National Consumers League

Closer look at Tax Day

By Sally Greenberg, NCL Executive Director
Tomorrow is Tax Day. People resent the Internal Revenue Service because they take your money. Republican candidate for president Mike Huckabee said during a 2008 candidates debate, “People would love to see the IRS abolished. The harder you work, the more you earn, the more the IRS and the government wants from you.” That’s called “the progressive taxation” system. The more money you make, the more you can pay.

Seems fair to me. So I’m not of the Huckabee school – I much prefer this quote, from Progressive era Supreme Court justice Oliver Wendell Holmes Jr. -- and in fact, it is emblazoned on the front of the IRS building in Washington DC: “Taxes are the price we pay for a civilized society.” Indeed. And this is also good time to take a look at where our taxes go. Thanks to Campaign for America’s Future and their “National Priorities Project” for excellent information on this topic. Across the United States, the average taxpayer paid $11,715 in 2013 federal income taxes. The military received the largest share that of tax payment: 27 cents on every dollar, compared to 22.5 cents for health care. Defense spending doubled from 2001 to 2011. So we’ve doubled defense spending in one decade. I was surprised to see that military spending outpaced money going to support social programs, given all the griping and grumbling from conservatives about “entitlement programs.” This means the average taxpayer paid $3,174.25 to the military in 2013. Health care received $2,662 for programs like Medicaid and the Children’s Health Insurance Program. Meanwhile, only $238 went to education programs, and just $15.84 and $6.56 went to the Low-Income Home Energy Assistance Program and National Forest System, respectively. National Priorities has also looked at each state’s average taxpayer and calculated where taxes from every state are going. These state-by-state tax receipts show the state with the highest average taxes paid (Connecticut, $18,988) and lowest (Mississippi, $7,402), and everything in between. Although these state receipts show the average taxpayer’s contribution to the budget, Americans don’t all pay taxes equally. In theory the tax code is progressive, meaning those who make more money pay higher tax rates – yet in practice that’s not always the case. As Warren Buffett made famous, billionaires sometimes pay lower rates than middle-class workers. And some corporations, like Bank of America and Citigroup, have gotten away with paying zero federal income taxes, even when they make billions in profit. That’s because the tax code is chock-full of tax breaks. Ten of the largest tax breaks that together totaled more than $750 billion in tax savings in 2013 overwhelmingly benefited the top 1 percent of households, with 17 percent of the benefits going to those top earners. That’s in part because tax deductions – one important type of tax break – are far more likely to benefit the wealthy than middle- and low-income folks, because deductions only offer savings to taxpayers who itemize deductions. Only 16 percent of households making between $25,000 and $30,000 itemize tax deductions, while nearly 100 percent of those making over $200,000 itemize.