It’s mid-April. Every year at this time, taxes are on most people’s minds. Eager to push the latest tax cutting proposal, anti-government activists seize this opportunity to tell people that the American tax burden is horrible and crushing. It surely is a right and a responsibility of citizens to be informed about the level and the distribution of taxes, as well the public goods and services those taxes fund. It would be nice, however, if the discussions about the tax burdens we actually face were a little more honest.
Running fast and loose with statistics, foes of public education and other government services warn of an out-of-control tax machine threatening to consume our lives. The Tax Foundation’s “Tax Freedom Day” report, touted by anti-tax and government foe Oregon Tax Research, is a classic example, claiming that it takes more and more work effort each year just to pay our taxes. In the Tax Foundation’s most recent report, they claim we have to work until early May just to pay off a never-sated taxman, a full week longer than just a few years ago. Intentionally or not, the Tax Foundation and their Oregon cronies trample the truth and contribute to the hardening cynicism toward democratic public institutions.
The twists and turns the Tax Foundation goes through to arrive at their conclusions are truly the stuff of gold-medal high divers. Their report inflates tax burdens by overstating taxes and understating income. For instance, they count rent paid for use of federal land as a tax, and don’t count capital gains income (even though they recognize the taxes on capital gains).
Most importantly, the Foundation tries to convince each of us that we share the tax burden of the rich, without enjoying their income. If I had to pay Phil Knight’s tax rate on my income, I’d be in trouble. If I could have his taxes, and his income, I’d be doing great.
By spreading taxes paid mostly by the rich such as estate taxes and corporate income taxes across all taxpayers, the Tax Foundation creates an artificially high estimate of the typical tax burden. More sober sources show that the tax burden on middle-income Americans, not skewed by taxes paid by the rich, has remained fairly constant for some time. Data from the Republican-controlled Congressional Budget Office (CBO) shows that families in the middle of the income distribution paid an average of 18.9 percent of their income in federal taxes in 1999, down from 19.7 percent of income in 1995. Commerce Department data shows that state and local tax burdens have stayed steady for many years.
Combining Commerce and CBO tax data reveals that the total federal, state and local tax burden on middle-income families fell from 30.0 percent in 1995 to 29.2 percent in 1999. The 33.5 percent burden asserted by the Tax Foundation in its 1999 report is not what a typical taxpayer faces.
The average effective state income tax burden in Oregon hasn’t changed much, either, hovering between 5 and 6 percent across the 1990s. For the middle fifth of taxpayers, it has fluctuated between 4 and 4.5 percent. Total Oregon taxes as a share of personal income has been declining since 1990.
Oregon’s taxes are not excessive, and they buy a plethora of valuable public services: parks, police, schools, sewers, child-care for low-income families leaving welfare for work, roads, health care for low the working poor, and more. The anti-government activists’ reports overstate the tax burden of typical families, and their tax policy proposals, such as Bill Sizemore’s and the so-called alternative referred by the legislature (Measure 88), do virtually nothing for the typical taxpayer.
If we are to reform taxes, let’s do it in a way that doesn’t amount to a massive give-away to the high-income families that have reaped the lion’s share of rewards of our economic expansion, as both Sizemore’s and the legislature’s referral of Measure 88 would do. Our public services are too important and need to be funded adequately.
