POLS 220
N BERCH
SPRING 2014
Taxes
I.
“Who Pays
What?” is important and less noticed=incidence
A.
progressive taxes
B.
proportional taxes
C.
regressive taxes
II.
Look at different taxes
A.
Federal
income tax is generally progressive
1.
rates are
very progressive
2.
not as progressive as they used to be
3.
tax breaks make it less progressive
B.
FICA
(Social Security/Medicare) tax is regressive
1.
seems
proportional
2.
only on earned income
3.
cap of a little over $100,000 on most
C.
Federal
excise taxes are regressive
1.
poor spend greater percentages of income on gas,
alcohol, tobacco
2.
other purposes for tax
D.
State
income taxes vary
1.
WV
somewhat progressive (not as much as it used to be)
a.
mini-version of Federal
b.
sometimes brackets outdated
2.
PA almost
proportional—slightly progressive
3.
Some MW states have single rate with exemptions
a.
slightly
progressive
b.
examples:
IL, MI, OH
4.
ME
system--% of federal income tax
a.
currently
about a third
b.
efficient
c.
most progressive
d.
politically challenging
5.
tax
breaks make system less progressive
a.
deductions similar to federal
b.
deducting federal tax itself
E.
State
sales taxes are regressive
1.
poor
consume more of their income
2.
tax breaks usually make it less regressive
a.
PA
exempts most food and clothing
b.
some states offer small income tax rebates
F.
State and local property taxes are regressive
1.
doesn’t
appear that way at first
2.
renters pay property tax
3.
assessment process favors wealthy
4.
fixed income elderly
5.
you can only own so much home
6.
tax breaks (circuit breakers and homestead
exemptions) make property taxes less regressive
G.
State
excise taxes are regressive
H.
State and Federal corporate income taxes are
progressive
III.
Overall
tax incidence
A.
Federal
system is mildly progressive
1.
especially progressive with respect to the
poor
2.
progressive tax outweighs other regressive taxes
3.
less progressive than it used to be
B.
state and
local systems vary
1.
HI, VT,
MN, OR, MT, DE are proportional to slightly regressive—rely on progressive
income tax
2.
TX, TN, SD, FL, NH, WA are all highly regressive
a.
average
poor person pays 15%
b.
average wealthy person pays 3%
c.
no income taxes
d.
rely on property and/or sales taxes
e.
Tiger Woods, , Phil Mickelson, Papa Bush all
rational actors
3.
average
state and local system is pretty regressive
a.
poor pay
14%
b.
wealthy pay 6%
4.
WV is
pretty close to average
a.
poor pay
13%
b.
wealthy pay 7%
c.
progressive income tax is offset by sales tax
with few exemptions
d.
property tax is less important
C.
Combined
federal, state, and local system is barely progressive
D.
Why do some states have more progressive tax
systems than others? History, income,
interest groups, parties, brackets.
