How Republican Pundits Got The Tax Debate All Wrong
Have you heard Republican pundits claim that poor folks don’t pay taxes? The Center on Budget and Policy Priorities gives us a reality check in its latest analysis.
The Republican-cited figure that 51 percent of households didn’t pay federal income tax in 2009 is a temporary spike caused by the 2008 recession. In 2007, 40 percent of households did not owe federal income tax. (Keep in mind that most of those are elderly, unable to work due to a serious disability, or students.) These figures cover only the federal income tax. In fact, low- and moderate-income people pay a much larger share of their incomes in other federal tax like payroll taxes and sales tax on consumer goods — aka “excise” taxes. (Graphs 1 and 2)
Most state and local taxes are regressive, meaning that low-income families pay a larger share of their incomes in these taxes than wealthier households do (Graph 3).
The fact is that most people who don’t owe federal income tax in a given year do pay substantial amounts of other taxes — even more than their high-income counterparts. Although the federal tax system is progressive overall, state and local tax systems are regressive and undo a significant share of that progressivity. There is nothing wrong with having one part of the overall tax system shield low- and moderate-income households, who pay substantial amounts of other taxes and generally pay federal income tax as well in other years.