There’s been a lot of talk lately, most of it from Democrats, to the effect that the rich do not pay enough in taxes in the America. The line of argument is often that the rich derive great benefits from the government, so they ought to pay their fair share of taxes to the government. But for some reason this argument always focuses on income taxes, at least in my experience. Our income tax system already is progressive, but those making the argument generally don’t mention other, regressive taxes that hit the poor and middle classes harder than the rich.
Social Security and Medicare are both funded by payroll taxes at a flat rate: 12.4% for Social Security and 2.90% for Medicare. However, those flat rates only apply up to a maximum, which for the current year is $110,100. Salaries or other income above $110,100 are not subject to payroll taxes. Thus the taxes that fund these two programs are regressive. They take a larger percentage of income from the poor and middle class than from the rich, and the richer a person is, the lower the percentage that he pays. To compound the injury, the rich liver longer on average than the poor and middle class, so they get benefits from these two programs for a longer period.
Taxes on tobacco are another example of regressive taxes. A fixed amount is charged per pack, the poor are more likely to smoke than the rich, so on average the poor pay more tobacco taxes than the rich.
Likewise with a tax on soda that’s a reality in a few places and proposed in many more. Lawmakers often identify soda as a health threat, but actually in terms of calories and sugar it has a lot less than many other drinks. However, lawmakers show much less interest in taxing drinks that are more popular among the upper class, while soda is more popular among the poor.
If we want to make the tax burden more progressive, we could focus on eliminating regressive taxes rather than making the income tax more progressive.