To tag along to my post yesterday about regressive taxation, I have been enamored with this report by the non-partisan Institute for Taxation and Economic Policy, and their 2009 report “Who Pays?: a comprehensive analysis of state and local tax systems in all fifty states:
While federally taxes tend to come through the income taxes, states tend to tax differently. This becomes a real world example of how regressive taxes play out in the real world. When relying heavily on sales and property taxes, the poorest of the poor end up paying 11% of their tiny annual income on taxes alone. And the people who pay the least under these tax structures, are the richest of the rich at 5% of their annual income.
Remember this the next time someone tries to encourage the idea that people “don’t pay taxes”. To me, this exemplifies what makes sense about the income tax. With the federal program, a family of four making approximately $25,000, is seen as un-taxable, because that is an amount the government supposes is required to reasonably get by. The government does not want to take that money, because the end result would only be an additional hardships that would cause more people to fall under poverty lines. There is even a cost/benefit analysis to be made, that by letting those people off the hook for federal income taxes, they are helping reduce those under the poverty level, who would then need to be enrolled in government programs, increasing the tax burden.
This is an important thing to know, since already about half of people working are paid at such a meager wage, that they still are eligible for and receive food stamps. We shouldn’t be adding to those who need assistance, through extra sales tax burdens.
I really do believe, it’s these kinds of policy decisions being made, that help shape what the country we live in, and what we want it to look like.