Thanks to efforts of the Tea Party movement, much attention has been paid lately to the question of federal taxation. Are Americans being taxed to death? Is the tax situation getting better or is it getting worse? Polemics aside, what are the actual facts?
To answer that question, a medical doctor volunteering at the Goshen Fair recently brought to his work station two old IRS 1040 manuals with tax tables for 1962 and 2003. He wanted to know how tax levels and rates under Bush-Obama today compare with tax levels and rates during the perceived “golden age� of Eisenhower-Kennedy five decades ago.
The results were charted on a large poster at the fair so curious passersby could assess the actual situation for different levels of taxable income — then and now. Without critical analysis or further editorial comment on my part, here are the doctor’s diagnosis, prognosis and prescription for U.S. taxpayers.
If you earned $12,000 of taxable income per year under the Eisenhower-Kennedy tax code, you paid $2,700 in tax, thus you paid at an effective tax rate of about 22.5 percent. By comparison, today if you earn $12,000 under the Bush-Obama tax code you pay only $1,200, or an effective tax rate of 10 percent. You save $1,500.
If you earned $52,000 under Eisenhower-Kennedy you paid $21,500 in tax, or an effective tax rate of 41 percent. Today you pay only $7,100, or an effective rate of about 13.5 percent. That’s one-third the tax. You save $14,400.
If you are among the fewer than 2 percent of Americans who have the good fortune to earn $300,000 a year, the situation is this: Under Eisenhower-Kennedy you paid $ 235,000, or an effective rate of 78 percent. Under Bush-Obama you pay only $85,000, or an effective rate of about 28 percent. Today you save $150,000. Not bad.
Or, are you among the “super wealthy�? If you earned still more in excess of $300,000, you would, of course, pay at still higher “marginal� rates on the excess. At what rates? In the golden years of Eisenhower-Kennedy you would have paid at the 91-percent marginal rate. Today under Bush-Obama you pay at only 35-percent marginal rate, a saving of 56 percent. Would you buy a Humvee or hire 30 more gardeners, or would you more likely just put the saving in the stock market?
President Obama has announced his tax plan to retain the Bush tax breaks for practically everyone, that is, the more than 98 percent of Americans who earn under $250,000 a year, and to provide significant tax breaks for small businesses. He would penalize corporations that send jobs abroad.
But he would let expire the tax breaks for persons earning over $250,000 a year, thus asking them to shoulder a greater share of the national tax burden. Is this too much to ask of the wealthiest 2 percent?
If you watch Fox News you are led to believe that if the Obama tax plan is adopted, the “average� tax increase for “all� Americans will somehow work out to 2 to 10 percent. How do they arrive at this alarming (but false) calculation?
They prorate the tax increase for the top 2 percent over the bottom 98 percent of taxpayers (who actually will see a reduction in their taxes) and, lo and behold, they come up with an “average� of 2 to 10 percent tax increase for “everyone.� Nice trick if you can swallow it! The facts and the math are totally incorrect.
In conclusion, if all you care about in November is your own tax liability, and if you earn over $250,000, then logically you should vote Republican. Otherwise, equally logically, you should vote Democratic. But if you are really more concerned about the economy, jobs, the environment, health care and war or peace, then maybe the tax issue should not be at the forefront of your decision making.
The physician’s taxation diagnosis is this: You are better off tax-wise than you might think. His prognosis: Things are getting better, not worse. His prescription: Stop worrying about your taxes. Start worrying about social justice.
Sharon resident Anthony Piel is a former director and general legal counsel of the World Health Organization.
