April 15 2014

Tax Day: Which Americans Are Paying Their Fair Share?

Patrice J. Lee

Happy April 15th! Today is Tax Day, the day that Americans must submit their annual tax filings or face penalties – pecuniary or even jail time.

Taxes are a sensitive area for Americans. An entire liberal movement has been built around the idea that the top one percent of Americans own too much wealth and don’t pay what some think is enough in taxes, so that wealth should be redistributed by government.

Never mind that tax filers in the top 1 percent averaged a 23.39 percent tax rate, while filers in the bottom 50 percent paid an average tax rate of 2.37 percent, according to the Tax Foundation. Furthermore, those at the top also give away substantial amounts of wealth to colleges and universities, the arts, and nonprofit organizations serving myriad causes.

However, the term paying your “fair share” is in vogue because it’s a quick route to stirring up populist anger against the wealthy class. It’s a loaded term and one that the President and Democrats often use to justify raising taxes. The President even crafted a tax rule called the Buffett Rule –referring to billionaire investor and March Madness bracket boss– to require households that earn over $1 million pay a minimum tax rate of 30 percent. That’s a lot of basketballs!

What we’re really talking about though is perceptions. A perennial question among Americans whether you think you pay too much in taxes, not enough, or just the right amount?

According to Gallup nearly half of Americans believe that middle income people pay too much in taxes, which is up 42 percent from a year ago, and it’s the first time since 2007 that a higher percentage of the public says middle-income Americans are paying too much rather than their fair share of taxes.

Here’s what Gallup finds:

More Americans now think the middle class is paying too much in taxes than at any time since the 2001 tax cuts. The reasons for the shift are not obvious. Although some Americans' federal income tax rates have increased in the past year, those increases were largely confined to the highest earners. The payroll tax increase, taking effect in January 2013 paychecks, may have influenced Americans' perceptions of their income taxes, though those effects would have been first felt last year. News reports about higher tax rates for some taxpayers may have influenced Americans' perceptions of middle-income taxes, or perhaps the ongoing debate between Obama and Republicans about efforts to reduce income equality are having an effect. Also, many Americans consider themselves middle class, even if they fall on the higher end of the income distribution, and this could help explain the spike.

An interesting trend is the growing proportion of Americans who believe lower-income individuals pay too little. This comes after a presidential election in which some attention was paid to the so-called "47%" who pay no income tax because of their low income levels. While this issue caused some trouble for Republican presidential nominee Mitt Romney, who spoke dismissively of this segment of the population in a secretly recorded video, it appears that an expanding number of Americans do believe the lowest-income earners should pay more in taxes.

Not surprisingly most Americans think that middle America (particularly themselves) pay too much and the poor not enough. Half of Americans have no right to answer that question because they pay no income tax at all.

Tax Day is a reminder that the government doesn’t trust is with our own money so it deducts its share before we even get our payroll checks in our hands or bank account, borrows some of it interest-free, and then returns the leftovers to us in the form of refunds.

And it spends those funds on causes and actions that many Americans disagree with and even violate our freedoms and rights. It’s our tax dollars that funded the IRS scandal and the development of ObamaCare. Our tax dollars also go to support the government dependency of millions of Americans on entitlement programs.

Perhaps a better question is this: Does the government deserve to keep as much of what I earn as I pay in taxes?

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