For most, tax burden lower than in ’80

Binyamin Appelbaum and Robert Gebeloff / New York Times News Service /


Published Dec 4, 2012 at 04:00AM / Updated Nov 19, 2013 at 12:31AM

BELLEVILLE, Ill. — Alan Hicks divides long days between the insurance business he started in the late 1970s and the barbecue restaurant he opened with his sons three years ago. He earned more than $250,000 last year and said taxes took more than 40 percent. What is worse, in his view, is that others — the wealthy, hiding in loopholes; the poor, living on government benefits — are not paying their fair share.

“It feels like the harder we work, the more they take from us,” said Hicks, 55, as he waited for a meat truck one recent afternoon. “And it seems like there’s an awful lot of people in the United States who don’t pay any taxes.”

But in fact, most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.

Households earning more than $200,000 benefited from the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.

Lower-income households, however, saved little or nothing. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.

The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the past 30 years. State and local taxes, meanwhile, increased for most Americans. Those taxes generally take a larger share of income from those who make less, so the increases offset more and more of the federal savings at lower levels of income.

Now an era of tax cuts may be reaching its end. The federal government depends increasingly on borrowed money to pay its bills, and many state and local governments are similarly confronting the reality that they are spending more money than they collect. In Washington, debates about tax cuts have yielded to debates about who should pay more.

Public debate over taxes has typically focused on the federal income tax, but that now accounts for less than a third of the total tax revenues collected by federal, state and local governments.

To analyze the total burden, The Times created a model, in consultation with experts, which estimated total tax bills for each taxpayer in each year from 1980, when the election of President Ronald Reagan opened an era of tax cutting, up to 2010, the most recent year for which relevant data are available.

The analysis shows that the overall burden of taxation declined as a share of income in the 1980s, rose to a new peak in the 1990s and fell again in the 2000s. Taxes amounted to 31 percent of personal income in 2010 — 31 cents from every dollar — the same share federal, state and local governments took in 1980.

People with higher incomes pay taxes at higher rates, and real incomes rose over the past three decades, particularly at the top. There are now many more millionaires, in other words, paying more than they did in 1980 — but less than they would have if tax laws had remained unchanged since 1980.

Those affluent households still pay a larger share of income than the rest of the population, but the difference has narrowed significantly.