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10 Inconvenient Truths for Tax Day

With Tax Day again upon us, two story lines will predictably dominate the media coverage on April 15th. In their perpetual war on taxes, conservatives will claim that rates are too high even as those Americans who receive tax credits get "welfare." Meanwhile, frothing-at-the-mouth Tea Partiers will protest about being "Taxed Enough Already."

Sadly, the numbers tell a different tale. After a decade of the Bush tax cuts, it's clear that only one side is fighting - and winning - the class war. As for the Tea Baggers, they aren't merely, as Jon Stewart suggested last year, "confusing tyranny with losing." They are confused about so much more.

Here, then, are 10 Inconvenient Truths for Tax Day:

  1. Over 95% of Working Households Got Tax Cuts
  2. Only 2% of Tea Baggers Know Obama Cut Their Taxes...
  3. ...and 52% of Tea Partiers Think Their Taxes are Fair...
  4. ...and Think the Federal Tax Level is Over Double What It Is
  5. 1% of Families Earned 24% of All Income...
  6. ...and 57% of All Capital Income
  7. 400 Richest Taxpayers Saw Incomes Double, Tax Rates Halved
  8. Only 1 in 500 Families Pay the Estate Tax
  9. Corporate Taxes Have Plummeted as a Share of GDP
  10. The U.S. Loses $345 Billion a Year to Tax Evasion and Fraud

The details and data on each follow below.

1. Over 95% of Working Households Got Tax Cuts

As promised, President Obama delivered tax relief to over 95% of working American households. But you don't have to take the White House's word for it. As Nate Silver, Citizens for Tax Justice and others also documented, "President Obama Cut Taxes for 98% of Working Families in 2009."

As it turns out, the $160 billion in tax cuts provided to families and businesses this year by the Recovery Act also produced an average IRS refund of over $3,000, a 10% jump from last year.

2. Only 2% of Tea Baggers Know Obama Cut Their Taxes...

Sadly, furious Tea Partiers seem to be unaware that they are beneficiaries of "no taxation with representation." A CBS poll in February found that only 12%o of respondents thought that the Obama administration had already lowered taxes, while 53% believed they remained unchanged. But among the boiling Tea Baggers, the cognitive dysfunction was almost total:

Of people who support the grassroots, "Tea Party" movement, only 2 percent think taxes have been decreased, 46 percent say taxes are the same, and a whopping 44 percent say they believe taxes have gone up.

3. ...And 52% of Tea Partiers Think Their Taxes are Fair...

Tea Party confusion over the taxes they claim to detest manifest itself in myriad other ways. On the eve of their final Tea Party Express rallies this week in Boston and Washington, CBS asked Americans, "Is the income tax you will pay this year fair?" 62% of respondents overall said yes. Again, among the denizens of Tea Bag Nation:

Yet while some say the Tea Party stands for "Taxed Enough Already," most Tea Party supporters - 52 percent - say their taxes are fair, the poll shows. Just under one in five Americans say they support the Tea Party movement.

However, those most active in the Tea Party are less satisfied with the amount of income taxes they will pay. Fifty-five percent of Tea Party activists - those who have attended a rally or donated money - (about 4 percent of Americans overall) say their income taxes are unfair.

Why the sudden reasonableness from the Birthers, Birchers, Deathers and Deniers of the Tea Party? For one, as the Tax Policy Center detailed, income tax revenue as a percentage of gross domestic product (GDP) has been roughly unchanged for 50 years, hovering at around 8%. And as the Center on Budget and Policy Priorities recently showed:

Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data. That's true whether it comes to their federal income taxes or their total federal taxes.

4. ...and Think the Federal Tax Level is Over Double What It Is

To put this discussion of federal taxes and spending in context, it is also important to note that the Tea Party supporters can't. As former Reagan Treasury official Bruce Bartlett wrote last month, "For an antitax group, they don't know much about taxes."

Among other findings in a survey of the assembled DC Tea Baggers on March 16:

Tuesday's Tea Party crowd, however, thought that federal taxes were almost three times as high as they actually are. The average response was 42% of GDP and the median 40%. The highest figure recorded in all of American history was half those figures: 20.9% at the peak of World War II in 1944.

5. 1% of Families Earned 24% of All Income...


While all eyes have been on the supposed Tea Party movement, the United States has reached levels of income inequality not seen since 1929.

As the New York Times reported in August, "for most of the last 30 years, the incomes of the richest have risen rapidly." The Times' stunning chart neatly summarizes the massive upward redistribution:

Share of income for the top 1%: In 2007, 24% of income went to the 1.5 million families who earned more than $400,000.

