• The average American family now pays 24.5 percent of its income to the federal government in taxes, compared with only 2 percent in 1950.

• When state and local taxes are included, the government now takes 37.6 percent of the income of the average family with children.

• Among married-couple families where both the husband and wife are employed, two-thirds of the wife’s earnings go to pay for increased federal taxes and only one-third to supporting the family.

One root cause of this antifamily bias in the tax code is the eroding value of the personal exemption.

• In 1948, the $600 personal exemption for children shielded 68 percent of the average family’s income and the standard deduction shielded the rest.

• To have the same relative value today, the personal exemption would have to be about $7,000 to $8,000.

The second tax blow to family finances has been the increase in Social Security payroll taxes.

• In 1948, the Social Security tax was 2 percent on annual wages of up to $3,000 – 1 percent nominally paid by the employee and 1 percent paid by the employer.

• By 1992, the combined Social Security tax had risen to 15.3 percent on annual wages of up to $55,500.

Families with children now have less aftertax income than elderly households, single persons and couples without children.

Source: Robert Rector, “Reducing the Crushing Tax Burden on America’s Families,” Backgrounder No. 981, March 7, 1994, Heritage Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002, (202) 546-4400.

Perhaps I should have put it like this:

If it were true that the government merely served the interests of the rich, then it would be hard to complain, since it is the rich who are paying for it.

And people wonder why the federal government serves the interests of the well-to-do! It’s theirs! – bought and paid for. The bottom 40% (i.e., families with incomes of about $40,000 and below) contribute practically nothing except to their own retirement scheme.

(1)

Suppose that Country A has, in 2000 dollars, a GDP per capita of $13,000 and a total GDP of $1.8 trillion.

Meanwhile, Country B has a GDP per capita of $35,000 and a total GDP of $9.8 trillion.

Suppose that both countries pay 20% of their GDP in federal taxes.

For Country A, that works out to $360 Billion, or $2600 per capita. For Country B, it works out to $1.96 trillion, or $7000 per capita.

Does Country A have a higher tax burden than country B, a lower one, or about the same?

I don’t think one can assume, without further comment or argument, that federal taxes as a percentage of GDP is the right measure to use here.

(Country A is the US in 1944; Country B is the US in 2000).

(2)

It’s not at all obvious that tax rates tell us all we need to know about the distribution of the tax burden. What about actual taxes paid? According to Ted’s website, the top quintile (that would be families with incomes of about $100,000 and above) currently pays about 69% of all federal taxes. Unfortunately, the same site doesn’t seem to have any comparable information on the days when top marginal rates were 80%. Did the rich actually end up paying even more back then?

And people wonder why the federal government serves the interests of the well-to-do! It’s theirs! – bought and paid for. The bottom 40% (i.e., families with incomes of about $40,000 and below) contribute practically nothing except to their own retirement scheme.

Or what Mark said.