Forty-year-low tax burden not stopping Fox from hyping "Tax Freedom Day"
Research ››› ››› JOCELYN FONG
Fox & Friends falsely suggested that the Tax Foundation's "Tax Freedom Day" reflects the tax burden paid by the average American and that "Tax Freedom Day" now comes later than in recent years. Fox & Friends also falsely claimed that "47 percent of Americans don't pay any taxes."
Carlson misleadingly asked if "Tax Freedom Day" is "being pushed later every year"
Carlson: "[I]s this date being pushed later every year?" Co-host Gretchen Carlson stated, "[T]oday is Tax Freedom Day, the last day of the year you pay taxes if you were to forward every pay check to the federal government to cover your tax liability. But is this date getting pushed later every year?" Fox business analyst Stuart Varney replied that "It's gonna be pushed later ... because more taxes are coming down the pike at you."
"Tax Freedom Day" occurred earlier in 2009, 2010 than any year in past four decades
Nation's total tax burden lower under Obama than any year since 1965, according to Tax Foundation. Each year, the Tax Foundation announces "Tax Freedom Day," which it calculates by dividing "total tax collections" by "the nation's total income" and identifying the corresponding percentage of the calendar year. In its 2010 report, the Tax Foundation states that for 2010, "Tax Freedom Day" occurred on April 9, and in 2009, "Tax Freedom Day" occurred on April 8. The report shows that "Tax Freedom Day" during the Obama administration came earlier, indicating that the tax burden was lower, than any other year for the past four decades. The Tax Foundation further stated that "All Taxes" totaled 26.9 percent of the nation's income in 2010 and 26.6 percent in 2009, a lower percentage than any year since 1965. Fox & Friends did not provide any of this context.
Recession, tax cuts, push "Tax Freedom Day" earlier. The Tax Foundation stated:
This year's Tax Freedom Day is one day later than in 2009, but more than two weeks earlier than in 2007. The shift toward a lower tax burden since 2007 has been driven by three factors: (1) The recession has reduced tax collections even faster than it has reduced income; (2) President Obama and the Congress have enacted large but temporary income tax cuts for 2009 and 2010, just as President Bush did in 2008; and (3) Two significant taxes were repealed for 2010 as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of the income tax.
Fox & Friends falsely suggests "Tax Freedom Day" represents tax burden of average American
Carlson: "Tax Freedom Day" is "the last day of the year you pay taxes if you were to forward every pay check to the federal government to cover your tax liability." Carlson stated, "Get excited cause this is the last week that you are working for the man. That's right, today is Tax Freedom Day, the last day of the year you pay taxes if you were to forward every pay check to the federal government to cover your tax liability." Co-host Steve Doocy later stated, "[S]ince New Year's Eve ... every time we show up for work and go to work, we've been working essentially for--to pay off our taxes. And so from here on, we're working for ourselves."
"Tax Freedom Day" doesn't represent the actual tax rate paid by most Americans
Tax Foundation: "Tax Freedom Day" says nothing about "tax burdens faced by taxpayers in different income ranges." The Tax Foundation states, "Determining the national Tax Freedom Day involves calculating an overall average tax rate for the nation. This is done by dividing the nation's total tax payments by the nation's income as projected by the Tax Foundation for 2010." In a March 2008 paper on its methodology, the Tax Foundation stated that "Tax Freedom Day" does not provide information about the tax burden "for specific subgroups of taxpayers who may face higher or lower tax burdens than this average." The Tax Foundation added:
Tax Freedom Day compares total U.S. tax collections with total U.S. income. It does not provide a distributional analysis of the effective tax burdens faced by taxpayers in different income ranges.
