And while we’re talking about taxes and whatnot, there’s an excellent post at Skeptic Money that looks at the popular claim that half of Americans “don’t pay taxes”.
That’s how Rick Warren put it in a tweet recently, expressing his annoyance that so many of his countryfolk have so little income that the law currently doesn’t consider it justified to claim any tax from them whatsoever. It’s the poor who should contribute more.
Of course, this is complete bullshit.
Significantly less bullshit is the original claim, before it got mangled and distorted into an ideology that someone found more comfortable: nearly half of American households pay no income tax.
That’s an approximation of the Tax Policy Center’s findings a couple of years ago, and although it’s a very different thing from what Rick Warren said, it still sounds rather shocking at first. It seems to imply that a lot of people are getting away with making no significant financial contribution to the welfare of the country as a whole, which seems a bit much, given that many of these people are surely making a liveable wage.
But that only seems like a problem until you consider the other kinds of tax people pay, beyond the federal income tax.
America’s got a lot of different kinds of taxes.
Sales tax means that buying goods – your average day-to-day stuff – often requires you to throw money the government’s way. Gasoline tax means you’re getting taxed by the government every time you fill up your car. Property tax hits homeowners and renters alike. And even people who don’t pay federal income tax get lumped with something called a FICA tax, which pays for things like Social Security.
Skeptic Money uses a hypothetical example and some estimated numbers, to show just how wrong it is to describe the poorest half of Americans as paying “no tax”, and how misleading it is to declare that they pay “no income tax” without providing any context. When all the above deductions are considered, as the blog post describes: “So… no income tax; just 30% of their income paid in taxes.”
This is what billionaire Warren Buffett is talking about when he says that his last tax bill, as a percentage of his taxable income, was lower than that of anyone else working in his office.