A recent study by the Congressional Budget Office on tax rates and burdens has set off the usual dust-up between Republicans and Democrats.
Democrats say that the tax burden has shifted to the middle class because of the Bush tax cuts, while Republicans say the wealthy are paying more income taxes than they would have without the cuts.
As it happens, they’re both right. And it would behoove both sides to take a closer look at the study to find a way to bridge their differences.
For instance, the Democrats are correct in saying that the tax burden—if you consider every tax Washington imposes, from income to payroll to excise to corporate taxes—has shifted to the middle class. According to the study, the share of all taxes paid by households in the highest fifth of incomes—those making, on average, $182,700 a year—dopped from 65.3 percent to 63.5 percent. Meanwhile, those in the middle income quintile—with an average of $51,500—saw their share of all taxes rise from 10 percent to 10.3 percent.
Republicans counter that the highest 20 percent of earners now pay a larger share of federal income taxes than they would have without the tax cuts—from 78.4 percent, if 2000 tax law had remained in effect, to 82.1 percent under the tax cuts. So one-fifth of the population pays more than four-fifths of federal income taxes.
The fact is that the tax code is so complicated that opposing sides can claim almost anything they want and most people couldn’t tell who is telling the truth.
That means it’s time for a change.
Both parties should start tackling the tax code and its complexity soon. It makes sense economically, and it would make sense politically.
And then maybe, with a simple and fair tax code, these dust-ups could be a thing of the past.