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Everything you need to know about the US tax burden, but were afraid to ask…

by Aaron McCormack on November 30, 2012

An excellent piece in the New York times today that clearly spells out how the US tax system has placed more burden on the less-well-off in the past 20 years (since Reagan won the Presidency).

The online version is available here.

In short, tax RATES have declined for everyone in the period – but more noticeably for the highest income earners (probably something to do with how capital gains and investment returns are taxed).

But, bear in mind, the absolute income levels for the richest folks in America have grown massively over the past 30 years, with much of that growth happening over the past decade.  On the other hand, income of the average American has been flat over that period.

How wisely government spends what it collects is another debate entirely, but in terms of how the economy is benefiting people and who is paying for government the following things are absolutely true and I have never seen any facts to the contrary:

1. The US economic system is “disproportionately” benefiting people who are already well-off.

2. The average US citizen is no better off than they were 30 years ago.

3. Because rich folk earn such a large chunk of national earnings, they do pay a huge chunk of the overall tax take in absolute dollar terms

4. BUT, the share of their income that they pay in tax has fallen sharply, even though their income has grown hugely.

5. AND there is absolutely NO EVIDENCE that increasing tax rates on the wealthy will in any way impact investment and job growth.

6. HOWEVER, simply raising the tax rates paid by the rich is not a great help in raising money.

Bear this in mind, US folks, as you listen to the continued debate about the “fiscal cliff”.  Raising taxes on the wealthy is probably the right thing to do. It is important symbolically and will be vital if the Democrats are to deliver on entitlement reform.

But any argument that says “taxing the rich more is a major part of solving our problem” (from the Left) or “taxing the rich will destroy growth because it impacts job-creators” (from the Right) is false at all levels.

The American system is at heart a corp-tocracy.  The trickle-down impact of successful corporations to average Americans is reducing as more of the work and wealth flows overseas.  The country, and the people who run it, will have to both understand and want to change this if income distributions are to change in favour of the average Joe.

 

From → General, Politics, USA

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