A Deception Many Journalists Uncritically Promote
Today, April 18, 2023, is NOT the mythical Tax Freedom Day.
This annual stunt is one of the most misleading and downright intellectually dishonest pieces of propaganda in America. It’s based on abusing facts and simple math to deceive Americans about our burden in supporting our government.
For decades the Tax Foundation, did its best to rile up people against taxes more than to inform them about the wide variations in tax burdens – even among people with the same income and family structure and size. Incidentally, compared to Canada, the European Union, and other countries with advanced economies, our tax burdens are below average.
Now groups like the Free Market Foundation, the Mountain States Policy Center, the Missouri Farm Bureau, and InvestmentNews.com help spread this nonsense.
We live in the Second American Republic—under our Constitution—because the First American Republic failed after seven years. Why did it fail? Because it lacked the power to tax.
The idea behind this stunt is that the total of federal, state, and local taxes for the year equal what everybody earned or collected in income by the so-called Tax Freedom Day.
In fact, using the tax foundation’s own data, “tax freedom day” for the vast majority of Americans occurs sometime in February.
Elon Musk of Twitter, Jeff Bezos of Amazon, Donald Trump of the failed insurrection, and some other rich Americans enjoy tax freedom starting moments after we sing Auld Lang Syne. That’s because they pay little or no federal income, little or no state income tax, little or no Social Security and Medicare tax, and pay modest sales taxes compared to the cash flowing into their pockets.
Taxing the Poor
Not so for the poorest half of Americans who file federal income tax returns. That group also make piddling incomes, on average $13,745 in 2020. This half of taxpayers collected just 7 pennies out of each dollar of total income reported on federal tax returns.
For the poor half of Americans who must file a tax return, their tax burden goes like this:
- Federal income tax for the poorest half, according to the Tax Foundation, was 4% in 2019, so they paid up by Jan. 15.
- Wages are almost 75% of their income. That means their Social Security and Medicare tax is about 5.7% of their income. Using the Tax Foundation’s methodology, half of Americans have paid these payroll taxes in full in 21 calendar days. Millions of American workers pay more in payroll taxes than income taxes, by the way.
- State income taxes vary widely. Some states, like Florida, Texas, and Washington, which Trump, Musk, and Bezos claim as their homes, don’t impose income taxes.
Where the poor get clobbered is consumption taxes, primarily sales taxes on goods. Of course, even among the poor, not all money is spent on goods. But let’s generously assume a typical 6% state and local tax burden on half of their income. That’s 11 days for these taxes.
Add it up, and that’s 47 days or Feb. 16.
The Tax Foundation propaganda would have these poor folks believe that government gets all their meager income through the 108th day of the year. Nonsense.
A Different Tune
For all but one day of the year the Tax Foundation uses a very different tactic to inflame anti-tax passions. The Tax Foundation complains that the vast majority of income taxes are paid by the highest income earners while about 36% of households which file income tax returns pay no income tax.
In 2020, the latest Internal Revenue Service data shows, 463 households reported income of $1 million or more, but paid zero income tax. These rich non-income taxpayers achieved “tax freedom” from all taxes at all levels of government in the first hours or at most the first few days of 2023.
Ancient Tax Principles
Income taxes are supposed to burden those with the biggest incomes. Since the time of the Old Testament and the ancient Athenian democracy, a principle of tax has been that the more your make the greater the share you give back to government so that the society which made your riches possible will endure. Just how much or how little should be given back should be vigorously debated. But not the principle.
An honest discussion of the concept of Tax Freedom Day would use the median— half make more, half less—because that is a measure of the typical point in the year when people have paid all their taxes.
To be clear, our tax systems are a mess. More than a century of exemptions, special tax rates, deferrals, and other favors bought and paid for with campaign donations—and encouraged via deceptive tactics like those employed by the Tax Foundation’s mythical Tax Freedom Day— distort America’s tax systems to the detriment of all but rich tax escape artists.
Secrecy in who sponsors provisions of the tax code as well as in tax return information, a dramatic decline in the number and quality of tax audits, and an ever-growing host of dubious tax delay and avoidance devices marketed by Wall Street and its legions of accountants and lawyers all distort the revenue-raising function.
Tax Favors Galore
In addition, all sorts of subtle devices reach into the pockets of the vast majority of Americans and silently funnel away pennies, nickels, and dollars every day that end up in the thankful alts of the richest among us. I’ve exposed many of these devices over the years, particularly in my book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).
The overwhelming beneficiaries of tax favors and subsidies are the wealthiest among us and the corporations they own and often control, but that doesn’t figure into the propaganda that the Tax Foundation is pushing again this year.
Tax Propaganda Works
This deceptive propaganda, which overwhelmingly favors the rich by stirring up resentment of taxes far out of proportion to the burden most Americans bear to support civilization.
Using deception is sad, and annoying, because the nonprofit and charitable Tax Foundation does lots of other work that’s perfectly fine, laudable even.
Propaganda works because it appeals to people’s emotional wishes rather than reason and facts. Advertising is a type of propaganda, using techniques that are very successful at separating people from their money, often for dubious products and services. But good tax policy isn’t about emotions, it’s about the need to raise revenue to sustain civilization. And that’s done best by following the ancient principles that have been tried and tested for roughly 2500 years.
First among these principles is taxation based on ability to pay, aka the more you make, the greater your burden should be. The others are convenience of payment, certainty as to what is owed, and time of payment (for example, taxes in an agriculture community should be due after the harvest, not before planting).
It’s not intuitive to think about taxes any more than it is to think about death until you’re dying.
The United States Is Its Taxes
But keep this in mind: without taxes there is no United States of America, there is no liberty, there are no freedoms. But for taxes we would be living under the Third Reich or the Japanese empire because the Arsenal of Democracy was fueled with taxes.
We live in the Second American Republic—under our Constitution—because the First American Republic failed after seven years. Why did it fail? Because it lacked the power to tax.
That first Republic was financed with voluntary contributions. Think of it as government by bake sale, a technique to raise money that proves ad equate to finance kindergarten parties, but not civil justice, a military, and the public furniture—the commonwealth infrastructure like roads and ports—that enables the creation of private wealth.
The founder of modern conservatism, the British historian and jurist Edmund Burke, wrote in 1793 that “the revenue of the state is the state.” He was and is right. A government is its taxes.
We voted for the politicians who created our tax system. If you don’t like the way our tax system is these days—and I certainly do not—put the blame where it belongs. Blame yourself and your fellow Americans who voted in these politicians or, by not exercising their franchise whether through laziness or denial of their right to vote, allowed our politicians to gain and hold onto office. Take responsibility for our tax system. If you want a better system, then elect politicians who will create a system to your liking.
And, please, don’t get taken in by this fundamentally dishonest propaganda promoted every year by the Tax Foundation and spread by journalists who know a cheap and easy story when they see one.
