Who pays taxes?

Here’s a little more of that right wing populism that’s intended to assuage all that economic anxiety in this Akron diner:

 Mike Gibbons, a leading Republican Senate candidate from Ohio, said at a media event last fall that middle-class Americans don’t pay “any kind of a fair share” of income taxes.

“The top 20% of earners in the United States pay 82% of federal income tax — and, if you do the math, and 45% to 50% don’t pay any income tax, you can see the middle class is not really paying any kind of a fair share, depending on how you want to define it,” Gibbons said.

The comments by Gibbons, a millionaire investment banker from Cleveland, were made in a September episode of “The Landscape” podcast by Crain’s Cleveland Business. But they could take on new resonance after Republican Sen. Rick Scott of Florida, a potential 2024 presidential candidate, introduced a governing plan in February that has divided the party over its call to raise taxes on millions of Americans who don’t earn enough to pay federal income taxes.

Let’s take a look at what federal taxes a middle class worker pays. Median weekly wages for full-time wage or salary workers — note that this is not for workers as a whole, a huge percentage of which are not full-time — were $990 per week in the second quarter of 2021, which translates to just over $50,000 per year.

Here’s the breakdown of what an employee at the University of Colorado who makes that salary will pay in federal taxes. I’m assuming a single-income family with a couple of kids:

Federal income taxes: Around $4,000

Employee FICA and Meditax: $3825

Employer FICA and Meditax: $3825

The employer contribution is a straight pass-through, and in economic terms represents employee compensation that simply goes straight to the government in the form of an invisible tax.

So that’s a 21.6% effective federal tax rate, on compensation of $53,825 ($50,000 nominal salary, plus $3825 in employer FICA/Meditax that the employee never sees).

How does that compare to the average effective tax rate of the uber wealthy? I’m glad you asked!

Between 2013 and 2018, the top 400 American families by income paid an average effective federal tax rate of 23%. The top 15 by income paid an average effective federal tax rate of 20%. The top 25 by wealth paid an average effective federal tax rate of 16%.

But there’s more. Our average full-time worker has to pay a bunch of quasi-taxes as well, because she needs to pay for medical insurance for her family, and a whole lot of her actual as opposed to her nominal income is going to be dedicated to covering an expense that in totalitarian countries where they don’t have Freedom ™ would be paid for by taxes that fund a national health care system.

By the way one thing right wingers absolutely love to talk about is how quoting salary numbers of middle class workers is very deceptive, because you have to tack something like 30% or 35% onto those salary numbers, in the form of the extremely valuable benefits those workers get from their employees.

And it’s true! Our modal worker here at the University of Colorado, if she elects the second-cheapest out of the four insurance plans available to her, will pay $4,100 in employee contributions for that plan, but what this omits is that the University of Colorado will contribute almost exactly $20,000 toward the cost of that insurance. So our average worker’s real salary, so to speak, isn’t $50,000 — it’s really $73,825. Isn’t that great?

Unfortunately, that means her real federal effective tax rate, counting formal taxes and functional quasi-taxes, is around 43% of her income, i.e., double the effective federal tax rate that the richest Americans generally pay.

I guess freedom isn’t free.