Thursday, December 23, 2010

Great Overview of Who Pays Taxes in US

This link is to research on US tax policy. It describes the federal, state and local taxes and it shows the contribution of income groups to each tax, as well as each groups contribution to the total taxes collected by government. There is so much false information about taxes in the media, and especially floating around the internet, that every American should have access to the best available information. Government does at least two very important things: it raises money through taxes and it spends the money. Every citizen should understand tax policy and what government does with the money. This is an excellent primer on tax policy. It's 14 pages in length but it is well written and a couple of tables summarize much of the detail.

The conclusion of the research is that the federal income tax is progressive, but most state and local taxes are regressive. The entire tax system is slightly progressive (actually it is close to a flat tax system) but it would need to be more progressive if we wanted to compensate for increasing income inequality. This study does not compare tax policy in the US with that of other industrialized countries, but there are studies which show that taxes in the US are among the lowest in the world by a wide margin. Although nobody likes to pay taxes, there is less criticism of taxes in many countries with much higher tax rates. This may be explained somewhat by differences in value systems, but people in high tax countries believe that the money is better spent than most Americans believe about government spending. There is also much greater anti-government sentiment in the US than in most industrialized countries. This of course, has been well cultivated in the US.

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