily "outside the payroll tax" system?

But their political point should worry conservatives, if not the general population:

Are any future tax cuts, or even tax reforms, possible when the lion’s share of the tax burden is increasingly borne by a shrinking pool of taxpayers who – at least on paper – appear to be "upper-income"? And will the expanding pool of non-payers demand even higher income taxes? These are questions lawmakers must begin to debate.
As they say, that's a feature of the Bush tax cuts, not a bug.

Posted by Nathan at June 20, 2005 05:12 PM

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