Tax Cuts and the Well Off

I don’t know if it’s a real heuristic, but I like to use what I call the opposite expectations assumption: if someone makes a case for a position opposite of what you would expect, then that position is probably quite strong.  So when the Wall Street Journal runs a softly negative article about Democrats’ fall posturing as defenders of middle class tax cuts and that article contains a chart showing how little taxes the middle-class pays, the article illuminates the preposterousness of Republican claims that tax cuts help the little guy.

I have pasted the chart at the end of this post.  Basically, Democrats want to slightly lower taxes for most households and raise them significantly on those earning over $1,000,000.  If you are a couple earning between above $300,00 and below $1,000,000, your taxes will barely rise.    The real action is with those households earning over $1,000,000 – they would go from paying $254,000 in annual taxes to $307,000, an increase of around 20%.

There are two key points to the chart.  First, you can barely lower taxes on people who barely pay any in the first place: so few people pay so little that the reductions amount to less than $1,000 per individual or household.  This means that any claim by either to party to cut taxes for the middle class is more akin to splitting hairs than anything else.  Second, rich households would still be paying very little of their income as federal taxes in comparison to most developed countries, though we need to factor in payroll, state income, and property taxes for a complete picture.  Taking these facts in conjunction, it’s easy to see why tax cuts implicitly favor the rich: they’re the only ones paying taxes.

The quick Republican response is to cry, “Exactly! Most of government revenue comes from rich people!”  That retort of course proves my first point, but the real lesson of the chart is one that neither party wants to seriously consider: taxes are too low across most income levels, and solvency is only achievable when we increase our taxes.