The Truth About the American Tax System

Photo courtesy of

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If you live in the US, you are bound to come across countless individuals who just can’t stop complaining about taxes. “We’re taxed too much,” they say. “They practically take my whole pay check!” they cry. “Why should I have to pay more taxes just because I make more?” they whine.

But would you believe that in 2010, the US was the third least taxed country, ranking 32nd out of a group of 34 wealthy nations in terms of taxes as a percentage of Gross Domestic Product (GDP)? Well, it’s true. Below are some facts about our tax system from that may surprise you. You’ll also see that much of our economic inequality stems from the way our tax system is structured, as economist  Joseph E. Stiglitz  has asserted in his writings and in an interview with Bill Moyers that I highly recommend you watch.

– Payroll taxes are regressive. This means that after the first $117,000, the more money a person makes, the smaller the share of income gets deducted from his/her paycheck.

– The more money you make, the more tax breaks you are eligible for. If you are in the bottom fifth income level (the poorest), you receive only 8% of all tax breaks given to tax payers. Those in the top fifth income level (the richest) receive 51%!

– The richest 400 families in America (the top 1% of the 1%) have seen their average incomes increase by 392% between 1992 and 2007. Yet during the same period, their tax rates have gone down by 37%!

Ideological arguments about whether taxes are too high or too low miss the crucial question of who ends up bearing how much of the burden of financing our public sector.

It isn’t difficult to see that inequality is built into our system. If we want things to change, let’s pay more attention, ask more questions, and demand more answers!




5 thoughts on “The Truth About the American Tax System

  1. In addition to the regressive nature of payroll, sales, use taxes, loopholes, etc., there is another big disparity in our tax code. Capital gains, or the appreciation of accumulated wealth, are taxed at far lower rates than income derived from labor. This contributes greatly to income inequality because it primarily benefits the top 1% while reducing public funding for much needed social services and projects.

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