I think it paints the wrong picture of our tax code. I've heard it referred to as, "it can either be fair or simple, not both." To most who label it as unfair, they don't take into account all taxes -- they pick and choose the taxes they think are unfair, and single out the biggest variances. Let's look at the 10 people eating dinner:
The 4 people eating for free (the poverty level) -- this implies that some pay no tax, when that is entirely false. The income tax threshold for a single person is roughly $9,350. This can vary, as they may qualify for credits, and receive public assistance to offset some of that. They have no investment income. Of course, they pay 7.65% tax for FICA and Medicare (their employer wouldn't pay their portion without them - we'll add that too) - $1,430.55. I would venture to guarantee that they spend half their take home on taxable (sales tax) items. Let's just say another 6% of half their income, or $280.50. You can probably assume that 2% of their rent goes toward property taxes (let's say rent is 30% of salary - $56.10. So each of those 4 people are paying roughly $1767.15 in tax, and making as much as $10,065.28 (grossed up for employer match) -- or approx 17.6% in taxes.
Now look at Joe Schmoe middle class (the guy who paid $7). He makes 50k, owns a 150k home, all his investments are tax deferred (401k, IRA). He itemizes $12,500 in tax/interest, $1,500 in property tax (1%). His income tax would be approx $4,660. He spends 35% of his income on taxable items (6% sales tax) -- or spends $17,500 and pays $1,050 in tax. His FICA/medicare would be $7,650. His total taxes are $14,860 - with total income of $53,825 (grossed up for employer match) or 27.6%.
Now the high-roller -- let's just say he makes 400kin income, lives in a 750k home, and has investment income (1/2 dividend, 1/2 interest) of 100k. He itemizes ~ $65,000 in taxes/interest. He is going to pay approx $98,431 tax on his income, an additional FICA/medicare of $47,956.8. He will have tax on his investment income of $25,000. We'll assume that he pays 2% property tax on amounts greater than 150k, and 1% on first 150k -- or $13,500. Let's say that they spend 25% of their employment income on taxable items (sales tax) -- or $100,000, and the sales tax rate is 6% ($6,000 in tax). To sum it all up, $536,356.80 in income (grossed up by employer FICA + investment income), and a total of $190,887 in taxes (35.5%).
So to those who talk about the vast inequities I say, "Balderdash!" the poverty level is still paying about 18%, middle class 30%, and wealthy 35%. Sounds more fair than anyone wants to admit.
