Informative as they are, the graphs don't show the complete information. For example, they don't show the effects of various deductions and other ways the actual tax for individuals can be reduced, and they don't show the treatment of capital gain, so for example, you can't draw a conclusion about any period of time being more tax-heavy than another.
I don't know, to me it looked like taxes were higher during war years. The graph shows taxes dropping between WW1 and WW2, remaining elevated throughout the Cold War and increasing when the US participated in armed conflict, and then going down the last two decades. At least that's the general trend I saw in the graph.
The baseline is taxable income, which is calculated after exemptions and deductions. Those exemptions and deductions make a much larger difference at the low end than the tax rate. We really aren't seeing what's happening at the low end in this graphic.
Yes, the largest problem with the graphs is that so much work is being done by the phrase "taxable income".
Imagine Joe Example makes $500,000 per year, and faces an average tax rate of 80%, but through various quirks of the tax code he can deduct $400,000. He pays $20,000 in taxes on his $100,000 in "taxable income". Next year a tax reform bill is passed; his tax rate drops to 40%, but deductions are completely removed. He now pays $200,000 in taxes. In other words, his tax rate halves, but the tax he pays increases by 1000%.
Deductions matter! The headline rate is, frankly, one of the less important variables in how a tax system works.
(A smaller problem with these graphs is that it only shows income tax. That's only one of many taxes, and for the rich and poor, it's often not the most important one. Payroll, capital gains, and dividends matter too! As do sales taxes, property taxes, and even corporate taxes...)
[+] [-] ebaysucks|14 years ago|reply
Tax bracket creep is a big effect that can't be ignored.
[+] [-] ArchD|14 years ago|reply
[+] [-] rsanchez1|14 years ago|reply
[+] [-] bediger|14 years ago|reply
[+] [-] brlewis|14 years ago|reply
[+] [-] Codayus|14 years ago|reply
Imagine Joe Example makes $500,000 per year, and faces an average tax rate of 80%, but through various quirks of the tax code he can deduct $400,000. He pays $20,000 in taxes on his $100,000 in "taxable income". Next year a tax reform bill is passed; his tax rate drops to 40%, but deductions are completely removed. He now pays $200,000 in taxes. In other words, his tax rate halves, but the tax he pays increases by 1000%.
Deductions matter! The headline rate is, frankly, one of the less important variables in how a tax system works.
(A smaller problem with these graphs is that it only shows income tax. That's only one of many taxes, and for the rich and poor, it's often not the most important one. Payroll, capital gains, and dividends matter too! As do sales taxes, property taxes, and even corporate taxes...)