01 October 2012

Who Pays Taxes?




Virtually all Americans will pay taxes during their lifetime. The uncertainty that came packaged with the Great Recession has allowed for the proliferation of many other economic misconceptions, especially in regard to taxes. Today’s economic context for tax reform is very complex. Most immediately, the economy is still in the midst of a slow recovery with an unemployment rate that remains too high.  Even with robust rates of job growth, it will take years to close the jobs gap. An important role of fiscal policy in the near term is to support recovery in the labor market.

Nothing’s sure but death and taxes, which is why it doesn’t make sense to argue about who pays taxes.  The more correct argument is over who pays which specific taxes, to what extent, and at which point in time.  This latter discussion is more complex, and the resolution less satisfying, which is why you never see it.  The truth of the matter is that all people pay taxes in some way, and virtually every worker pays income (oops, I mean “payroll”) taxes.  Everyone pays taxes someway, somehow; directly and indirectly.  The only variables are rate and timing.

Thus, it’s not wise to talk about how 47% don’t pay any income taxes—the government will still tax them somehow.

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