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Tuesday, September 25, 2012

Tax Foundation: Putting a Face on America’s Tax Returns -- A Chart Book

Tax FoundationTax Foundation, Putting a Face on America’s Tax Returns: A Chart Book:

Inequality has been at the forefront of the nation’s political discourse recently thanks to a number of published reports purporting to show the rich getting richer while the rest of America is stuck in neutral. Indeed, one report suggests that Americans have not been this unequal since the Great Depression in 1929.

Spurred by this news, support is growing in both Washington and among the public to raise tax rates on the “rich” to reduce inequality in America. Indeed, many believe that the tax policies enacted in 2001 and 2003—which lowered marginal tax rates for all taxpayers—are a root cause of today’s inequality. Therefore, critics conclude, raising tax rates on high-income Americans will halt the growth of inequality.

As this book shows, much of the perceived rise in inequality is really the natural result of the business cycle as well as social and demographic forces far beyond the role of tax policy. Indeed, there is no evidence of a long-term trend in inequality over the last 20 years, only wide swings up and down.

Thanks to misdirected tax policy, America is becoming divided between a shrinking group of taxpayers who are bearing the lion’s share of the cost of government today and a growing group of taxpayers who are disconnected from the basic cost of government.

The goal of this book is to put a face on the ever-changing demographics of American taxpayers. The failure to understand these changes has produced poor tax policy and threatens to undermine efforts to overhaul the tax code.

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Highlights taken from the American Enterprise Institute:

10 stunning and myth-busting charts on the U.S. tax system

1. The U.S. income tax code is very progressive.
2. And it is more progressive than what it used to be.
3. Even with tax breaks, the system is progressive.
4. The rich pay twice as high a tax rate.
5. Want to tax millionaires and and billionaires? Better be quick about it.
6. Income inequality? This explains some of it.
7. Also, the aging of America skews income distribution.
8. Education also plays a huge role in income inequality.
9. Oh, by the way, tax hikes on the rich are also tax hikes on business.
10. Taxing the rich won’t solve the debt problem.

Posted by: Woody | Sep 25, 2012 10:51:51 AM