April 19, 2011

Taxes

David Cay Johnson has a great piece in the Willamette Week debunking the myths about taxes. He notes that although the US has a lower tax rate than other first world countries like Germany, that citizens in those countries get better services than we do.

A proper comparison would take the 30 percent average tax on American workers and add their out-of-pocket spending on health care, college tuition and fees for services, and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a tiny risk in Germany.

Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other modern countries. While soaring medical costs are a key reason that since 1980 bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among modern countries—almost twice the rate in Germany, which is close to the average of modern countries.

On the corporate tax side, the Germans encourage reinvestment at home and the outsourcing of low-value work, like auto assembly, and German rules tightly control accounting so that profits earned at home cannot be made to appear as profits earned in tax havens.

In our country some Americans do really, really well, and for many others, well, just pray that the bad risk tail doesn't fall you.

Posted by Mary at April 19, 2011 04:50 PM | US Politics | Technorati links |
Comments

Concern about budgets and taxes should begin with a focus on who doesn’t pay their fair share of taxes. The most recent IRS Oversight Board Report found that $290 billion in individual and corporate income taxes goes uncollected because of misreporting. Almost 2/3 of the misreporting by individuals occurs among the top 10% of households by income. So, you might think that John Boehner would be concerned about collecting these taxes. You would be wrong: instead Mr. Boehner proposes cutting $285 million from the IRS budget.

Even more illuminating is the comparison of who pays and who doesn’t with 1961, the year in which President Obama was born.

In 1961 there were 15,753 households who reported income of more than one 1 million in 2011 dollars – and their average federal income tax rate was 43.1%. Today there are 361,000 households with income over $1 million – almost a 20-fold increase. At what rate do these pay? 23.1%. If these very few extremely rich households paid at the 1961 rate, we would have an additional $231 billion in revenue – for roads, scholarships, health care and other public needs.

Who else doesn’t pay their fair share? At the head of the list would be companies such as General Electric, Goldman Sachs and Bank of America.

Andy

Posted by: Andy at April 19, 2011 09:35 PM