Share of income for the bottom 90%: In 2007, 50% of income went to the 135 million families who earned less than $110,000.

(Only the steep Bush Recession led to the rise of the super rich hitting, as the Times put it, "a sobering wall.)

As the Center for American Progress noted, the Bush tax cuts delivered a third of their total benefits to the wealthiest 1% of Americans. And to be sure, their payday was staggering. The Center on Budget and Policy Priorities detailed that by 2007, millionaires on average pocketed $120,000 from the Bush tax cuts of 2001 and 2003. Those in the top 1% stashed an extra $45,000 a year. As a result, millionaires saw their after-tax incomes rise by 7.6%, while the gains for the middle quintile and bottom 20% of Americans were a paltry 2.3% and 0.4%, respectively. (Other CBPP studies demonstrated that the Bush tax cuts accounted for half of the mushrooming deficits during his tenure in the White House and will continue to do so over the next decade.)

6. ...and 57% of All Capital Income

Now as in the 1990's, Newt Gingrich has a "bold idea": "We eliminate the capital gains tax." During the 2008 campaign, Republican candidate John McCain proposed only slashing the capital gains rate from 15% to 7.5%. That change would have netted a $55,000 annual payday to McCain and his beer heiress wife Cindy, but would have delivered 60% of its benefits to families earning over $1 million a year.

An analysis by University of California-Santa Cruz Professor G. William Domhoff explained why:

A key factor behind the high concentration of income, and another likely reason that the concentration has been increasing, can be seen by examining the distribution of all "capital income": income from capital gains, dividends, interest, and rents. In 2003, just 1% of all households -- those with after-tax incomes averaging $701,500 -- received 57.5% of all capital income, up from 40% in the early 1990s. On the other hand, the bottom 80% received only 12.6% of capital income, down by nearly half since 1983, when the bottom 80% received 23.5%.

And as the New York Times uncovered in 2006, the 2003 Bush dividend and capital gains tax cuts offered almost nothing to taxpayers earning below $100,000 a year. Instead, those windfalls reduced taxes "on incomes of more than $10 million by an average of about $500,000." As the Times revealed in a jaw-dropping chart, "the top 2 percent of taxpayers, those making more than $200,000, received more than 70% of the increased tax savings from those cuts in investment income."

7. 400 Richest Taxpayers Saw Incomes Double, Tax Rates Halved

For Democrats wavering in their resolve to end the Bush tax cuts for the wealthiest Americans, shocking data released by the IRS in February should hopefully stiffen their backbones. Between 2001 and 2007, the 400 richest taxpayers doubled their annual incomes to an average of $345 million, while their effective tax rate plummeted to only 16.6% from 29.4% in 1993.

Noted tax journalist David Cay Johnston summed up the new data, "The incomes of the top 400 American households soared to a new record high in dollars and as a share of all income in 2007, while the income tax rates they paid fell to a record low. The numbers tell the tale of the widening chasm between the uber rich and everyone else:

In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16...

Adjusted for inflation to 2009 dollars, the top 400 enjoyed a 27 percent increase in their income, or nine times the rate of increase for the bottom 90 percent...Since 1992, the bottom 90 percent of Americans have seen their incomes rise by 13 percent in 2009 dollars, compared with an increase of 399 percent for the top 400.

8. Only 1 in 500 Families Pay the Estate Tax

The Republican scam over the so-called "death tax" is as bogus now as it was when President Bush first perpetrated it nine years ago. The House GOP budget, fittingly unveiled by Rep. Paul Ryan on April Fool's Day 2009, would eliminate the estate tax altogether. While Nevada Senator John Ensign griped, "It destroys a lot of small businesses and a lot of family farms and ranches in America," House Minority Leader John Boehner (R-OH) groused:

"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes."

As it turns out, of course, not so much.

As the Washington Post explained, under President Obama's proposal (exempting couples with estates under $7 million with a 45 percent rate for amounts beyond that) 99.76% of estates would pay no taxes whatsoever. While CBPP estimated that only 1 in 500 estates is impacted by the current law, the Tax Policy Center quantified just how few family farms or small businesses are actually impacted by the estate tax proposals under consideration:

We estimate that under the Obama proposal, 100 family farms and businesses would owe tax. (We define such estates as those where farm or business assets are valued at under $5 million and comprise the majority of estate assets.) The Lincoln-Kyl proposal would cut the number to 40. Even under current law, fewer than 2,700 family farms and businesses would owe tax.

