The Schrug

A Facebook friend of mine posted a link to this income tax rate graph, which shows that the “average federal income tax rate for a median-income family of four” has declined from about 12% in 1980 to about 5% today – although it has been rising again in the past few years. My friend asked whether this would take some steam out of the Tea (i.e. “Taxed Enough Already) Party arguments.

I said the Tea response to this is that a) it’s unfair for "working people" to be paying the lion’s share of the nation’s income taxes in order to subsidize people who "choose" low-income lifestyles, and b) earning whatever amount of money it takes to put you into one of the higher tax brackets doesn’t actually make you "rich." (In other words, the average Tea Partiers probably think their incomes are higher than average and that therefore they pay more than the average federal tax.)

The analysis I’d like to see is this: Take a two-income family of four making the median income in 1980. (For sake of argument, call it $35K.) How much would they have paid in federal taxes — including Medicare and Social Security — assuming the standard deductions? Now follow that same family, assuming their wages rise with the CPI. What would their taxes have been over the last 30 years? Now follow a second family who started in the same place in 1980 but whose incomes went up a constant 5% per year every year (ignoring CPI). How much would they have paid in taxes over time?

Any idea how I could get those numbers? Is there an on-line historical tax calculator somewhere?

As usual, I should have Googled before I asked the question. Of course there’s an on-line historical tax calculator somewhere, and here it is. This calculator, from USA Today, shows not only how much a household’s tax burden would have been, but what the money would have been spent on. It doesn’t do the analysis exactly as I proposed above, but it’s pretty close. I think I’m going to have a little fun with this tool … results in another post.

By the way … another Tea response would be that even if taxes are at historic lows, they’re still too high. If we could get rid of all that “wasteful government spending,” they’d be even lower. Rebutting that argument requires an entirely different approach.

A second by the way … I put “average federal income tax for a median-income family of four” in quotations because I don’t really understand this concept. Where does “average” come in? The graph shows what that hypothetical family would have paid each year, so it’s not averaged over time. And I can’t imagine they’ve taken a sample of median-income families in all 50 states and averaged each family’s federal tax burden. I think I’ll have to ask the CBPP about that one.