Most mainstream media outlets aide in the proliferation of myths about our tax system and our economy. Here are 5 myths about the US tax system that you probably thought were true. All graphs were taken from Tax Foundation's Chartbook on America's Tax Returns.
1. Once a Millionaire, Always a Millionaire
As you can see by the graph below, this shows how many consecutive years millionaires file their taxes as millionaires. Half of the people who become millionaires are only at that status for one year.
2. Tax Credits Only Help the Rich
This graph shows the effective tax rates since 1980. As you can see, because of tax credits and deductions, every American across the board is being helped by the loopholes in the tax system. For those less wealthy Americans, the tax loopholes make the effective tax rate below zero (meaning they don't have to pay any money in taxes, sometimes they receive money from the government).
3. Taxing the Rich Fixes Our Fiscal Situation
The graph below shows our 2012 federal budget deficit in comparison to taxing everyone who makes over $1 million at 100%. Even if we took every since penny from all of those horrible rich people, it still wouldn't even pay for our budget deficit in 2012. Even after paying the $1.2 trillion our government has added to the debt just in 2012, we still have another $16 trillion to go. We have a spending problem, not a revenue problem.
4. Raising Taxes on Wealthy Individuals Doesn't Hurt Businesses
This is one of the most glaring falsehoods that is going around in the media today. When the President talks about raising taxes on those individuals who make over $200,000, he doesn't tell you that most of the people in that statistic are truly small businesses filing their taxes as individuals. The bottom line is this: when taxes are raised on those making $200,000 or more, small businesses are hurt more than wealthy Americans because most small businesses file their taxes as individuals.
5. The US Tax System is Becoming Less Progressive
The graph below shows the percentage share of total income taxes that are payed by the different groups of citizens. As the graph shows, the amount the wealthiest 10% of Americans has been paying has increased by nearly 15% since 1985. The percentage share of the bottom 90% and the bottom 50% has gone down almost every year since 1985. Our tax system isn't becoming more regressive; it's becoming more progressive. Our country is relying more and more on wealthy Americans to pay more of what they earn while many Americans aren't paying a single dime in income taxes.