tag:theconversation.com,2011:/uk/topics/tax-rates-38732/articlestax rates – The Conversation2021-06-09T17:41:33Ztag:theconversation.com,2011:article/1478932021-06-09T17:41:33Z2021-06-09T17:41:33ZSenator Warren’s wealth tax might prevent billionaires from paying nearly nothing in taxes – but it’s probably not constitutional<figure><img src="https://images.theconversation.com/files/405399/original/file-20210609-15050-1h64umm.jpg?ixlib=rb-1.1.0&rect=344%2C106%2C4562%2C3522&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Jeff Bezos paid no taxes in some years despite gaining billions in wealth.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/BezosSpace/45fbb45ab82947a98333d8f75e3bddfa/photo?Query=bezos&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=737&currentItemNo=3">AP Photo/Patrick Semansky</a></span></figcaption></figure><p>A new report that shows America’s biggest billionaires <a href="https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax">paid barely any income tax</a> from 2014 to 2018 has <a href="https://www.newsweek.com/elizabeth-warren-renews-wealth-tax-call-after-report-that-americas-richest-pay-little-taxes-1598752">revived talk</a> of a <a href="https://www.rollcall.com/2021/06/08/wyden-renews-wealth-tax-push-after-billionaires-returns-leak/">wealth tax</a> – such as the <a href="https://www.congress.gov/bill/117th-congress/senate-bill/510">one proposed by Sen. Elizabeth Warren</a>. </p>
<p>The report from ProPublica – which <a href="https://www.propublica.org/article/why-we-are-publishing-the-tax-secrets-of-the-001">based its findings on a trove of tax records</a> submitted by an anonymous source – found that investor Warren Buffett paid US$23.7 million in taxes on $125 million in reported income, while amassing $24.3 billion more wealth during that same five-year period. Amazon founder Jeff Bezos saw his wealth soar $99 billion from 2014 to 2018, yet paid just $973 million in taxes on $4.22 billion in reported income.</p>
<p>In total, the 25 richest Americans saw their wealth rise $401 billion over this period as the value of their investments such as stocks and properties grew. They paid just $13.6 billion in income taxes, or 3.4% of their wealth gain. For context, ProPublica noted middle-class Americans in their early 40s gained just $65,000 in wealth during the period – and paid almost the same amount in taxes</p>
<p>As an <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=56687">expert on tax policy</a>, I’m deeply familiar with how America’s system has exacerbated inequality. There’s at least one problem with Warren’s wealth tax as a solution, however: It may be unconstitutional.</p>
<h2>Income and wealth inequality</h2>
<p>Concerns about inequality have increased in recent decades.</p>
<p>Americans <a href="https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality">enjoyed substantial economic growth</a> and broadly shared prosperity from the end of World War II into the 1970s.</p>
<p>But in the 1980s, <a href="https://www.brookings.edu/blog/up-front/2017/12/08/what-we-learned-from-reagans-tax-cuts/">President Ronald Reagan dramatically slashed taxes on the wealthy</a> – twice – cutting the top rate on wages from 70% to 28%.</p>
<p>Studies have shown that the drop in tax rates, combined with other “trickle-down” policies such as deregulation, <a href="https://www.thebalance.com/trickle-down-economics-theory-effect-does-it-work-3305572">led to steadily rising income and wealth inequality</a>. </p>
<p>The wealthiest 1% <a href="https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality">controlled 39%</a> of all wealth in 2016, up from less than 30% in 1989. At the same time, the bottom 90% held less than a quarter of America’s wealth, compared with more than a third in 1989. </p>
<p>Currently, the federal government <a href="https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/">taxes all income above $518,400</a> at 37% for single filers with <a href="https://www.thebalance.com/net-investment-income-tax-3192936">an additional 3.8% investment tax</a> on incomes over $200,000. Of course, as the ProPublica cache of tax documents shows, loopholes and tax dodges <a href="https://www.propublica.org/article/how-we-calculated-the-true-tax-rates-of-the-wealthiest">result in actual income tax rates</a> significantly lower.</p>
<figure class="align-center ">
<img alt="Elizabeth Warren sits at a Senate committee table as she speaks" src="https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405469/original/file-20210609-14697-1jn49oe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Warren argues her wealth tax would force billionaires to pay more in taxes.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/CongressIRS/1bdf00ba541e49598361378bc8cf8669/photo?Query=Elizabeth%20AND%20Warren&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=5944&currentItemNo=5">Evelyn Hockstein/Pool via AP</a></span>
</figcaption>
</figure>
<h2>Warren’s wealth tax</h2>
<p>Warren’s <a href="https://www.congress.gov/bill/117th-congress/senate-bill/510">wealth tax proposal</a> aims to change that. </p>
