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?

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Does Buffett Really Pay Less Than His Secretary?

Source: White House

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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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$10.8 Billion

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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?

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