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Do you think that income taxes went up last year, stayed the same or went down? In a New York Times/CBS poll, only 12 percent of the people got the answer right--taxes went down. The stimulus package gave most wage earners up to $800 if they were married and $400 if single, along with incidental tax cuts for homebuyers, car buyers and college expenses. Few people have noticed the wage-earner cuts because they were distributed through the payroll deduction system. Instead of getting a single check, which you might have saved, you got a few extra dollars every couple of weeks. Almost certainly, you did your duty and spent the money, which is what the stimulus program was for.
You might be surprised to learn that federal income taxes have rarely been this low. The median family of four, earning $75,594, will pay only 4.6 percent of its total income in federal income taxes, after taking exemptions, deductions and tax credits. Last year it was 3.5 percent. Those are the lowest rates since 1955, the first year that this data became available. In 1981, just before the Reagan tax cut, that same, middle-income family paid an average of 11.8 percent. You can find all the numbers here, courtesy of the Center on Budget and Policy Priorities.
Income taxes are just part of the story. For 75 percent of Americans, payroll taxes, for-Social Security and Medicare benefits, take a much larger bite. Adding everything together, the median-income family paid 14.2 percent of their income in federal taxes in 2006 (the most recent data available). That was close to the lowest level since 1979. Most likely, total taxes in recession-year 2009 were lower still.
Lately, some higher-income people have taken to railing at the 47 percent of households that pay no federal income taxes at all, as if they were free riders on the economy. First, this calculation leaves out their Social Security and Medicare taxes. Second, their taxes are low to zero because their incomes are moderate, at bestbelow the $35,000 to $52,000 range--with very little real increase over the past 10 years. If higher income people wanted to drop to $35,000, they too could join the lucky ducks whose incomes pass tax free. What? No takers? What a surprise.
For the wealthy and the well-to-do (earning $151,909 and up), federal income tax rates have dropped from 19.1 percent in 1981 to 12.6 percent today, in an era when their incomes soared. Theyre paying the bulk of the taxes because theyve accumulated the bulk of the money. That's a deal anyone would take.
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