Much Ado About Nothing: The Truth About Income Taxes

Posted by AzBlueMeanie:

For all the sound and fury generated by the corporate sponsored, right-wing media driven "income tax protest" tea parties asserting that Americans are "overtaxed," the reality is just the opposite: it turns out it was all much ado about nothing.

Arizona's income-tax rates are among the lowest in the U.S.:

The Arizona Republic used income-tax rates collected by the non-profit Tax Foundation to see how Arizona stacked up with other states at three taxable-income levels: $50,000, $150,000 and $1 million. At each level, Arizona had lower tax bills than all but three to six states.

Arizona's highest tax rate targeting the well-off is fifth-lowest in the nation; that rate kicks in at a higher level than all but seven states.

Overall, Arizona's tax burden ranks 41st nationally for all state and local tax rates, the Washington-based Tax Foundation found in its analysis of tax rates as of Jan. 1.

Similarly, the Arizona Daily Star reported Arizona tax system flawed, but not harsh:

[I]f you step back and look at the tax burden that Arizonans face compared with other states, things don't look so bad.

Statemaster.com, an independently funded Web site developed to provide free updated, essential information about the United States, ranks Arizona 41st in tax burden per capita, which is $1,673. The national average is an annual state bill of $2,049. Those figures don't include federal or local taxes.

Statemaster's No. 1 is Hawaii, at $3,050. The rest of the top 10: Wyoming, $2,973, Connecticut, $2,941; Minnesota, $2,890; Delaware, $2,862; Vermont, $2,844; Massachusetts, $2,628; New Jersey, $2,415; California, $2,391; and Michigan, $2,381.

Ranking below Arizona: Georgia, South Carolina, Tennessee, Missouri, Alabama, New Hampshire, Colorado, South Dakota and Texas.

Another group, the non-profit Tax Foundation, also ranked Arizona's tax rates 41st in the nation.

Furthermore, it placed Arizona 34th in its corporate tax index for 2009. Arizona's index number — 5.12 — is better than average. A 10 is achieved by states whose tax laws affect businesses the least. Three states got 10s: Wyoming, South Dakota and Nevada.

Among those with worse corporate tax index numbers than Arizona's: California, 4.28; New Mexico, 4.59; and Washington, 4.57.

The Arizona Daily Star editorial concluded, "As for the tea bag crowd, they're whistling into the wind in Arizona. The data show it's a pretty low-tax, business-friendly state."

"But what about the big bad evil federal government?" you will protest. It turns out that Americans' Tax Burden Is Near Historic Low. The Washington Post reported the latest Congressional Budget Office report:

As thousands of anti-tax protesters rallied across the nation yesterday and the president promised tax cuts for most, new data showed that the federal income tax burden is already hovering near its lowest level in three decades for all but the wealthiest Americans.

The nonpartisan Congressional Budget Office estimates that the average family forked over barely 9 percent of its earnings to the IRS in 2006, the most recent year for which information is available. The effective tax rate hit its all-time low in 2003 and has since crept up only slightly.

Middle-class families — to whom President Obama has delivered even more tax relief since he took office in January — have fared especially well, according to the CBO. The middle fifth of taxpayers, who earned an average of $60,700 per household in 2006, paid just 3 percent in federal income tax that year, down from a high of 8.3 percent in 1981.

Furthermore:

[M]ore people are likely to pay no income taxes at all.

According to the most recent IRS statistics, about 45 million households — a third of all filers — owed no federal income tax after taking their credits and deductions in 2006. This year, with the profusion of new credits in the stimulus package, about 65 million households — or 43 percent of all filers — are likely to owe no income taxes, according to a new analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.

Of course, even filers who have no income tax liability still pay federal taxes, due in large part to the payroll tax, which funds federal insurance programs like Social Security. According to the CBO, taxpayers shelled out an average of 7.5 percent of their earnings in payroll taxes in 2006.

I wandered by the local tea party here in Tucson while I was downtown, and I would venture to guess that the vast majority of the people in atttendance are not in the top five percent percentile of income earners. Most, if not all, directly benefitted from the middle-class tax cut recently given to them by President Obama. Tax rates have not increased in 16 years, not since President Clinton increased the top rate on the most wealthy Americans in 1993 (President Bush later rescinded that rate increase in 2001). So what is it these tea baggers were really protesting?

Based upon some of the signs I saw carried in the crowd, it seems to me that these were ideological conservatives who are upset about no longer being in power and they are opposed to President Obama and Democrats being in control of the government on a purely ideological basis. It is about group identity, power and control – "us" versus "them." The kind of social dynamic fueled by Faux News and hate radio, pitting one group of Americans against their fellow Americans by portraying "others" as less American than they, i.e., the frequent use of "socialist," "communist" and "marxist" as a pejorative insult to demonize President Obama and Democrats. This kind of childish behavior does nothing to solve the many crises this country currently faces.

But they are not interested in solving the many crises this country faces. It is all about creating failure for Obama (as Rush Limbaugh has instructed them) through obstruction of Obama's policies and demonizing him as some kind of foreign devil so that ideological conservatives may be unified by their hatred and may regain control and power in the next election. It is more of the same divisive politics of personal destruction practiced by the right-wing since they demonized Bill Clinton upon his taking office. Same as it ever was, same as it ever was.