Spotlight Exclusives

Looking at the Low-Income Tax Burden

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Taxes and who pays them is a big political issue, especially this time of year. And with soaring deficits, tough economic times, and a heated debate about the size of government, many Americans are asking if they۪re getting back what they pay for.

A common figure in the debate is 47 percent. That۪s the proportion of Americans who don۪t pay federal income tax, and they have been portrayed in many talk shows, blogs, and other outlets as getting a free pass while other Americans support them with hard-earned tax dollars.

But as David Leonhardt describes in the New York Times, that number doesn۪t capture the whole picture.

It۪s true that for many Americans, tax credits, like those granted in recent stimulus bills and in earlier legislation like the Earned Income Tax Credit (EITC), have eliminated federal income tax liabilityalthough the actual number of those who don۪t pay is closer to 10 percent, not 47.

But this argument overlooks the variety of other taxes that affect low-income Americans. First, they pay state and local taxes, including sales taxes. These tend to be more regressive than federal taxes, so they hit the poor especially hard.

In addition, poor families pay a significant portion of their income in payroll taxestypically, more than they receive through the EITC and other benefits. And the benefits Americans get from their payroll taxes, in terms of Social Security and Medicare, are less for those who don۪t live as longsomething that, sadly, affects low-income Americans.

As the debate about taxes and cutting the deficit rages on in the months and years ahead, it۪s important that we take a very close look at the figures.

Posted by Mike


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