The following article by John C. Goodman explains away some lies and myths about taxation. Goodman is an award-winning economist, author of seventeen books and a senior fellow at the Independent Institute.
I have excerpted some major points of the article. To read the whole article, follow the link. The highlighting in the below excerpts is mine.
Sense And Nonsense About Taxes
by John C. Goodman, Forbes, Oct 9, 2024- As we draw closer to the November elections, there is an inordinate amount of attention being paid to “disinformation,” and a great deal of fact-checking of candidates’ statements. So this seems to be an ideal time to fact-check some statements being made about “taxes.”
Who benefits from income tax cuts?
Consider these two statements
Most of the benefits of the 2017 (Trump) tax cuts went to the rich.
The tax code today is just as progressive (if not more so) than it was before the tax cuts went into effect.
Surprisingly, both these statements are true. The first statement is true but misleading. The second statement is simply true.
What is rarely said in policy debates is that for the most part, half the population isn’t paying income taxes at all. According to the Tax Foundation, the top one-half of taxpayers are paying 97.7% of all income taxes, while the bottom half pays a paltry 2.3%. So, it’s hard to think of a tax cut that wouldn’t confer most of the benefits on the top half of the income distribution.
Progressivity is a different matter. Suppose we cut everyone’s taxes by 1%. For someone with a million dollars in income, that would be $10,000. For a $30,000-a-year worker, that would be $300. That’s a big difference in raw numbers. But from an equality standpoint, everyone’s share of the country’s after-tax income would be the same both before and after the tax cut.
Do the rich pay their fair share?
When Joe Biden says “the rich aren’t paying their fair share,” what is he talking about? ... If we define the rich broadly (to refer to the upper half), their share is already approaching 100% and that is as high as it can go. But even if we are talking about the really rich, their share is quite high.
The top 1% (people who earned more than $682,577 in 2021) paid 45% of all income taxes collected that year. The top 10% (earning more than $169,800) paid three-fourths of all income taxes.
This reflects the fact that the United States has the most progressive tax system in the world. We tax the rich proportionally more than any other country.
Why is our income tax system so progressive?
... Republicans are the main reason. Going all the way back to Ronald Reagan, every Republican tax bill threw more and more people off the income tax rolls. ... Republicans have been shifting the tax burden to the rich every time they have legislated on taxes, according to a study by the National Center for Policy Analysis.
What about corporate taxes?
... The Tax Policy Center (TPC) estimates that 20% of the corporate income tax is paid by labor in the form of lower wages and 80% is paid by capital (lower dividends and interest payments, for example). ... workers are also shareholders through their pension plans, 401(k) plans and IRA accounts. ... workers bear part of that burden as well.
Taxing capital gains
... gain does not reflect any increase in income .... It merely reflects a change in the market’s expectations. ...Taxing unrealized capital gains is ... like taxing the gambler —not at the end an evening of gaming, but after each time a roll of the dice produces a win, while ignoring each time there is a loss.
What is wrong with taxing investment to pay for consumption?
... almost all progressive ideas for new revenue involve confiscating funds that are now in the capital market and using those funds to pay for current consumption. But less investment means slower economic growth. And that means our children and grandchildren will have a lower standard of living. (read it all)
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Rod, I generally agree with the conservative/libertarian orthodoxy that the less taxes for everyone the better. Not to mention the proper skepticism about where our tax money goes. But we on the Right have another valuable perspective - that we matter as individuals. What isn't dealt with with the "yeah, but the rich pay 97.7 (or whatever) percent of federal revenues" argument is whether the "rich" (at whatever income level that means but probably those with $5 milliion+ (to pick a random number) are paying their fair share individually? The rich, as do we all, but probably even more so, have an incentive to mitigate their legal payment to Uncle Sam, but I'd like to see a study that answers how many of the wealthy pay less than (and how MUCH less than at various differences) their scheduled tax rate?
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