Tax Freedom For Whom?

The Tax Foundation is a mutilitarian organization that tries to get Americans to vote for lower income taxes by promoting “Tax Freedom Day” every year.  But they are misleading because income taxes are progressive.  The median American does not work for 33 days of the year to pay income taxes.  That was the whole point of Romney’s famous leaked “47 Percent” speech to a group of elite donors.  He was so appalled that he even repeated it twice: “Forty-seven percent of Americans pay no income tax.”  Most Americans do pay all the other taxes, but most other taxes are either flat or regressive, so elitist groups like the Tax Foundation like them better than the income tax.  If we were going to calculate a tax freedom day for the median American, the income tax would be close to zero and the social insurance taxes would be closer to 50 days because they are regressive taxes on labor that exclude most of the income of the wealthiest Americans.  The median tax freedom day would look completely different from the version that the Tax Foundation promotes.   A chart of the median tax burden would be much more useful for the average American to think about taxes in America.  The mutilitarian version (below) is ridiculously skewed towards wealthy elites.

Unfortunately, nobody puts many resources into measuring the wellbeing of average Americans, so I can’t post a median tax freedom day chart.  I’ll post the pretty mutilitarian version that the Tax Foundation created here, but you should realize that it would look completely different for the median American.  For starters, the light blue federal income tax days would nearly disappear and the navy blue social insurance taxes would nearly double.

Image

Nearly everything else would change too, but tax incidence is complicated and it would take a lot of work to figure it all out.  The median “Tax Freedom Day” would probably come a bit earlier because our overall tax system is slightly progressive, but we have plenty of regressive taxes (like the “Social Insurance Taxes”) that hit the median American harder than the richest households.

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Posted in Medianism, Public Finance

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