Shit I think y’all should know

Hey there! My daughters have joined a strange new cult. In this cult, all bloggers go to Hell. Thus, my daughters are determined to save me by preventing me from ever blogging again. It is the only possible explanation for why they are so dead set on keeping me off the computer. I have lots of ideas roaming about in the Fertile/Febrile Fokker Mind. Are they on my blog? No. Because my daughters are trying to save me from Eternal Damnation.

Anyway, I thought I could at least sneak in a bit of information. This was originally posted by John Sides. I found it to be enlightening. Plus, it gives me ammo when Tea Baggers are griping they pay too many taxes. (What? Sewers, roads, schools, fire departments, and the military is free? STFU and pay for the services you need and count on. ) I got this from The Monkey Cage. I dig it, because I am one of those nutty people who tries to get information before I form an opinion.

5 Myths about Federal Taxes

My colleague Bob Stoker walked into my office yesterday and, apropos of Andy’s post about Greg Mankiw, noted that there sure was a lot of misinformation about taxation. I suggest he write a corrective, and here it is.

Myth #1: Federal taxes are higher than they have ever been.

According to the Congressional Budget Office (CBO), the opposite is true. Budget analysts typically measure the federal tax burden as a proportion of GDP because this accounts for the amount of our economic output that is devoted to paying federal taxes as the economy grows or contracts. Federal taxes from all sources were 14.8% of GDP in 2009 and are projected to be 14.6% of GDP in 2010. See the CBO report, “The Budget and Economic Outlook: An Update,” August 2010, Table 1-2 (pdf).

By comparison, the lowest tax burden during Ronald Reagan’s Presidency was 17.3% of GDP. Under President Bush federal taxes reached their low point at 16.3% of GDP. See the CBO historic budget tables:

Myth #2: People at the top of the income distribution pay more than half of their incomes in federal taxes.

According to the Tax Policy Center, the average federal tax rate in 2009 (including income taxes, payroll taxes, estate taxes, and corporate taxes) among the top 20% of the income distribution was 22.9%. Among the top 1% of the income distribution, 26.1%; among the top 0.1 of the income distribution, 27.9. The top one tenth of one percent of the income distribution paid an average federal tax rate of less than 28%.

Myth #3: Poor people don’t pay taxes.

It would be more accurate to say working poor families with several children don’t pay federal taxes. According to the Tax Policy Center, the average federal tax burden on the bottom 20% of the income distribution is negative…that means, people in this income range typically get more money back from the federal government than they pay in federal taxes. However, this is a consequence of the Earned Income Tax Credit (EITC) and the Child Tax Credit. For most families the most generous benefits are provided by the EITC and you must work to receive this credit. The current value of the credit is $5,657 for families with three or more qualifying children. Although modest EITC benefits are available to childless taxpayers, the credit is much more generous for families with children. When the generous benefits that are provided for working poor families are aggregated with others in the bottom 20% of the income distribution, the overall federal tax rate for this group is negative.

Myth #4: Federal marginal tax rates always go up as income increases.

The marginal tax rate is the rate that is applied to the last dollar of taxable income. Although it is generally true that federal marginal tax rates increase with income (because the personal income tax is progressive), this is not always true. The FICA tax that supports Social Security and Medicare is a significant portion of the federal tax burden for many taxpayers. The part of the FICA tax that supports Social Security (a 6.2% tax on earned income that is paid by employees and employers) has an income cap (currently $106,800). Earned income above that cap is excluded from the tax. Beyond this, at present unearned income is entirely excluded from the FICA tax (though this is scheduled to change for the part of the FICA tax that supports Medicare under provisions of the federal health care reform). Because most calculations of the federal tax burden include both the employer’s and employee’s share, moving earned income just above the cap reduces the federal marginal tax rate by 12.6%. Here is a history of FICA tax rates from the Social Security Administration.

Myth #5: Only affluent people pay federal taxes.

It is true that people in the top 20% of the income distribution provided 67.2% of federal tax revenues in 2009. However, they receive 54.3% of cash income. Despite this however, most American households pay a share of the federal tax burden. Although 47% of households paid no federal income taxes, two-thirds of these households did pay social insurance taxes to support Social Security and Medicare. The “deadbeats” who paid neither tax were mostly elderly people and people with annual incomes below $20,000. See again the analysis of the Tax Policy Center:

So there you go, now you know. Go forth and walk in enlightenment. And try to eat some good food (Bacon! Cheese!) and get laid, ‘cause I want only the best for my Fabulous Fokkerites.

About Betty Fokker

I'm a stay-at-home feminist mom.
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16 Responses to Shit I think y’all should know

  1. Bethany says:

    Nice. I think I kind of knew some of this, but it’s nice to see it laid out because dear god, so many people gripe about taxes without any sort of reason beyond “mine!” and then pretend not to actually use roads, sewage, or other public systems.