CBPP: "Tax Freedom Day" may "mislead policymakers, journalists, and the public." The Center on Budget and Policy Priorities stated in March 2009 that "[a]uthoritative figures from the non-partisan Congressional Budget Office show that middle- and even upper-middle-income Americans pay a considerably smaller share of their income in taxes than the Tax Foundation report implies," and that "[j]ournalists and others who report on 'Tax Freedom Day' as if it represented the day until which the typical or average American must work to pay his or her taxes are misusing these figures and fostering serious misimpressions about the level of taxes most Americans pay":
Each year, the Tax Foundation releases a report projecting "Tax Freedom Day," which it describes as the day when Americans will have "earned enough money to pay this year's tax obligations at the federal, state, and local levels."
The Tax Foundation's "Tax Freedom Day" report is plagued by two major problems. First, its estimates of state and local tax burdens suffer from a number of serious methodological flaws. Second, over the years, many journalists and policymakers have misinterpreted the Tax Foundation's report as reflecting the tax burdens faced by typical middle-income workers.
In fact, the Tax Foundation's calculation of the "average" tax burden merely measures tax revenues as a share of the economy; it is similar to estimates of total revenues as a share of Gross Domestic Product (GDP). In a progressive tax system like that of the United States, only upper-income households pay tax at rates equal to or exceeding the overall level of revenues as a share of the economy. Authoritative figures from the non-partisan Congressional Budget Office show that middle- and even upper-middle-income Americans pay a considerably smaller share of their income in taxes than the Tax Foundation report implies. The CBO data suggest that 80 percent of U.S. households pay federal tax at a lower rate than the Tax Foundation's estimated "average" federal tax burden.
The Tax Foundation itself acknowledges this issue in a methodology paper accompanying its report, pointing out that its estimates reflect the "average tax burden for the economy as a whole, rather than for specific subgroups of taxpayers." Journalists and others who report on "Tax Freedom Day" as if it represented the day until which the typical or average American must work to pay his or her taxes are misusing these figures and fostering serious misimpressions about the level of taxes most Americans pay.
The following example shows how the Tax Foundation's methodology can overstate the tax burdens of the typical family. Suppose four families with incomes of $50,000 each pay $2,500 in taxes -- 5 percent of their income -- while one wealthy family with income of $300,000 pays $90,000 in taxes -- 30 percent of its income. Total income among these five families is $500,000, and the total amount paid in taxes is $100,000. Thus, 20 percent of the total income of the five families goes to pay taxes. But the 20 percent figure is highly misleading as an indicator of the typical tax burden for families in this group.
Fox & Friends falsely claims 47 percent of Americans "don't pay any taxes"
From the April 9 edition of Fox News' Fox & Friends:
CARLSON: Interestingly enough, I think yesterday we were reporting on a story that 47 percent of all Americans don't pay any taxes.
VARNEY: Yes. Forty-seven percent of households pay not a single dime in taxes. And some of those households actually make a profit from the Treasury.
In fact, 47 percent reportedly won't pay "federal income taxes," but still pay other taxes
AP: "[V]ast majority of people who escape federal income taxes will still pay other taxes." The Associated Press reported on April 7, "About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization." AP further wrote that "[t]he vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property."
Tax Policy Center: "[E]ven citizens who pay no income tax still pay other kinds of taxes." In an April 4 Washington Post op-ed, Roberton Williams and Rosanne Altshuler of the Tax Policy Center wrote that "even citizens who pay no income tax still pay other kinds of taxes":
About 45 percent of households will owe no federal income tax in 2010, according to our estimates. Half of them earn too little, while the other half -- mostly middle- and lower-income households -- will take advantage of tax credits such as the earned income credit, the child and child-care credits, the American Opportunity and Lifetime Learning credits, which help pay for college, and the saver's credit, which subsidizes retirement saving.
But even citizens who pay no income tax still pay other kinds of taxes. They pay Social Security and Medicare taxes when they work, sales taxes when they buy things and property taxes on their homes. Drivers pay gasoline taxes, and smokers and drinkers pay excise taxes on tobacco and alcohol. According to our research, more than 75 percent of us will pay at least some form of federal tax in 2010.
Those who pay no federal taxes are mostly the low-income elderly or very poor families with children. Even about half of those with annual incomes under $10,000 pay some federal tax, most often payroll taxes on wages.