Tax Facts
The average American family is paying less in federal income taxes than at any time since the Eisenhower administration.
A recent study by the Tax Policy Center (and reported by the Orange County Register) finds that a median-income family of four has paid less in federal income taxes for the past two years than at any time since 1955. The average American family paid a federal income tax rate of 4.68% in 2010, compared to rates of 11% or more from 1980-1982. While the marginal federal income tax rate for such a family is 15%, deductions like the earned income tax credit, child care tax credits, and the "Making Work Pay" tax credits included in President Obama's 2009 American Recovery and Reinvestment Act cut the real burden of a typical middle class family by almost 70%. The economic recession also plays a role in this phenomenon, as unemployment or falling wages can drive families into lower tax brackets.
The wealthiest Americans are paying substantially less in taxes than they did twenty years ago
The Associated Press recently explored trends in the IRS' tracking of the four hundred highest adjusted gross incomes. IRS data from the last year with such information available (2007) reveals these top four hundred earners, with an average income of $345M, paid a federal income tax rate of 17%. This 17% rate is down more than one-third from the 26% rate the top four hundred were paying in 1992.
Even more galling, Tom Herman of the Fiscal Times points to roughly ten thousand Americans who earned over $200,000 in 2007 but paid no federal income taxes. The Wall Street Journal's Robert Frank shows how this trend extends to state income taxes as well. In California, more than 2400 upper income households pay no state income tax and in New York the number is over 1500.
Many of the wealthiest US corporations pay little or no federal taxes
Forbes reveals that several of the top twenty-five US corporations paid no federal taxes in 2010. Exxon, Citigroup, General Electric, Bank of America, are among the corporate giants that paid no U.S. federal income taxes in 2010. Others like Ford and Chevron paid 1-2% of their pretax income in U.S. income taxes - a fraction of the tax rate of the average American family. The ability of these international companies to utilize low-tax foreign countries places American-based companies at a fundamental competitive disadvantage. For example, CVS pharmacies ($100B in domestic sales) pay a full 35% federal income tax rate, as they have no overseas operations to lower their overall rate.
Senator Bernie Sanders has compiled his own list of the most egregious corporate income tax evaders.
Miscellaneous Tax Facts
Blogger Michael Wise compiles 15 "surprising facts" about the income tax. Find out: Why April 15th? How many people think its ok to cheat on their taxes? How many hours and how much money do Americans spend preparing their taxes?
And if you're insufficiently taxed by the first list, Wise offers another compilation of "20 outrageous and just plain weird tax deductions".
Tax Perceptions
Despite the above facts that demonstrate most Americans are paying less in federal income taxes than at any time since the 1950s, there is an apparent perception in some quarters that taxes have dramatically increased over the past few years. The Tea Party movement is the best example of this sentiment, and they have no doubt helped fuel such a narrative. However successful the elites of the Tea Party have been driving their message through the media, the American public has not embraced their view of federal tax policy.
Gallup finds no such spike in belief that taxes are too high. In polling released just this week, Gallup shows that the 50% who say the federal income tax is "too high" (43% "about right") is well in line with polling over the last several decades. In fact the 50% who currently say taxes are too high is less than the 52-53% share in the last two years of the Bush administration. And 50% is lower than at any point during the 1990s and ten points lower than in the middle of Ronald Reagan's first term (1982: 60% "too high).
Perhaps even more fundamentally, 57% of Americans believe the income tax they pay is "fair". This number has hovered in the high 50s / low 60s for the last decade, and is twelve points higher than the 45% "fair" number from 1999. Early April nationwide polling from Fox News asks a similar question in a slightly different way, and revealed a slight majority of registered voters feel the taxes they pay are "pretty close to their fair share" (52%), compared to 42% who said they were taxed "more than their fair share".
While both Gallup and Fox News show majorities believe their own federal income tax rates are "fair', a sizable majority feel "upper-income people" and "corporations" should be shouldering more of the tax burden. Recent Gallup polling reveals that two of three voters (67%) feel corporations pay "too little" in federal taxes and 59% feel upper-income people pay too little. Conversely, a small plurality feel lower-income people pay too much (40%), with 37% feeling they pay their "fair share", and an additional 21% who believe those with lower-incomes pay too little.
In their belief that corporations and upper-income earners aren't taxed enough, Americans see federal tax policy as a tool to address the income inequality they deem objectionable. Gallup finds 57% of Americans believe "money and wealth should be more evenly distributed", to 35% who believe the current distribution is "fair". A nearly 5:1 majority of Democrats believe there should be more even distribution (78% Should be Distributed More Evenly / 16% Status Quo is Fair), while a solid majority of Republicans believe the current distribution is fair (36% Should be Distributed More Evenly / 56% Status Quo is Fair). Independent voters (55% Should be Distributed More Evenly / 36% Status Quo is Fair) closely ape the nationwide numbers.
However, on the more polarizing verbiage of "should government redistribute wealth by heavy taxes on the rich?" (Should 47% / Should Not 49%) voters are more evenly divided.
