Post Tax Day Thoughts

Will get to my thoughts on Spain hopefully tomorrow.  In the meantime here's some post tax day thoughts from an article written in the Washington Post yesterday by Robert Samuelson:  {Highlights mine.}

1) Historically, the income-tax burden isn’t high. In 2014, federal individual income taxes amounted to 8.1 percent of the nation’s income (gross domestic product). It’s been noticeably higher. From 1995 to 2000, it averaged 8.9 percent of GDP. The tax cuts of George W. Bush — most of which have been accepted by the Obama administration — have lightened the income-tax burden. For about 80 percent of Americans, payroll taxes for Social Security and Medicare exceed income taxes, says the Treasury Department.

2) The remaining income-tax burden falls mainly on the rich and the upper-middle class. From 1979 to 2011, the share of income taxes paid by the wealthiest 1 percent rose from 18 percent to 35 percent, and the share paid by the richest fifth (including the top 1 percent) rose from 65 percent to 88 percent, says the Congressional Budget Office. This reflects two factors: growing income inequality (the rich pay more because they have more) and lower tax rates on the middle class. Average income-tax rates on the middle fifth of Americans have dropped from 7.4 percent in 1979 to 2.4 percent in 2011, reports CBO. 

3) Even this lightened tax burden is increasingly invisible. Most people never see the money they pay in taxes. Income taxes are not only withheld; they’re overwithheld, so that many taxpayers get a refund. The Internal Revenue Service is running a mandatory saving system. (As of early April, the IRS had issued 77 million refunds worth $217 billion.) Payroll taxes are also automatically deducted. 

4) The IRS is also a welfare agency: The tax system is so complex that almost everyone benefits from some break. In 2011, 28 million poor families received $63 billion under the Earned Income Tax Credit, reports the Urban Institute’s Elaine Maag. Homeowners get the mortgage interest deduction. Parents get the child tax credit. Itemizers get the charitable deduction.

Link:  Washington Post:  The Tax Revolt RIP?  {You may have to register with the Washington Post to read this article.}