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Stealth Tax Unfairly Hitting the Middle Class, Poor

While television pundits and fringe politicians complain that only half of the country pays income taxes, the reality of who foots the bill in the United States couldn’t be further from the truth. According to an analysis by PBS’ Joshua Holland, the undiscussed “stealth taxes” that the middle class and poor pay have become a massive burden on the population and the economy.

While Sean Hannity spends each night boasting a statistic that more than 40 percent of people don’t pay any income tax, the reality of who funds the federal budget isn’t so simple. Income taxes only make up about 40 percent of the federal budget. Payroll taxes, which everyone pays, make up another 40 percent. To say that everyone isn’t chipping in is preposterous when the every employee’s paycheck has a big sliver designated for Uncle Sam’s coffers.

If we look closer at the way the payroll tax system works, we realize that it’s the rich who aren’t paying their fair share. The payroll tax is capped. Everyone pays the same 6.2 percent rate up to the first $113,700 of their income. Any income above that isn’t subject to taxation. That means a person would pay the same $7,050 in Social Security tax whether they made just over $100,000 or well over $1 million.

Of course, the payroll tax is only part of the equation. Just because people pay income tax doesn’t mean they pay their fair share. According to the report, the top 400 highest earning households in the US paid an average income tax rate of 19.9 percent, the same as a single worker making $110,000 per year. Mitt and Ann Romney proved a perfect example as their tax releases showed that the millionaire couple paid less than 15 percent in income taxes.

Federal taxes aren’t the only place where the middle class is being hit unfairly, the state tax system is worse. While the top 20 percent pay the highest rate in federal taxes, they pay the lowest rate in state and local taxes while the bottom 20 percent pays the highest rate. State taxes fund nearly half of the costs of welfare and food stamp programs.

(Image courtesy of OnTask)

About the author

Igor Derysh is the Managing Editor of Latest. com and a syndicated columnist whose work has appeared in The Los Angeles Times, Chicago Tribune, Boston Herald, Baltimore Sun, and Orlando Sun Sentinel, and AOL News. His work has been criticized in even more publications. Follow him on Twitter @IgorDerysh