How Government Helps the 1 Percent

http://www.truthdig.com/report/item/how_government_helps_the_1_percent_20150114

It is thus a public service that the Institute on Taxation and Economic Policy (ITEP) has issued a report showing that at the state and local level, government is, indeed, engaged in redistribution—but it’s redistribution from the poor and the middle class to the wealthy.

It’s entirely true that better-off people pay more in federal income taxes than the less well-to-do. But this leaves out not only Social Security taxes, but also what’s going on elsewhere.

                                       

The institute found that in 2015, the poorest fifth of Americans will pay, on average, 10.9 percent of their incomes in state and local taxes and the middle fifth will pay 9.4 percent. But the top 1 percent will pay states and localities only 5.4 percent of their incomes in taxes.

When you think about it, such figures should not come as a surprise. Most state and local governments rely on regressive taxes—particularly sales and excise levies. Poor and middle-class people pay more simply because they have to spend the bulk of their incomes just to cover their costs.

This gets to something else we don’t discuss much: Public policies in most other well-to-do countries push much harder against inequality than ours do. According to the Luxembourg Income Study (LIS), the United States ranks 10th in income inequality before taxes and government transfers. By this measure, Ireland and Britain, and even Sweden and Norway, are more unequal than we are. But after government transfers are taken into account, the good old USA soars to first in inequality. Norway drops to sixth place and Sweden to 13th.