Scott Hodge President Tax Foundation www.taxfoundation.

org

Inequality: Are we more or less unequal?

Who earns what and who pays what? The changing demographics of American taxpayer who are the payers The growth and cost of nonpayers

Who Earns What? Who Pays What?

Does Buffett Really Pay Less Than His Secretary?

Source: White House

Singles Are Now the Majority of Taxpayers

70.0%

65.2% Single Filers

60.0%

60%

50.0%

40.0%

Married Filers
30.0%

40%

34.8%

20.0%

10.0%

0.0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009

*Source: IRS, single includes head of household filers, married includes married filing separately

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More Business Income is Now Taxed Under the Individual Tax Code than Corporate Code
$2,000 $1,800 $1,600 Pass-Through Income $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Corporate Income
Net Receipts in Billions of 2009 Dollars

Source: IRS, Statistics of Income

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12 10

$10.8 Billion

8
6 4 2 0 Nonpayers Transfer Spending

+1% =

X 20% point Growth Since 1991

Equals $215 Billion in Higher Transfer Spending in 2012

1%-point Increase in Nonpayers = .745%-point Increase in National Debt

Inequality is not as bad as claimed and fluctuates with the business cycle Biggest influences on inequality are demographic beyond reach of tax code Two Americas taxpayers and nonpayers Question: Which is more unfair Fact that top 2% pays 51% of income taxes or fact that half of Americans pay no income taxes?