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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe greatest trick the rich ever pulled was making us believe they pay all the taxes
Typically when politicians fight about taxes, they fight about the income tax. That is to say, they fight about the tax that rich people hate not the taxes poor people hate.
This leads to a really perverse dynamic, wherein the taxes the privileged pay are worthy of attention and the ones the poor pay are ignored. It paints a picture where the government is being supported on the backs of the wealthy, and the poor and middle class are free-riding. It leads to plans for various kinds of tax cuts and tax reforms that matter massively for the rich and very little for the poor.
The issue here is the ceaseless focus on the federal income tax. A report from the Joint Committee on Taxation found that most Americans (65.4 percent of filers) pay more in payroll taxes than income taxes. It's only once you start looking at folks making over $200,000 a year that most people are paying more in income taxes.
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The numbers here are surprising if you think about tax systems as something people only pay into, rather than get anything out of. But because so much of US social policy is structured as tax credits, a lot of people get more money back from income taxes than they put in. The JCT finds that people making under $40,000 get $81.1 billion more back from the income tax system than they put in largely because of refundable credits like the Earned Income Tax Credit and the Child Tax Credit.
But that same group pays $121.5 billion in payroll taxes. They still, on net, contribute billions to the federal government every year. Of course, this doesn't even count the sizable contribution of the poor and middle class in state and local taxes, which are actually higher for the poor than they are for the rich.
more:
http://www.vox.com/2015/4/15/8406605/payroll-tax-income-tax
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The greatest trick the rich ever pulled was making us believe they pay all the taxes (Original Post)
kpete
Apr 2015
OP
merrily
(45,251 posts)1. I wonder who leaked some years back that General Electric owed zero tax the prior year
and why they leaked it.
Things like that are not exactly things our elected officials harp on.
yallerdawg
(16,104 posts)2. Brilliant nod to Keyser Söze!
And oh so apropos!
TampaAnimusVortex
(785 posts)3. I'm confused on this.
Payroll taxes ARE income taxes are they not?
How is it possible that:
"a lot of people get more money back from income taxes than they put in."
and
"But that same group pays $121.5 billion in payroll taxes."
Are they not getting all their money back and then some? or not?
ieoeja
(9,748 posts)5. "Payroll Tax" is Social Security and Medicare.
Income tax is withheld by payroll, but it is called "Income Tax". Only the other two are called "Payroll Tax".
staggerleem
(469 posts)7. But if we live long enough ...
... then the payroll taxes come back to us, in the form of Social Security & Medicare benefits.
I tend to think of what we are referring to here as "payroll taxes" as insurance premiums, where Uncle Sam is the insurer. And even if I don't live to collect my SS bennies, they go to my wife, so there's still value there for me.
jeff47
(26,549 posts)6. If it's filed via a 1040, it's income tax.
Payroll taxes ARE income taxes are they not?
Nope.
For most people, Social Security and Medicare are payroll taxes. They are only taxed on the size of their paycheck, not their total income.
Income taxes are based on your total income.
(If you do not receive a paycheck - self employed and not giving yourself one, for example - then you'll have to pay Social Security and Medicare taxes as income taxes.)
For the vast majority, their total income is the same as their paycheck. But not for everyone.
ieoeja
(9,748 posts)4. Given that most people owned their homes outright when the Great Depression occurred...
... have you ever wondered why so many people lost their homes?
1. Federal taxes were extremely low, so State and Local governments had to fund everything themselves.
2. Most States at the time relied principally on property taxes.
People lost their homes to taxes as often as not during the Great Depression. So what did Reagan do?
1. Made Federal taxes extemely low, so State and Local governments have to fund everything themselves now.
2. More and more States are shifting away from a reliance on property taxes and increasing property taxes instead.
What could possibly go wrong?