Friday, July 22, 2011

Who doesn't pay taxes?

A recent conservative meme is that more than 50% of Americans don't pay any income tax, with the implicit (or explicit) conclusion that most American's aren't contributing their "fair share." This idea becomes a justification for cutting Social Security and Medicare, since the people benefiting clearly aren't paying their fair share.  Naturally, if you just talk about income taxes you miss state and local sales taxes, real estate taxes, Medicare taxes, Social Security taxes and gasoline taxes.  But those can't be significant right?

But let's not muddy things too much - we'll limit our focus to just Federal taxes and ask the question:
Do the data support the idea that most Americans aren't contributing to Federal revenue?  
 The figure below shows the percentage of revenue from the three principal sources (~90% of revenue): individual income taxes, corporate income taxes and Social Security/Medicare taxes.

Looks to me like anyone paying Social Security/Medicare is doing their share, whether or not they pay income taxes. Indeed, the general trend since 1970 is that those paying SS/M are paying an increasing share of the Federal revenue.

I'm not sure what the "fair share" for corporations should be, but it looks to me like they've been treated rather well.

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