Reflections on Tax Day

Tuesday was Tax Day. Paying taxes affirms our commitment to society and to our fellow human beings. Tax dollars pay for the physical foundation of our nation: national defense, public safety, roads, bridges, drinking water, wastewater, solid waste facilities, airports, railroads, etc. Taxes also pay for the institutional foundation of our nation: public education, health care for the elderly and indigent, and help for those in need.

Fierce debate over the finer points of how much money we pay in taxes and how that money gets spent is important. Through this debate and our political process we control our own destiny as a society.

In that spirit, in an upcoming fact sheet, MECEP will use data from Maine Revenue Services to show how, like most states, Maine has a regressive system of state and local taxes: low-income families in Maine actually pay more taxes per dollar of income than Maine’s top 1%.

I’d like to briefly call attention to the federal tax system. Although it remains just barely progressive- meaning after-tax income is only slightly more equally distributed than before-tax income- it has been steadily declining in progressivity over recent decades. We know this due to the meticulous research by Thomas Piketty and Emmanuel Saez who point to three dramatic changes in the federal tax system over the last 40 years:

  1.  A decline the top marginal individual income tax rate from 91% to 35%.
  2. A decline in corporate income taxes as a share of GDP from 3.5-4.0 percent in the early 1960s to less than 2 percent in the early 2000s.
  3. An increase in payroll tax rates that pay for Social Security retirement benefits and Medicare.

Go read the whole thing. Then read the profile of Picketty and Saez in Tuesday’s New York Times.