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Tuesday, April 19, 2011

The problem with taxes; "only little people pay taxes"

Courtesy of Mother Jones here are some graphs that clearly illustrate the problem with the current tax system.

Despite GOP/Tea Party wailing about tax rates and why the wealthy should get more tax cuts, the reality is far different. The right uses statutory tax rates to illustrate their ideas while ignoring effective tax rates, or how much people and corporations actually pay in taxes.

These graphs do not even consider secondary taxes that affect lower and middle income individuals far more than the wealthy, something that the right also refuse to consider in their tax propaganda. Gasoline taxes, alcohol taxes and sales taxes are all taxes that everyone pays directly or indirectly. Someone earning $50,000 a yeaar will probably spend less on gas than someone earning $1 million a year but the millionaire will not be spending 20 times as much on gas. If they spend 3 times as much on gas, they are paying an insignificant percentage of income on those taxes whereas someone earning $50K a year might be paying an additional 1-2% on those taxes. Same story with sales taxes.

Firstly here is an illustration of the income and taxes paid by the richest of the rich, the top 400 earners according to the IRS.

Who benefits from the Bush tax cuts.   Once again it's those at the very top, the highest 0.1%

The continual mantra by the right is that our corporate tax rate of 35% is too high.  That argument may hold water for small businesses.  The government defines small businesses as those with 500 or less employees.  They are the ones who end up paying the 35% or close to it because they cannot afford an army of lobbyists to carve out tax loopholes so they end up paying no taxes like GE, Exxon etc.    Here is a graph showing how corporations have come to contribute less and less of the overall revenue.  To those who don't get it, we have a spending problem and we have a revenue problem.  Corporations and the richest among us are being taxed at historic lows, and that is even before all the loopholes an exemptions.  It's no wonder that revenue has dropped from an average of 20% of GDP to under 15%.  It's impossible to come close to balancing the budget if revenue stays at under 15% of GDP. 

Lastly Mother Jones illustrates the taxes paid by a janitor and the taxes paid by the people who live in the Park Avenue building names after Leona Helmsley who famously claimed that 'only the little people pay taxes' after she was convicted of tax evasion because even the low percentage of taxes she had to pay were beneat
h her. 

The janitor pays a higher tax rate than the average earnings of the Helmsley building's inhabitants despite earning over 35 times as much money.  Only little people pay taxes.  This much is obvious.


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