10 FACTS ABOUT OUR CURRENT TAX SYSTEM
THE CURRENT TAX SYSTEM GIVES US THE FOLLOWING:
THE FOLLOWING SHOWS OUR TAX SYSTEM IS UNFAIR, RUINING OUR ECONOMY, THREATENING OUR DEMOCRACY, TEARING APART OUR SOCIETY, OUTRAGEOUSLY COMPLEX, INEFFICIENT AND WASTEFUL.
1. In a recent year, billionaire Warren Buffet paid total taxes amounting to 11% of his $8 billion investment income and gains. In 2010 Mitt Romney paid 14% of his investment income and gains. In the same year, a typical, single minimum-wage worker paid a tax rate of 34% of her $14,500 wages (about 3-fold higher).(See Note 1 below) (link)
3. The top 400 income earners in the latest IRS report earned an average $260 million and paid an average federal income tax rate of 17% of their incomes, down from 30% in the early 1990's (see graph at right). Some in the top 400 pay no (0%) federal income tax, and nearly all make much more in investment gains that does not get counted as taxable income. They can avoid ever paying taxes on investment gains by not cashing them in, borrowing against them, and then passing the gains to their kids, at which point the gains can be cashed in tax-free. The top 400 pay little or no payroll (Social Security) taxes. Meanwhile America's typical (median) worker made $26,000 and paid 23.4% (vs. the top 400's 17%) of it in federal income and payroll taxes (link, link, link)
4. State and local taxes shift even more of the tax burden on the working-poor and middle-class. A typical millionaire's "property tax" is 0.08% of his actual total property (his net-worth), while is a middle-class family's "property tax" is often 10% of their net worth (125-fold higher). A typical millionaire pays 0.7% of his income and investment gains in sales taxes, while a middle class family pays 3.5% of their wages (5-fold higher). (See Note 4 below)
6. History shows that tax cuts for the wealthy have been a 30-year "failed stimulus package," which racked up half our current national debt. (link) President Reagan claimed cutting taxes for the wealthy, would make the economy flourish. Since then the "job creators," the top 20%, have accumulated 87% of the nation's wealth, and yet our average GDP growth has dropped 25%, we have had the worst recession in 80 years, and now we recently had four years of over-7% unemployment. If 30 years of low taxes for the wealthy "job creators" hasn't trickled down yet, it's time we gave up on the idea. (See Note 6 below)
7. Far from stimulating the economy, the tax cuts for the wealthy have ruined our economy. Our tax system rewards investment over work, and this leads to recessions, unemployment, and poverty. (See Note 7 below)
8. Our tax system's breaks for the wealthy and the wealth concentration it produces has multiple deleterious social effects including erosion of democracy and lower life expectancy for all. (See Note 8 below)
9. Our tax system is underfunding government. The recessions caused by our tax system and the multiple tax breaks for for the wealthy lead to underfunding of important priorities like education, basic research in future technologies, maintenance of our economic infrastructure, environmental protection, etc.; all critical to future economic growth. Chronic underfunding of government leads to a ballooning national debt, now about $15 trillion dollars ($50,000 per person), more tax revenue lost to pay interest on this debt, less credit available for the private sector, and enriching and empowering foreign nations that lend us money.
10. Our federal tax code alone consists of about 60,000 pages. It is so complex and opaque that everyone suspects that there are, buried within it, special provisions that benefit the powerful and well-connected. They are right. Each year Americans spend an estimated 6 billion hours deciphering our tax code at a cost of about 200 billion dollars.
Notes and details for the above tax facts:
1. Most other "tax facts" you read base their figures on the progressive federal income tax and conveniently ignore the other 70% of taxes paid in this country. Social Security, real estate, sales and gas taxes shift the tax burden to the poor and middle class. The above figures include taxes at all levels of government (yes, including corporate and other indirect taxes).
2. Consider how much money that wealthy investors in corporations could have accumulated if they had no educated employees (public education), roads (to ship their products), cheap oil (subsidies, the military), senior consumers (social security, medicare), financial bailouts, the internet, on and on.
4. This is because in the US property taxes are levied only on real estate and on the total value of the home, including the part effectively owned by the bank. The above figures are based on a mill rate of 200, a young middle-class family, who just used all their savings to make a 20% down payment on a $250,000 home, and a millionaire in the same city with $50 million in investments, including a $2 million home. Sales tax calculations are based on a 7% sales tax the middle class family spending half the income on taxable goods and services and the millionaire earning $5 million in investment gains and spending $500,000 of it on taxable goods and services.
6. Average real GDP growth decreased 25% comparing the 30 years since Reagan to the 30 years prior, when the top tax rates were much higher. The best economy we ever had was during the brief period Clinton was able to raise taxes on the wealthy investors and bring them close to the tax rates workers pay (the GOP predicted that the tax increase would "kill jobs" and ruin the economy). The worst economy we ever had was when when the GOP slashed taxes on wealthy investors. That was the last time the top 1% accumulated 40% of the nation’s wealth, as they have now, and was immediately followed by the Great Depression.
7. Mr. Buffet, for example, pays a tax rate on his investment gains that is almost 4-fold lower than a middle-class family pays on its wages. This distortion of market forces and the resulting wealth concentration leads to too many investment dollars chasing too few worthy investments. Supply exceeds demand, investment prices climb, leading to an investment bubble. These market forces overwhelm any attempts to regulate the financial markets. The investment bubble will inevitably burst (particularly with higher tax rates on the vast middle class suppressing consumption). The burst bubble in turn triggers or exacerbates a recession. Then all but the very wealthiest are at risk for losing their jobs, their homes, their kid's college funds, and their retirement savings.
8. Our tax system contributes to the vicious cycle of concentration of wealth and political power in the very rich. It hampers social mobility, limiting education opportunities for the poor and middle class, which means fewer citizens realize their full potential, which in turns weakens our nation's economy and its capacity to act as a force for good in the world. Research shows that economic disparity in developed nations is associated with the following at all levels of society: worse general health, lower life expectancy, teenage pregnancy, higher infant mortality, more psychiatric disease, more substance abuse, more homicides, low societal trust and cohesion.
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QUIZ: Mitt Romney pays property taxes of $226,000. This amounts to about 0.1% of all his “property” (his accumulated wealth, his net worth). What percent of all their property (net worth) does a median family in the US pay (median house value=$170,000; median property tax rate=1.4%; median net worth (includes morgage debt) =$70,000)?
ANSWER: A median family pays 3.4% of all their property in property taxes. That’s 34 times Romney’s rate.
FAIR SHARE TAX REFORM: A comprehensive tax reform plan for federal, state and local governments, that reduces total taxes on the working-poor and middle-class by thousands each year, encourages stable economic growth, vastly simplifies our tax laws, and slashes the national debt.
CONTACT ME: fairsharetaxes@att.net