Tuesday, April 15, 2014

Perception And Reality

With the blast of snow that's been rolling across much of the U.S. the last few days, it's easy to see how many Americans might think Mother Nature may have taken one too many sips of Nyquil in trying to fight off spring fever. The fact is, the calendar is correct and the current season in the U.S. is spring, which means it's time for events like prom and tax day - the latter of which is today.

Much like tax day, high school proms have rarely been drama-free, especially for the parents and grandparents of high-strung high schoolers. These days, prom isn't exactly a cheap event either, as Visa's annual prom spending survey has proven once again. This year's survey shows that the national spending average for prom is over $1000 on both the East and West Coasts - enough that you might just see a few parents panhandling for extra dollars for their kid's prom experience this year.

When you take a second look at the costs of prom around the nation this year, things may not be as bad they seem. The good news is that the national average amount parents and teens will spend has dropped 14%, the first time it has decreased in three years. That's a statistical fact that runs counter to both the claims of teenagers, and the claims of many fear mongers in the media today.

In a similar way, millions of Americans believe federal taxes in America are too high, as a Gallup poll confirmed on Monday. Much like the perception of prom costs, the facts about our American federal taxes don't exactly match with the opinions of most Americans - or the rhetoric they hear on cable "news" channels.

The CBO confirmed those facts this week noting that effective Federal tax rates - what Americans ACTUALLY pay, after all the deductions and credits are added up - are near historic lows. In fact, the historical trend for individual tax payers in America appears to be moving downward.

Further, the argument that those on the political right make - that poor people don't REALLY pay taxes - is in fact, antithetical to the facts. As Matthew Yglesias shows at Vox.com, when you look at the sources of Federal Tax Revenue, Payroll Tax and Personal Income tax - two of the biggest kinds of taxes the working poor in America pay - also happen to account for the overwhelming majority of federal revenue.

As Yglesias goes on to show, with help from the Urban-Brookings Tax Policy Center, only 14.4% of Americans pay neither income or payroll taxes. Most of those people - nearly 10% - are elderly, while most of the other 4.4% have annual incomes under $20,000.

As Paul Waldman noted at The American Prospect yesterday, there are even more reasons to cheer tax day today, including that U.S. federal tax rates are extremely low by international standards. There's also the fact that - compared to their income - Americans in every income bracket actually pay a share of taxes remarkably close to their income level. Which means that - at least on the federal level, Americans are not really overtaxed.

Meanwhile, amid all this good news about taxes, the CBO also recently noted that the federal deficit has continued to drop sharply - and the overall price of the health insurance expansion under the Affordable Care Act is actually going to cost $1.3 trillion dollars LESS than previously forecast. That mans Americans can put more of those tax dollars towards things our nation needs, like infrastructure investments, police, and fire personnel.

As Waldman also noted, those taxes pay for the things we all enjoy in society - including the salaries of the school teachers chaperoning prom, who will hopefully help that nearly $1000 become a short-term investment that returns good memories for a lifetime.