  2. Sure Thing says:

    I’m one of those annoying people who do my taxes, file them early and walk around telling people, “I did my taxes, you?” Because I’m enforcing my superiority this way. And I use roads and sewage.

    And hope to work in schools for a salary.

    • Betty Fokker says:

      My brother is a fireman. He risks his life for others. Others pay for this service via taxes. I support the troops, so I think taxes are a necessary evil. Good for you, and thank you for paying my brother a salary and providing housing for those serving in the military, among other things :-)

  3. I pay my taxes, but sometimes cringe at the lack of deductions available even though I am a single mom. I need to educate myself on what gets paid for by federal income taxes and what gets paid for by my local sales taxes. But I am all for any system that takes care of teachers, firefighters, police, EMTs and the military.

    • Betty Fokker says:

      I understand the cringe. I really do. It is my own personal philosophy that if billionaires and huge corporations like McDonald’s paid more taxes, then single moms could pay less. Apparently this is crazy talk.

  4. lunarmom says:

    Well done, says the woman married to a cop that doesn’t make much above a mid-range salary on the national povery level guide.

  5. toni says:

    Please tell Bob thank you for this. It’s nice to have in one handy spot to help refute misinformation.

    One ‘duh’ question, though — what’s GDP. I’ve heard of GNP, and didn’t want to assume it’s the same thing.

  6. toni says:

    hmm, okay, I’m going to have to research that to see what the difference between GNP and GDP ultimately mean. You have me curious now. ;)

  7. Thanks for the injection of reason into discussions that generally devolve quickly into “uh-uh” and “uh-huh”, followed by “is so” and “is not”.

    As for what taxes pay for what, in most US counties (or their equivalents) it is the county property taxes that pay for things like the sheriff’s office, the county jail, the county fire department and (if available) the ambulance service. In some places, the tax base is increased by having some sort of users’ fee.

    I am a fire/rescue dispatcher and 9-1-1 operator for my north Florida county. Here, we are under the supervision (and budget) of the county sheriff’s office. Our department answers all the 9-1-1 calls in the county (whether they are for law enforcement or fire or ambulance), process those calls (in a computer system), send the right help to the right place as quickly as possible and appropriate, provide backup information to help our officers and firefighters and paramedics remain safe and be effective. We also provide pre-ambulance medical instructions to help our callers help injured or ill people, from bleeding control to airway maintenance to CPR to childbirth. And we do it 24/7, all year, including all holidays.

    It’s a demanding, rewarding job/profession, yet our salary has not seen a cost-of-living increase in the four years I’ve been there, despite the measurable and verifiable actual increases in the cost of living. Indeed, the refusal of local taxpayers to consider the necessity of paying property taxes at their current rates (gods forbid you mention an increase!) has meant that the pool of money available to the county commission to fund our department has shrunk. And that means our budget has shrunk, painfully, at a time when people in the county need our services more, because (as you can imagine) times of economic hardship and high unemployment tend to increase crime rates (burglaries, robberies, domestic violence, child abuse, even homicide), not shrink them.

    Yet the people who don’t want to pay their fair share of the taxes are the same folks who expect us to have an officer or firetruck or ambulance at their place of need NOW and want to know WHAT’S TAKING THEM SO LONG, despite the fact that their own smallmindedness led directly to the reduction of the numbers of units on the roads or stopped the expansion of fire/rescue services to new stations in the county.

    It’s a stupid spiral and a source of constant frustration.

    BTW, our salary in the comm center starts at about $3/hr above the federal minimum wage.

    OK, I’ll get off my soapbox and repeat my thanks for your bringing attention to the truth.

    • lunarmom says:

      Thank you Toni! That is EXACTLY how it is here in our county (in Oregon). My husband and son are deputies, and we have lived with this unacceptable situation for years, decades in fact. Thank you for saying it so perfectly, but more so, thank you for doing your job and keeping guys like the two I love safe.

    • Betty Fokker says:

      Thank you for your service to the community! There are some of us still out there who appreciate the hard work of emts, fire fighters, police, and other public servants! I am completely bewildered as to where people think the money comes from if not from taxes. Fairies? Pixies?

  8. Toni says:

    I thank you both for your support and appreciation. Most people have no idea that the person who answers their requests for help or who sends the police/ambulance/firetruck is not just a clerk or receptionist, but instead is (in most cases) a dedicated and highly trained professional. It warms my heart to know you are not among them.
    You know Rachael Herron (Yarnagogo) is a fire dispatcher, also, in California, don’t you? She’s not just a knitting and writing rock star, but also an amazing person! If you drop in and say hi to her, feel free to tell her I sent you!

    • Betty Fokker says:

      I had no idea! I’ll be sure to say hi when I stop in … later, because right now the natives are restless and I hear drums in the dark. My girls are coming and they are demanding BEDTIME STORIES :-)

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