The Rich and Taxes

Excellent quote from Salon:

I am speaking here semi-professionally, as an economics professor (currently at Purdue, but I taught at the University of Chicago for five years, so my conservative bona fides are in order). It is not the case that the rich pay an overwhelming portion of taxes. They pay an overwhelming portion of income taxes. When you figure in payroll taxes and sales taxes, the distribution skews much more strongly toward the poor and middle-income Americans. This is because payroll taxes are only levied on the first (roughly) $70,000 of income, so you effectively pay 13 percent of every dollar of income up to that point, and nothing thereafter.

Of course, the fraction of income that is consumed falls rapidly with income, so the rich pay a much lower percentage of their income in sales taxes. These other taxes comprise roughly 45 percent of the federal budget, and a much higher percentage of state and local budgets. By defining the debate in terms of income taxes, rather than the entire tax burden, the Bush camp has made a reasonable case for a tax cut skewed heavily toward the wealthy. Now perhaps a case could be made that the wealthy should pay a lower burden than the rest of us, or that there is a particular reason to pay attention to income taxes rather than all the other taxes that eat away at our paychecks. But the Bush camp is not making this case; they are trusting in the public’s inability to uncover this fundamental dishonesty.

— David Hummels

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