Among those of us who maintain that not everything the federal government does should be either privatized or eliminated, it's common to point out that income tax rates are a lot lower than they used to be, especially but not only for the rich. So are taxes on capital gains--another talking point, even without the benefit of a wealthy presumptive nominee for president drawing attention to them.
But it's not just that federal income taxes are lower and less progressive than they used to be. They're also far lower than the tax brackets suggest--and far lower than many people think. Yesterday's David Leonhardt column offers a primer:
A large majority of American households--about two out of three--pays less than 15 percent of income to the federal government, through either income taxes or payroll taxes. . . . because of tax breaks, like the exclusion for
health insurance, and because marginal rates apply to only a small part
of a taxpayer’s income. On the first $70,000 of a couple’s taxable
income, the total federal income tax rate is only 13.8 percent.
"This disconnect between what we pay and what we think we pay," says Leonhardt, "is nothing
less than one of the country’s biggest economic problems." This is particularly true since so many voters want not just tax rates lower than the ones (they think) they're paying but also balanced budgets--yet significant cuts to any of the main drivers of federal spending remain unpopular.
Along with issuing itemized tax receipts, maybe we need the IRS to add a line to the 1040 that makes us divide our total tax payments by our gross income. Not because it would affect our tax return or payment; just because it'd be good to have this percentage in mind.