And that wasn't good enough for Arizona's Jon Kyl, the second-ranking Republican in the Senate. Thanks to his obstructionism in December, the estate tax temporarily expired for one year as of January 1, 2010. (Barring new legislation in Congress, in 2011 the rate will jump back up to its pre-2001 Bush tax cut level of 55%, starting at $2 million per couple.) That could cost the U.S. Treasury billions this year. In the mean time, the message from the GOP to the wealthiest Americans is "die here, die now, pay less."

9. Corporate Taxes Have Plummeted as a Share of GDP

In the April 14th edition of the New York Times, David Leonhardt noted:

Over the last 30 years, rates have fallen more for the wealthy, and especially the very wealthy, than for any other group. At the same time, their incomes have soared, and the incomes of most workers have grown only moderately faster than inflation.

But for one other group of "persons" - corporations - the tax burden has also decreased dramatically.

This development is demonstrated by Exxon and General Electric, which despite their pre-tax incomes of $35 billion and $10.3 billion respectively paid Uncle Sam exactly zero dollars last year. As a 2008 GAO study found, about two-thirds of businesses of all sizes pay no corporate taxes at all to the United States government.

The irony was not lost on Tom Schaller, who wrote at FiveThirtyEight.com:

Income taxes as a share of GDP have held steady during the same time period. Corporate and excise taxes, paid mostly by businesses and which conservatives complain are inefficient and simply passed through to consumers anyway, have gone down as a share of that 20 percent. What's gone up are payroll taxes which fund programs like Medicare and Social Security that the same tea partiers were warning Obama and congressional Democrats not to touch in the same breath they were complaining about the socialist expansion of the healthcare system.

10. The U.S. Loses $345 Billion a Year to Tax Evasion and Fraud

When Phil Gramm and the Republican Party first launched their 1990's war on the Internal Revenue Service, the agency estimated its losses due to tax fraud, cheating and evasion reached $195 billion a year. By 2007, the revenue lost to Americans' government had catapulted to $345 billion.

If the declaration of Austin IRS suicide pilot Joseph Stack sounded familiar ("Well Mr. Big Brother IRS Man, let's try something different, take my pound of flesh and sleep well"), it should.

As David Cay Johnston describes in his book Perfectly Legal, the GOP during the Clinton administration waged an all-out war on the IRS, turning the priorities for auditing Americans upside-down. As Delaware Republican Senator William Roth's Finance Committee held hearings in 1997 and 1998, Mississippi's Trent Lott decried the IRS' "Gestapo-like tactics." Frank Murkowski (R-AK) similarly denounced those supposed "Gestapo-like tactics" while excoriating the Agency, "You don't need to send in armed personnel in flak jackets." Don Nickles of Oklahoma raged, "The IRS is out of control!" Meanwhile, GOP pollster and wordmeister Frank Luntz quizzed focus groups with his favorite question, "Which would you prefer: having your wallet or purse stolen or being audited by the IRS?" For his part, then Senator Phil Gramm in May 1998 denounced the agency and its director, Charles Rossotti. Peddling myths of jack-booted IRS agents tormenting American taxpayers, Gramm called on Rossotti to fire his 50 worst employees, before concluding:

"I have no confidence in the Internal Revenue Service of this country. You do not have a good system. This agency has too much unchecked power."

No surprise, Congress went on to pass and President Bill Clinton to sign the IRS Reform and Restructuring Act in 1998. And as Johnston documented, "In 1999, for the first time, the poor were more likely than the rich to have their tax returns audited." (Mercifully, that practice has been reversed under the Obama administration.)

As for Gramm and his ilk at UBS and other Swiss bank, the IRS is finally cracking down on the secret offshore tax havens that are costing the federal government billions each year. But the atmosphere of hostility towards the IRS and the basic civic duty of paying taxes remains. And that missing $345 billion represents about one-tenth of the total federal budget.

Joe Biden was right: Asking wealthier Americans to pay higher taxes is "patriotic."

(This piece also appears at Perrspectives.)

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41 Comments
ysbaddaden's picture
)O(

And they'll be the inevitable stories about long lines at the post office for last minute filers

Never mind you can file online

That's like sending erotic love messages to your sweetie by carrier pigeon.


Diabolus est Deus Inversus

Blue Lensman's picture

Intercept falcons?

CFAmick's picture

are all that rich; I think the top .1% are the truly wealthy. They're the ones who earn the most untaxed income and control the most wealth.

Rich H's picture

downright poor.

Samson-'s picture

the uber-wealthy are the problem. targetting the upper middle class, and putting them in the same category as the uber-wealthy, has the potential to backfire

Handypants's picture
...

Not to mention unfair.

The biggest concentration of wealth is in very few hands - that is the place to look.

