The Tax Burden
December 1, 2012
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The New York Times published a very interesting article on taxes. Most importantly it is accompanied by great graphics illustrating the changing tax burden of households by income bracket over the period 1980 to 2010. The taxes covered include federal taxes, payroll taxes, state and local taxes, and corporate taxes.
The screen shot below highlights the share of yearly income paid in combined federal and state and local taxes by households in different income brackets. As one can see, the tax burden fell for every income bracket, with those at the top enjoying the greatest reduction. There is no getting around the fact that tax rates, at least for the wealthy, must go up if we are to adequately fund necessary programs.
This combined view of our tax burden masks a striking difference between the trends in federal and state and local tax burdens. While the federal tax burden went down over the period 1980 to 2010 for households in every income group, the state and local tax burden rose for households in every income group.
Significantly, and perhaps explaining the strength of the anti-tax movement, state and local tax burdens rose most for households in the lowest income brackets. The same is true for the payroll taxes. The screen shot below shows the trends in both state and local and payroll tax burdens for all income groups.
As the Times article notes, “Public debate over taxes has typically focused on the federal income tax, but that now accounts for less than a third of the total tax revenues collected by federal, state and local governments.” Clearly, tax reform needs to take place at all levels of government. But that is only one side of the picture. Attention must also be given to the pattern and beneficiaries of government spending.