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Happy 100th Birthday Income Taxes! Or How the Rich Have Gamed the System to Pay a Smaller Share

October 3, 2013 in Blogs

By Joshua Holland, Moyers and Company

Loopholes have been with us since day one.


 

Today marks the 100th anniversary of the federal income tax. That is, the income tax that we have today – the first US tax raised on earned incomes was a temporary one imposed to help pay for the War of 1812. Another helped pay for the Civil War, but was allowed to expire in 1872.

But it’s also true that the income tax burden has shifted from corporations to individuals. At the beginning of World War II, individuals and families paid 38 percent of federal income taxes, and corporations picked up the other 62 percent. That’s changed significantly — last year, individuals and families paid 82 percent of federal income taxes, and corporations kicked in just 18 percent.

Since the mid-1960s, the top tax rates for both individuals and corporations have fallen significantly, but individual rates have fallen much further. Of course, the tax rate on the books isn’t important — it’s what one pays that counts (corporate lobbies often complain that the US has the highest corporate tax rates in the world, which is true, but our companies pay a much smaller effective tax rate — and it dropped by 58 percent between 1960 and 2012).

How is it that American corporations are paying a smaller share of federal income taxes when the rates paid by individuals dropped much further?  It’s simple: ordinary American families don’t have teams of lobbyists to win them loopholes or armies of tax accountants and attorneys to exploit them.

As Bruce Bartlett wrote this week in The New York Times, this reality has been of concern since the income tax was first established:

Even before the income tax was enacted, the issue of loopholes came up. An article discussing them appeared in The New York Times as early as April 13, 1913. By 1915, one congressman complained: “I write a law. You drill a hole in it. I plug the hole. You drill a hole in my plug.”

Of course, there’s a lot more than federal income taxes to consider when thinking about who pays what. Payroll taxes – which burden working people far …read more

Source: ALTERNET

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