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| Monday is Tax Day – and if you're confused, you're not alone | Monday is Tax Day – and if you're confused, you're not alone |
| (about 20 hours later) | |
| You might believe that Monday is the American sociopath's favorite day: Tax Day. Smart people have already done their taxes, while those who may have been too busy are struggling to ensure that Mr Tax Man doesn't audit them. The truth about people hating the amount of money they spend on taxes is actually far more complex. | |
| Gallup finds that most Americans think the amount they have to pay is fair. Last year, the percentage came in at 59%. It has never gone lower than 57% since the first of the Bush tax cuts were signed into law in 2001. Even during the late 1990s, the percentage was right around 50%. | |
| The liberal cynic might suggest that rich people are driving this rise in the proportion of taxpayers who believe their contribution was "fair" in the years following the Bush tax cuts. To a degree, he or she would be right. | |
| As you can see, those belonging to households making more than $75,000 are far more likely to say their taxes are not unfair than they were at the beginning of the century. The 17-point drop from 2001 to 2012 is larger than any other income group. Middle-income Americans too, however, have also seen a drop from 51% to 38% in the last 12 years. | As you can see, those belonging to households making more than $75,000 are far more likely to say their taxes are not unfair than they were at the beginning of the century. The 17-point drop from 2001 to 2012 is larger than any other income group. Middle-income Americans too, however, have also seen a drop from 51% to 38% in the last 12 years. |
| The most interesting point on the graph, in my mind, is how lower-income Americans feel. You'll note that at the turn of the century they were most likely to believe that their tax rate was not unfair. Then, just as Barack Obama, a Democrat, became president, there was an upswing in the percentage of lower-income families thinking that their taxes are unfair. | The most interesting point on the graph, in my mind, is how lower-income Americans feel. You'll note that at the turn of the century they were most likely to believe that their tax rate was not unfair. Then, just as Barack Obama, a Democrat, became president, there was an upswing in the percentage of lower-income families thinking that their taxes are unfair. |
| The percentage of lower-income people who now believe the tax they pay is unfair is actually higher than that among middle- and upper-income Americans. One would have to think that most of this upswing is due to the belief that the slow economic recovery is hitting lower-income households hardest. | The percentage of lower-income people who now believe the tax they pay is unfair is actually higher than that among middle- and upper-income Americans. One would have to think that most of this upswing is due to the belief that the slow economic recovery is hitting lower-income households hardest. |
| On the other hand, the average tax rate – including federal and social security and Medicare employee taxes for four-person families at one-half the median income – is at its lowest rate ever. In fact, they are negative because of earned tax credits. The issue is that marginal tax rates are actually quite high for the working poor, at 39% for the most recent year. See here for a far more solid definition of average versus marginal tax rates than I could ever give.) | |
| As former Reagan administration official Bruce Bartlett points out: "The tax credit is phased out at a rate of 21.06% for families with two children after their earned income reaches [$17,590 for 2013]. The loss of a refundable credit is exactly the same, economically, as paying more taxes, and this is what imposes such high marginal rates on the working poor." | As former Reagan administration official Bruce Bartlett points out: "The tax credit is phased out at a rate of 21.06% for families with two children after their earned income reaches [$17,590 for 2013]. The loss of a refundable credit is exactly the same, economically, as paying more taxes, and this is what imposes such high marginal rates on the working poor." |
| The 39% marginal tax rate for those in the working poor is actually a higher marginal rate than for even the rich. So by earning a little more than the very poor, struggling families lose out on the ability to earn maximum credit. Combine that with any additional state and local taxes, along with tough economic times, and you can understand why lower-income folks are feeling the amount they pay is unfair. | The 39% marginal tax rate for those in the working poor is actually a higher marginal rate than for even the rich. So by earning a little more than the very poor, struggling families lose out on the ability to earn maximum credit. Combine that with any additional state and local taxes, along with tough economic times, and you can understand why lower-income folks are feeling the amount they pay is unfair. |
| The most amazing thing is that the rest of the country doesn't see it that way. The percentage of Americans who think lower-income people are paying too low a tax rate is at a 20-year high. The percentage who think that lower-income Americans are paying too much in taxes is also at a 20-year low. | The most amazing thing is that the rest of the country doesn't see it that way. The percentage of Americans who think lower-income people are paying too low a tax rate is at a 20-year high. The percentage who think that lower-income Americans are paying too much in taxes is also at a 20-year low. |
| What's the main factor driving this change? It's that more than two-fifths of Republicans feel that lower-income people aren't paying their fair share. The reason is likely because lower-income households pay no federal income taxes. | What's the main factor driving this change? It's that more than two-fifths of Republicans feel that lower-income people aren't paying their fair share. The reason is likely because lower-income households pay no federal income taxes. |
| Whether or not it's fair just to look at the average federal tax rate and not local rates as well federal marginal rate is a question you'll have to answer for yourself. | Whether or not it's fair just to look at the average federal tax rate and not local rates as well federal marginal rate is a question you'll have to answer for yourself. |
| On the opposite end of the spectrum, most Americans, 62%, agree that upper-income Americans pay too little. That, of course, is opposite to what upper-income Americans believe, as discussed above. | On the opposite end of the spectrum, most Americans, 62%, agree that upper-income Americans pay too little. That, of course, is opposite to what upper-income Americans believe, as discussed above. |
| The trend of upper-income Americans' self-perception and how the majority sees them is similar. Just like members of upper income, the percentage that thinks upper-income Americans pay their fair share is up. Now 25% think upper-income Americans pay the right amount – nine points higher than 20 years ago. | |
| Finally, the majority of Americans agree with the middle-income bracket's perception of itself. Back in 1992, just 36% of Americans thought middle-income Americans paid their fair share, while 57% thought they paid too much. Since the Bush tax cuts, the percentage has changed dramatically. Now, 56% of Americans think middle-income Americans pay their fair share and only 36% say they pay too much. This 36% matches nicely with the 38% of middle-income Americans who think they pay a fair amount. | Finally, the majority of Americans agree with the middle-income bracket's perception of itself. Back in 1992, just 36% of Americans thought middle-income Americans paid their fair share, while 57% thought they paid too much. Since the Bush tax cuts, the percentage has changed dramatically. Now, 56% of Americans think middle-income Americans pay their fair share and only 36% say they pay too much. This 36% matches nicely with the 38% of middle-income Americans who think they pay a fair amount. |
| So there you have it. Most Americans think they pay their fair percentage in taxes, and that percentage is higher than 15 years ago. An increasing proportion of upper- and middle-income people say their share has grown fairer during this period, and most Americans agree with their self-assessment. Most Americans believe, though, that the rich should still pay more. Lower-income Americans have an increasing sense that the amount they pay is too high, while most Americans are increasingly believing it is too low. | So there you have it. Most Americans think they pay their fair percentage in taxes, and that percentage is higher than 15 years ago. An increasing proportion of upper- and middle-income people say their share has grown fairer during this period, and most Americans agree with their self-assessment. Most Americans believe, though, that the rich should still pay more. Lower-income Americans have an increasing sense that the amount they pay is too high, while most Americans are increasingly believing it is too low. |
| Overall, it's a muddled picture … just like, I imagine, Tax Day is for most. |