Just in time for tax filing season, the Tax Foundation and
Congress's Joint Committee on Taxation have compiled some useful
facts about the federal tax system. Following are a few worth
thinking about as taxpayers write their annual checks to Uncle
Sam.
-- In 2005, the federal government took $2.4 trillion out of the
pockets of the American people. To put this number into context,
it is about the same as the size of the entire U.S. economy in
1959 in inflation-adjusted terms. Only two other countries on
earth have economies as large as our federal government: Germany
and Japan - and Germany just barely makes the cut, with a gross
domestic product of $2.7 trillion. China, which everyone is so
alarmed about, has an economy significantly smaller than the
federal government, with a GDP of $1.9 trillion - about equal to
what the U.S. raises just from taxes on individuals.
-- Contrary to popular belief, the vast bulk of federal taxes are
paid by the wealthy. According to the JCT, in 2006, 53.7 percent
of all federal income taxes were paid by those with incomes over
$200,000. Those with incomes between $100,000 and $200,000 paid
28.3 percent of all individual income taxes. Thus those with
incomes over $100,000 paid 82 percent of the total. They also paid
44.4 percent of all payroll taxes.
-- Those with incomes below $40,000 paid no federal income taxes
at all in the aggregate; the positive liability for those who paid
anything was more than offset by tax rebates from the Earned
Income Tax Credit for many more who paid nothing. In total, the
EITC put $41 billion into the pockets of low-income workers in
2005, 91 percent of it being paid to those with no income tax
liability. However, according to the Tax Foundation, three-fifths
of Americans believe that it is wrong for anyone to pay no taxes
at all, that everyone should pay something to finance the
government.
[...]
-- The Alternative Minimum Tax is a rapidly growing federal tax.
Originally designed to tax only the rich, increasingly it is a tax
on the middle class. In 2005, the AMT affected only 1.3 percent of
those with incomes between $50,000 and $100,000. Unless Congress
acts, this percent will rise to 42.8 percent this year and over 50
percent next year. This illustrates the problem with all
soak-the-rich tax proposals - eventually they end up taxing the
middle class, too.
