To celebrate tax day the Citizens for Tax Justice partnered with the Institute on Taxation and Economic Policy to develop this year’s top 10 tax facts. We’ll breakdown this list and tell you if it’s a tax fact or a tax fake.
1) Everyone pays taxes including those who earn the least.
There’s been a debate in the US regarding individuals paying their fair share of taxes. On one side you have those who argue the rich don’t pay enough and on the other side you have those who say the poor don’t pay at all.
So is the statement that everyone pays taxes fair? In short – yes, everyone pays taxes. In the US it’s almost impossible to avoid paying tax at least once in your life. There are numerous taxes which are paid each year including:
- Payroll tax
- State/Federal income tax
- Sales Tax
- Federal Excise tax
- Property tax
Essentially, if you’ve ever had a job, owned a home, or bought something at the store then chances are you’ve paid some form of tax.
Our Rating: FACT
2) Taxes in the United States are much lower than in most other developed nations.
If you thought paying tax in the U.S. was bad try living in other developed nations. According to the most recent data from the Organization for Economic Cooperation and Development (OECD) the United States is one of the least taxed nations in the developed world.
That might be hard to imagine but it’s true! As of 2016 the U.S. collected roughly 26% of GDP in total tax revenue. This includes both personal and corporate income tax, social security and medicare tax, property tax and sales taxes. With the passage of the new tax cuts this number is only expected to decrease in the upcoming years.
To put this in perspective, the average OECD country collects roughly 34.3% of GDP in tax revenue. Denmark alone collects half of it’s GDP in the form of tax revenue.
Our Rating: FACT
3) Foreign investors collectively will benefit more from the Trump/GOP tax law than the bottom 60 percent of taxpayers.
This statement is simply out of context and isn’t comparing apples to apples. This is like saying all sports teams collectively have more titles than the Cleveland Browns (they have zero if you didn’t know).
Roughly half of the taxpayers in the U.S. pay no federal income tax – simply because they don’t have enough income to pay the tax. This doesn’t mean they don’t pay any taxes at all (see fact #1), it just means they don’t pay federal income tax.
When comparing all foreign investors with the bottom 60% of US taxpayers it’s a no brainer that the sum of every single foreign investor will benefit more than the bottom half of U.S. taxpayers. Simply put, the bottom 60% already benefit by effectively paying no federal income tax.
Our Rating: MISLEADING
4) Only a fraction of all estates (0.07%) pay the Estate Tax.
The federal estate tax exemption for 2017 is $5.49 million. Most people (roughly 99.3%) won’t leave behind an estate of that magnitude. Even if they did, they would pay zero in estate tax.
The exception doubles in 2018 meaning that less estates will fall under the estate tax regime. Simply put, nobody pays the estate tax – with the exception of the ultra rich.
Our Rating: FACT
5) Tax cuts for the rich and corporations do not trickle down or spur economic growth.
Quantifying the impacts of tax cuts on an economy is difficult because the economy doesn’t work in a vacuum. Take for example the Bush-era tax cuts followed by the worst economic recession since the Great Depression. Or how about when president Clinton raised taxes and economic growth actually increased due to a tech bubble?
To simply equate the tax increases or tax decreases to these events would be misstating historical facts. Tax policy in and of itself doesn’t shape economic policy as much as economists and political pundits might think.
Our Rating: MOSTLY TRUE
6) The majority of the Trump/GOP individual tax cuts went to the wealthy.
According to the Tax Foundation the top 25% of taxpayers are liable for 86.78% of all federal income tax. So when the Institute on Taxation and Economic Policy says that the top 20% will get 71% of the benefits from the individual tax cuts it sort of makes sense.
If the top 25% pay nearly 90% of all the tax you’d expect any tax break to benefit that 25%. That’s like splitting a bill at a restaurant 90% and 10% and complaining when you use a 20% off coupon and you only get 10% of the discount.
Our Rating: FACT
7) The American public opposes the Trump/GOP tax law and believes the wealthy and corporations should pay more.
As with most legislation, the majority of voters will disapprove of any major change regardless of the facts. According to a poll from The New York Times conducted between Feb. 5 and Feb. 11 by SurveyMonkey, 51% of Americans approve of the tax law, while 46% disapprove.
Approval has risen significantly to 46% in January from 37% in December, when the law was passed. Side note: I wonder where the other 3% is…
Our Rating: MOSTLY FALSE
8) If Republicans in congress pass their proposed tax extension, the top 1% would get an annual tax Break of more than $29,000.
This is a tough one to judge. According to the Institute on Taxation and Economic Policy the average tax change in 2026 with the tax extension would be $29,000 for the top 1%. However, this number could range from an increased tax liability of millions of dollars to a tax break of millions of dollars.
That’s because there are several provisions within the new tax law that will impact those in the top 1% differently.
Take for example the doubled estate tax exemption which could save those in the to 1% millions of dollars in tax. Or how about the cap on state and local tax deductions which could mean a tax hike for those 1 percenters living in New York City.
Our Rating: TOO CLOSE TO CALL
9) Corporate tax rates were already low before the Trump/GOP tax law cut them further.
The Tax Cuts and Jobs Act permanently cut the corporate tax rate from 39% to 21%. That’s a huge drop but was the corporate tax rate already low to begin with?
According to the Institute on Taxation and Economic Policy, a group of the 15 largest U.S. companies paid no federal income tax on $24 billion in profits in 2017, and they paid almost no federal income tax on $120 billion in profits over the past five years.
Through numerous tax credits, loopholes, and sheltering of tax oversees, U.S. companies were able to avoid billions of dollars in tax. The new law is aimed at eliminating most of these credits and loopholes to line up the actual tax rate to the effective tax rate companies actually pay.
Our Rating: MOSTLY TRUE
10) Undocumented immigrants pay billions in state and local taxes.
According to the Institute on Taxation and Economic Policy, undocumented immigrants pay billions of dollars in state and local taxes. This goes back to fact number one which correctly stated that everyone pays taxes.
Whether or not undocumented immigrants pay enough in tax to pay for their consumption of state and local government programs (i.e. transportation, schools, the cost of an increased population, etc.) is a different story.
Our Rating: TRUE
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