Here Are Your Favorite Tax Graphs

Happy tax day! Let's celebrate (or mourn) our civic duty to pay the government for stuff by sharing our favorite charts. The following pictures come from readers like you. If you think they stink, the most effective recourse is not to scream at me, but to prove you've got something better by throwing a link and an explanation in the comment section. Here we go.

1) Does the tax code penalize marriage? Actually, it really can. Mike Stringer shares a graph that shows the difference in taxes for married couples filing jointly compared to filing separately. The general rule is that if two people earning six figures get hitched and file together, they will probably more taxes than if they filed separately. This is because we have a progressive tax system, and their combined income will lift them into higher tax brackets. The worst penalty is for couples where both spouses make between $200,000 and $300,000, because their combined income pushes them into the highest marginal tax bracket. The marriage "penalty" turns into a marriage "benefit" if one spouse isn't earning much money, which lowers the household's average income. The greatest marriage benefit, according to this graph, is for a man or woman earning about $75,000 to get hitched to somebody earning nothing.

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2) Who pays the most taxes? The rich pay the most taxes because they have the most money. This makes our tax code pretty clearly progressive, as Scott Grannis points out. I would like to add, however, that the progressivity in the tax code -- that is, the degree to which richer people pay a higher share of their money in taxes -- sort of stalls at the top of the income pyramid because (a) there are millions of millionaires who pay the same top marginal rate as somebody making about $330,000 and (b) the rich tend to get more of their money from capital gains, which are taxed at a privileged rate.

3) How have tax rates changed over time? Mike Wasikowski shares this graph from the New York Times which shows how total federal tax rates have fallen especially far for the richest 1% and 0.1%, while they've actually increased a little for the middle class. Rates have also fallen slightly for the bottom 40%.

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4) Are we a high tax country?  Michael Linden from the Center for American Progress shared this graph showing total government revenue, as a share of GDP, for all OECD countries, averaged over 2005-2009. The US ranks fifth from the bottom. "We're about 25% below the average OECD country, and we're almost 20% lower than Canada (which itself is still in the bottom third of OECD countries)," Linden writes, which suggests that the US is a very low-tax country.

It's also worth thinking about what we get for our money. In the UK, where taxes account for 10 more percentage points of GDP, there is a universal health care system. In the US, employees pay for private health care out of their compensation. This dedicated health care payment would be a health care tax in the U.S. if we had a public system like Britain's.

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5) Do top marginal rates matter? Tax rates matter. But top marginal rates don't matter as much as you might think when it comes to raising money for the government, as this graph from Cheato321 shows. I'll offer two reasons why. First of all, the US could have a top marginal rate of 99 percent, and it would have practically no impact on government revenue or economic growth if the threshold for that marginal rate were $10 billion of earned income. That's why "effective tax rates" matter much more than top marginal rates. Second, the rich can move around money -- for example, to tax-privileged investments -- to avoid tax incidence when rates climb.

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BONUS: Where do taxes come from? I've made this point a few times in the last 24 hours, but I'll make it again. Income taxes account for less than half of federal government revenue. Less than half. So when you hear it said that "half of Americans don't pay taxes" and the speaker is obviously talking about federal income taxes, this is not a good description of who is paying what. Between 80 and 90 percent of working-age Americans pay net positive payroll and income tax to the government. The few who don't are mostly very poor and receiving so-called "refundable credits" that can make families richer through the tax code.

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