We shouldn't be hitting any middle incomes - not even the marginally wealthy (I for one will never have to worry about being wealthy so I am a little biased)


"I know that there are people who do not love their fellow
man, and I hate people like that!
" ~ Tom Lehrer (1928 - )

fitley's picture

Yes CFAmick I agree with your intelligent statement that the top 1% aren't all that rich. Then again it's fun to agree with total jerkoffs talking bullshit.

Pete Seattle's picture

of his post.

he's making a distinction between 'rich' and 'wealthy'.
but it seems that being snarky and throwing names around is more fun than actual comprehending what you have read.

CFAmick's picture

The point being that since wealth is concentrated in the hands of the few, "the few" should be more accurately defined as the .1% than the 1%.

Alice X - Chomsky Nader's picture

Numbers for wealth are a more difficult to come by than for income.

The inequality of wealth in this country is even greater than that of income.

Off the top of my head, I will work on this later.

The top 1% (3 million people) begin somewhere between one and ten million in assets.

I would not call them middle class, they are members of the capital class.

The top .1% (300,000 people) begin well above that.

Forbes 400 are all billionaires.

I would welcome links to any documentation that can be found.


statusquObama, change you can only pretend in

Handypants's picture

Right on the money and good stuff.

One small correction . . .

"Asking TELLING wealthier Americans to pay higher taxes is "patriotic.""

We have always asked - the wealthy have always just said no. Time to make them do right by the country and all of our citizens.


"I know that there are people who do not love their fellow
man, and I hate people like that!
" ~ Tom Lehrer (1928 - )

Samson-'s picture

it's clear that only one side is fighting - and winning - the class war

the ruling class has done a masterful job is cleansing our political discourse of class discussions. which is an impressive feat considering our 3rd world-like class inequality. getting large swaths of the population to reject the notion of classes in america is similar to 'the greatest trick the devil ever pulled'.

Blue Lensman's picture

It helps to own both the megaphone AND the soapbox!

BigD145's picture

This.

BlueSam's picture

necessary to enforce dutiful compliance by those you are convincing of such.

Liberal AND Proud's picture

Well said...and 100% spot on.


Vote GOP and move forward to the 18th Century.

SonOfLiberty's picture

The uber-wealthy are a better RACE than you or I. They have better genes. They're the beloved of all gods. They are the masters of both the natural and supernatural.

They control the comings and goings of man. We are the sheep, and they are our shepherds. Do not blaspheme their great and holy name with your bleetings!

Baaah-lasphemy!

curtilingus's picture

Why should anyone be a billionaire? Seriously. We have individuals and family lines that are too big to fail.

And it makes me feel very small.

I'd work off the clock directly for him (as part of my duties) some 20 hours a week. In his largesse, he'd tip me $100. about every other week.

What a guy.

savannah43's picture

Medicare when they retire that they've paid into all their working lives feel entitled.

Rich H's picture

.

BigD145's picture

You don't make money by giving it away... to private citizens or the gov't.

Liberal AND Proud's picture

Giving?

Let's see...police, fireman, roads cost money.

Social programs reduce crime...that's a fact (and it's not about afterschool basketball games for blacks).

There is a benefit to every tax that is collected. EVERY ONE. It's is not..."giving money away".

The people that pay the taxes realize benefits in subsidized healthcare, disaster relief, etc. They also realize non monetary benefits...like street lights.

I assume you are going to give me the standard libertarian mantra in response.

And honestly, I'm really getting sick of serious discussions being met with pat answers which sound cute, but add nothing to the discussion.


Vote GOP and move forward to the 18th Century.

and when the rest of us do it, it's called "taxes"?

Thanks L & P, I guess he thinks it's a fair wage, $2.50 per hour.

Proud American Liberal's picture

by hoarding it either, and that's what is going on. Conservatives argue that the uber wealthy corporatists are the ones who create jobs....Well, where are the jobs?...I don't see any jobs being created. You guys have had the best low tax rates in history for "creating" jobs, as well as the supposed best economic conditions, so I ask again, Where are the jobs? Put up or shut up.

Liberal AND Proud's picture

Every tax cut given to the rich only increased their investment portfolios, and to add insult to injury they invested offshore to avoid paying even the reduced capital gains taxes. There was no trickle down.

And although some philanthropy may have gone up, those folks get a tax deduction for their "giving".


Vote GOP and move forward to the 18th Century.

BlueSam's picture

in this recession.

High income folks don't give as much by percentage as middle class earners, anyway.

BlueSam's picture

right mind would expand employment without a higher demand for goods and services.

