TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, August 31, 2011

NY Times: The Republican Tax War on the Poor

New York Times editorial, The New Resentment of the Poor:

In a decade of frenzied tax-cutting for the rich, the Republican Party just happened to lower tax rates for the poor, as well. Now several of the party’s most prominent presidential candidates and lawmakers want to correct that oversight and raise taxes on the poor and the working class, while protecting the rich, of course. ...

Until fairly recently, Republicans, at least, have been fairly consistent in their position that tax cuts should benefit everyone. ...[Republicans argue] that “everyone needs to have some skin in the game.” This is factually wrong, economically wrong and morally wrong.

First, the facts: a vast majority of Americans have skin in the tax game. Even if they earn too little to qualify for the income tax, they pay payroll taxes (which Republicans want to raise), gasoline excise taxes and state and local taxes. Only 14 percent of households pay neither income nor payroll taxes, according to the Tax Policy Center at the Brookings Institution. The poorest fifth paid an average of 16.3 percent of income in taxes in 2010.

Economically, reducing the earned income tax credit and the child tax credit — which would be required if everyone paid income taxes — makes no sense at a time of high unemployment. The credits, which only go to working people, have always been a strong incentive to work, as even some conservative economists say, and have increased the labor force while reducing the welfare rolls.

The moral argument would have been obvious before this polarized year. Nearly 90% of the families that paid no income tax make less than $40,000, most much less. The real problem is that so many Americans are struggling on such a small income, not whether they pay taxes. ...

At a time when high-income households are paying their lowest share of federal taxes in decades, when corporations frequently avoid paying any tax, it is clear who should bear a larger burden and who should not.

(Hat Tip: Ann Murphy.)

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And they pay sales tax in most states and they pay them if they are working or not. And the taxes they pay have a greater impact on their life then the taxes the wealthy pay have on theirs.

Posted by: George W | Aug 31, 2011 10:07:10 AM

Has anyone fact-checked the statement "At a time when high-income households are paying their lowest share of federal taxes in decades" ? Although tax rates are historically low on high incomes, the share of tax (i.e., taxes paid by rich people as a share of total taxes) is relatively high in historical terms. If they meant to say "tax rates", why didn't they say "tax rates" instead of "share" -- is it too much to ask that the NYT be truthful in their daily quest to spur "The NYT's Same-
Old Resentment of the Rich"?

Posted by: Andy Gardner | Aug 31, 2011 10:36:08 AM

I'm confused about NYT and liberals arguments:

1. Social Security is an social insurance plan, you pay into it to get benefits

2. Social Security is a tax

Choose! Either its a tax or its social insurance. If its a tax it lacks legimaticy since the whole basis of the arguement is that its not a Ponzi Scheme. If its a social insurance plan its not a tax and therefore half of the population has no skin in the game, they pay no tax.

I'm also a little confused. Do NYT think that European SocialDemocrats and socialist engage in a Tax War on the Poor?

In Sweden everyone working pays high taxes and social insurance fees:

1. Income tax rate 30-35 % for the poor and low income earners
2. Social insurance fees, similar to FICA, 35 % capped at $ 50,000 annual income
3. Sales Tax, VAT, 25 %, on all goods purchased

So what would the liberals and NYT call European Social Democrats if they call the Republicans aim to have everybody to have skin in the game, a War on the Poor? A Genocide of the Poor?


Personally I think its a good thing the poor has no skin in the game since no amount of tax increases on those earning $250,000 and more will have the slightest effect on rasing revenue. Revenue has been around 19 % of GDP for the last 70 years.

In fact the less skin in the game the poor have, the less interested will high income earners, entreprenuers and small busienss owners have in contributing. The legitimacy for the wlefare state will end and it will turn into a Class War and if that happens the Middle Class will look after themselves and jettison the poor.

Be very careful what you wish for!

Posted by: Cosmotarian | Aug 31, 2011 12:24:41 PM

It is sad and one day this country will get destroyed by the TAX systems. Politicians, Dems or Republicans, are using the tax codes to buy their tickets to the White House.

Posted by: audit defense | Aug 31, 2011 4:36:16 PM

When the citizens of democracies figure out they can just vote themselves benefits the democratic experiment will collapse. Who predicted this?

Posted by: DZ | Sep 1, 2011 5:55:40 AM

We need a Net worth tax! It is a "fair tax". Reduce the debt by contributing 10% of your net worth- Buffet cannot get away, corporations cannot escape and the politicians cannot game the income tax system if a tax is imposed on 10% of your net worth. It was advocated by Trump and I concur.(He wanted 14%, but the bible belting republicans should look at the law of tithing and accept 10%).

Posted by: Nick | Sep 1, 2011 9:18:34 AM

Tithing is on income not net worth

Posted by: m fox | Sep 1, 2011 4:07:21 PM