Effective tax rates on the households in the middle of the income distribution (40th to 60th percentiles) have fallen substantially since 2001 and even more since 1981. Income, payroll and excise taxes now take up 14.2% of income, down from 16.6% of income in 2001 and 19.2% in 1981.
My two cents:
- Couple this trend with the fact that so few Americans pay any federal taxes, and I worry that there simply is not a large enough constituency out there worried about the economic consequences of protectionism, rising property taxes, mandated health care, etc.
- For fear of taxing the middle class, policy makers are substituting costly regulations which might hurt just as much or more than taxes, but which are far less transparent than a tax program — one reason why a cap-and-trade program seems to be favored over a carbon-tax program to address the problems of global climate change.
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