Right-wing columnist Jonah Goldberg leads his column today (USA Today, 4/6/10):
Congratulations! This is your last week working for the man–at least for this year. The Tax Foundation calculates that Tax Freedom Day for 2010 is April 9, which means that by Friday, Americans will have spent nearly 100 days working just to pay their taxes. If Democrats have their way, Tax Freedom Day will keep getting later and later.
Every year there are journalists swallow this line–and every year, theCenter on Budget & Policy Priorities points out that the Tax Foundation’s study has serious methodological flaws. Most importantly, the group points out that even the Tax Foundationdoesn’t claim that it’s showing how far into the year the typical American must work in order to pay their taxes. As CBPP’s report this year puts it:
The Tax Foundation itself acknowledges this issue in a methodology paper accompanying its report, pointing out that its estimates reflect the ‘average tax burden for the economy as a whole, rather than for specific subgroups of taxpayers.â┚¬Ã‚ Journalists and others who report on “Tax Freedom Day” as if it represented the day until which the typical or average American must work to pay his or her taxes are misinterpreting these figures and inadvertently fostering misimpressions about the level of taxes most Americans pay.
It depends on how much each person makes. Most working Americans will pay taxes all year long on their Social Security portion of their FICA payroll taxes , but they have a very small federal income tax burden. They will pay 10% or less in federal income taxes. Thanks to the Democratic Amendment to the Bush tax cuts, Americans will be in the 10% bracket. They will only have to pay federal taxes after they deduct their standard or itemized deductions and exemptions. A family of four has four exemptions of $14,600 and standard deduction of $10,700. So that family would pay not federal income taxes until their income exceeded $25,300 and then they would enter the lowest tax bracket of 10%. The disabled, the blind, and the elderly get additional deductions of about $1050 for each family member who qualifies. After deducting exemptions and deductions from their taxable income, they will be in the 10% bracket for the next $16,750 of earned income. Capital gains, if you have them, are taxed at a much lower rate. This family of four would pay$1,675 on $42,050. That is less than 4% in federal income taxes. Above that amount, they would pay at the 15% on the next $51,250. The great majority of Americans will never get out of the 15% bracket. If that family actually could earn that much money, their average federal income tax would be 10%. Rush Limbaugh who makes 50 million dollars a year, almost a million dollars a week, will pay off his FICA tax on January 1 of each year.
This is a confusing item. It tells that the tax-freedom day can’t be taken at face value, but it doesn’t give an alternative or much explanation. What figure IS this representing? (an average that skews the date toward where the richest people finish paying, a median, something that skews the figure to represent corporations more than people?)What WOULD be a better date recognize? )
Only one time in my working career did I get a check without a Social Security withdrawal. The next year, because Reagan raised the cap, I paid on through. Why didn’t he scrap the cap altogether? Well, Pederson wouldn’t have anything to lay his mitts on would he?
Of course, Tax Freedom day is based on an average figure with the poorest Americans added to the richest in the calculation. Most workers will pay FICA all year long, while the wealthy will pay it for as little as one day. But the income tax calculation is based upon adding the high incomes to the low incomes and, as Mitch Hart wrote, skewing the numbers. The top 10% are paid as much money as the bottom 70% of Americans.