27-07-2025
J.D. Tuccille: Lower taxes are the best thing about the one, big, beautiful bill
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By contrast, the bottom 50 percent of earners paid 3 percent of federal income taxes on 11.5 percent of AGI. The U.S. tax system is very progressive; the more you make, the bigger the mugging by government.
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In 2023, Pew Research crunched the numbers and found that 'all groups of taxpayers with $1 million or more in adjusted gross income (AGI) had average effective tax rates of more than 25 per cent.' On the other hand, 'tens of millions of Americans owed little or no federal income tax' because of low income and refundable tax credits. For those earning less than $30,000, the average effective tax rate was 1.5 per cent before taking tax credits into account. Because of those credits, millions of people actually get money from the government after filing taxes, effectively giving them a negative tax rate (-3.33 per cent for those earning $25,000 to $30,000, after credits are considered).
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In fact, continues Pew, 'since 2000, there has been a downward trend in average effective tax rates for all but the richest taxpayers.'
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As for those paying the lowest possible rates, adds the Tax Policy Center, in 2025 '40 per cent of households, or about 76 million 'tax units,' will pay no federal individual income tax.' About 70 per cent of those paying no income tax earn less than $75,000, and 45 per cent earn less than $40,000. The ranks of those paying no taxes were expected to shrink to 33.5 per cent by 2035 if the TCJA was not extended.
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That doesn't mean that 40 per cent of the country is paying no taxes at all. Most still get forced to pay in to the federal Social Security and Medicare schemes just like everybody else, even if they prefer to make their own plans. And many states and some localities impose their own income taxes along with sales taxes. Of course, we all have to pay the tariffs on imports imposed by the federal government.
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The U.S. isn't alone in the progressivity of its tax system. According to the Fraser Institute, in Canada, 'the top 20 per cent of income-earning families pay nearly two-thirds (64.5 per cent) of the country's personal income taxes and more than half (56.9 per cent) of total taxes' while earning 47.8 per cent of total income. Meanwhile, 'the bottom 20 per cent of income-earning families are estimated to pay 0.7 per cent of all federal and provincial personal income taxes and 1.9 per cent of total taxes in Canada' while earning 4.8 per cent of total income. For the top 20 per cent of Canadian earners, the average personal income tax rate is 22.8 per cent; for the bottom 20 per cent it's 2.4 per cent. (Canada's taxes, overall, are higher than those in the U.S. Its income tax burden is the fifth highest among nations in the OECD while the U.S. is 23rd.)
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That doesn't stop people in both countries from complaining that the wealthy aren't paying their 'fair share.' But it does raise the question of just what 'fair share' is supposed to mean when 40 per cent of income taxes are paid by the top 1 per cent of earners and 61 per cent are paid by the top 5 per cent — both numbers much larger than the proportion of total income that's being taxed. It's rather obvious that 'fair' is just an expression of envy and a euphemism for 'take it all to make me feel better.'
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But envy isn't something that should be indulged in a free society. And, if we can find a way to lower taxes for everybody, that's a great way to encourage people to work for their own benefit.
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Again, there's plenty to object to in the OBBB. The fact that, like so much legislation these days, it was turned into a grab bag of unrelated items with an up-or-down vote on the whole mess required is just the beginning. Projections that it will send the deficit and debt soaring also raise concerns.
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