TIMOTHY NOAH APRIL 4, 2012
A growing article of faith among conservative Republicans is that poor people in America don't pay enough in taxes. The code phrase for this is “broaden the tax base,” though that same phrase has lately also been used (for instance, by Mitt Romney and Rep. Paul Ryan) to describe eliminating unspecified tax loopholes that (at least in theory) benefit the affluent. It's not clear these goals are unconnected—or that the loopholes that Republicans would ultimately be willing to target explicitly for elimination would be ones that benefit the affluent.
The general idea of raising taxes on the poor is that if people at the bottom of the income distribution get too used to thinking of government as something that gives them benefits and never, ever requires that they pay taxes, then they'll think that government comes free and they will demand more and more of it. The Wall Street Journal's editorial page long ago branded these lower-income big-government hogs “lucky duckies.”
One significant obstacle to this line of argument is that people at the bottom actually pay plenty of taxes. Even when they don't pay federal income tax, they pay payroll taxes and excise taxes at the federal level, and they pay state and local taxes. A new report by Citizens For Tax Justice, a labor-funded nonprofit with a reputation for dispassionate economic analysis, lays this out. When you factor in all state and local taxes, the bottom fifth (i.e. people earning, on average, about $13,000) pays on average an effective tax rate of about 17 percent. When you do the same for the top one percent (i.e. people earning, on average, about $1.4 million) the average effective tax rate is 29 percent.
If you ask me, 17 percent to 29 percent isn't a very progressive spread. Worse, the top one percent's effective tax rate (29 percent) is a mere four percentage points higher than the effective tax rate (25 percent) for the middle fifth, whose average income is $42,000, as against—let me say it again—the one percent's $1.4 million.
The point relevant to the lucky duckies debate is that the bottom fifth is paying a share of the nation's total taxes—federal, state, and local—that's roughly equivalent to its share of the nation's total income. That remains true for all groups as you go up the income distribution all the way to the top one percent. So let's hear no more crap about the lumpen proletariat failing to appreciate the burden of taxation. They feel it (and all other financial burdens) a lot more heavily than any Journal editorial writer, any member of Congress, any presidential candidate, or any think-tank apparatchik.