When people at the mid and bottom tiers of money don't buy as much, like now, there is zero incentive to add employees.

surfjac's picture

Mickey: "It was an epiphany. Do you know what an epipany is?"
Keoni: "NOT NOW MICKEY!"

motivation for the SS tax rate matter? That the fund created was looted to cover tax breaks for the wealthy is the point. Isn't it? They need to pay this back. I mean the beneficiaries of this subterfuge.

Jon Perr's picture

This is from April 15th, 2009, but is still relevant.

10 Republican Lies for Tax Day:

1. President Obama will raise taxes on small businesses.
2. The estate tax devastates small businesses and family farms.
3. 40% of Americans pay no taxes
4. Tax cuts always increase revenue.
5. The GOP is the party of fiscal discipline.
6. Ronald Reagan was the greatest tax cutter of all time.
7. FDR caused the Great Depression, or at least made it worse.
8. Obama's cap-and-trade plan will cost each American family $3,100 a year.
9. Obama's tax proposals will undermine charitable giving.
10. The rich pay too much in taxes already.

Proud American Liberal's picture

11. The free market will take care of everything.

curtilingus's picture
:p
Winski's picture

GREAT piece Jon... but let me point out one thing that I believe you left out of the article.. NO MEDIA OUTLET reporting at ANYTIME as we speak will EVER REPORT THIS DATA... EVER!

It's great to have an outlet for REAL data and C&L has been a great one... If you peel this onion back in another way , 2009 was a GREAT YEAR for the profits of the Fortune 500 companies on Wall Street and most of that profitability was driven by cost cutting from LAYOFFS !! Classic... Cut cost...revenue flat..profits explode...

And the hate-mongers and the pee-partiers and the neo-nut right wing gas bags will NEVER admit this phenomena ever happens...Not in THEIR America... (also known as fantasy land)...

Astounding... thanks for the work !!!

ronhohn's picture

... 47% of the people pay no taxes and 56% of the people are protesting high taxes.

Who are the 9% overlapping people? The super-rich with lots of tax loopholes to take advantage of, like offshore havens?


If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem

Limp-Dick Blimpaugh's picture

The tea party lunatics certainly are on welfare because they're at every tea party nutjob gathering they have.

BlueSam's picture

Bullshit.

Few of those fucks EARNED anything. They got cash handed to them for being who they are.

Glkgs's picture

I am new to this forum, but not new to the argument. I am tired of people bashing wealthy Americans. They spend a lot of money and for those of us with small businesses, they are our lifeblood. When they pull back and move their money (not yours) to another place, small businesses lose. No one has a right to take the money earned by others. Trying to legislate fairness does not work, has never worked and cannot ever work. For about 100 years now we have had Progressives (feel good word for Socialism) in both parties, that slowly made us dependent on the ever increasing Social Security, Medicare, and Medicaid taxes. Shame on us for voting the pandering liberals into office who are hell bent to have us pay the atrocious tax rates of Europe. You have your head in the sand if you think the rich are going to pay for that massive pile of junk that the Dems passed without reading it. I hope all the rich take their money and hoard it until clearer heads gets voted in. In the meantime, the US doesn't lose $345 billion. It never belonged to the US, it belongs to private citizens.

it, pays their taxes and there's hell to pay if you don't. The wealthy have bought and paid for a system in which they pay substantially less. For the most part, the money they make isn't invested in anything "real", only back into the stock market in order to make more money (off of derivatives etc...), or moved offshore.

If you can imagine a time before Reagan, the U.S. did o.k. Homes were affordable, school was affordable, credit cards couldn't charge 30%, etc... the list goes on.

Spare us how much "rich" people have done for this country. This country was born on the backs of the working class and the rich have garnered the benefits.

Falmouth's picture

So yes it does belong to the government and causes our taxes to be higher. I'm glad that through your business you are a whore to the wealthy and feel sorry for them. They pay a lower percentage of their income in taxes than we do and get preferential treatment in tax cuts. And how have progressives made us dependent on SS, Medicare, and Medicaid ? Do you think maybe the corporates that have eliminated pentions to decrease liabilities and increase their stock prices are more to blame ? And if there were no Social security and Medicare where do you think our country would be right now ?

miss_kitty's picture

They sure have it tough--like sweat shop workers and stuff!

No one has a right to take the money earned by others.

Then quit paying taxes, get off my roads, and never dial 911. No hooking up to public utilities, and no phones either (Govt used subsidies to build the communication infrastructure)
No public schools for your kids and no public unis, either. Stay out of trauma centers.

Another stupid idea brought to you by another stupid teabagging idiot.

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