<p>In March 2021, the Massachusetts Democrat <a href="https://www.nytimes.com/2021/03/01/business/elizabeth-warren-wealth-tax.html">introduced a bill</a> to tax households worth over $50 million and up to $1 billion at a rate of 2%, and anything over that at 3%. She <a href="https://cdn.theconversation.com/static_files/files/1498/Wealth_Tax_Revenue_Estimates_by_Saez_and_Zucman_-_Feb_24_20211.pdf?1614702906">first proposed the idea of a wealth tax</a> during the Democratic presidential primary in 2019.</p>
<p>The legislation, which <a href="https://www.warren.senate.gov/imo/media/doc/Wealth%20Tax%20Revenue%20Estimates%20by%20Saez%20and%20Zucman%20-%20Feb%2024%2020211.pdf">could raise an estimated $3 trillion</a> over a decade, is meant to reduce inequality by using revenue from the wealthiest Americans to pay for new federal programs to lift up some of the poorest.</p>
<p>Her tax <a href="https://cdn.theconversation.com/static_files/files/1498/Wealth_Tax_Revenue_Estimates_by_Saez_and_Zucman_-_Feb_24_20211.pdf?1614702906">would affect an estimated 100,000 families</a>, or fewer than 1 in 1,000, according to University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman. The tax wouldn’t start until 2023. </p>
<p>President Joe Biden, for his part, hasn’t signaled support for a wealth tax. But <a href="https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy?sref=Hjm5biAW">he is seeking to raise the top rate</a> the rich pay in income taxes from 37% to 39.6%. And, he wants to double the capital gains rate to help finance his infrastructure proposal. </p>
<h2>The problem with taxing wealth</h2>
<p>Unlike an income tax, a wealth tax <a href="https://theweek.com/articles/717294/wealth-inequality-even-worse-than-income-inequality">reaches the root</a> of both wealth and income inequality.</p>
<p>There’s only one snag: There are <a href="https://taxfoundation.org/warren-wealth-tax-constitutionality/">strong</a> <a href="http://nymag.com/intelligencer/2019/02/constitutional-concerns-are-a-major-risk-for-a-wealth-tax.html">arguments</a> that a federal wealth tax is <a href="https://theconversation.com/how-slaverys-lingering-stain-on-the-us-constitution-spoils-elizabeth-warrens-wealth-tax-proposal-for-now-110964">unconstitutional</a>. Wealth taxes violate Article I, Section 2, Clause 3, of the U.S. Constitution, which forbids the federal government from laying “direct taxes” that aren’t <a href="https://constitutingamerica.org/february-24-2011-%E2%80%93-article-1-section-2-clause-3-of-the-united-states-constitution-%E2%80%93-guest-essayist-w-b-allen-havre-de-grace-md-2/">apportioned equally among the states</a>. </p>
<p>A direct tax <a href="https://www.salon.com/2019/02/22/how-slaverys-lingering-stain-on-the-us-constitution-spoils-elizabeth-warrens-wealth-tax-proposal_partner/">is a tax on a thing</a>, like property or income. An indirect tax is a tax on a transaction: for example, a sale or a gift. </p>
<p>The income tax is a direct tax and constitutional <a href="https://www.law.cornell.edu/constitution/amendmentxvi">because of the 16th Amendment</a>, which specifically allows income taxes without apportionment. As for property, you may notice that <a href="https://www.financialsamurai.com/property-taxes-by-state/">only states levy real estate taxes</a>. In almost every case, the federal government cannot tax real estate or any other form of wealth absent a transaction. </p>
<p>Warren <a href="https://www.bloomberg.com/opinion/articles/2019-01-30/elizabeth-warren-s-wealth-tax-is-probably-constitutional">cites a small group</a> of law professors who back her claim that a wealth tax passes constitutional muster. But the argument against constitutionality is strong enough that a lawsuit before the Supreme Court <a href="https://minnlawyer.com/2021/03/03/wealth-tax-problem-its-probably-unconstitutional/">is sure to follow any attempt to enact a wealth tax</a>. </p>
<p>Barring a victory before a conservative Supreme Court or <a href="https://www.archives.gov/federal-register/constitution">an arduous amendment to the Constitution</a>, the federal government is shut out of taxing wealth.</p>
<h2>Two other proposals</h2>
<p>Two other proposals to tax the rich have also emerged in recent years.</p>
<p>Rep. Alexandria Ocasio-Cortez of New York <a href="https://www.cnn.com/2019/01/04/politics/alexandria-ocasio-cortez-tax-climate-change-plan/index.html">wanted to create</a> a new “60% to 70%” tax bracket for income earned from labor over $10 million. </p>
<p>One problem with that idea was that the wealthy <a href="https://www.fool.com/taxes/2018/01/27/4-tax-breaks-for-high-income-households.aspx">can avoid or lower that tax</a> by <a href="https://www.moneytips.com/how-the-mega-rich-avoid-paying-taxes">choosing when they receive the income</a>. A second is that the rich <a href="https://www.forbes.com/sites/omaseddiq/2018/03/10/how-the-worlds-billionaires-got-so-rich/#125b82df124c">earn most of their money from capital gains</a>, which <a href="https://www.bankrate.com/investing/long-term-capital-gains-tax/">are taxed at a much lower rate</a> than wage income. </p>
<p>Vermont Sen. Bernie Sanders, who has <a href="https://www.cnbc.com/2021/03/01/elizabeth-warren-bernie-sanders-propose-3percent-wealth-tax-on-billionaires.html">since signed on to Warren’s plan</a>, <a href="https://www.cnbc.com/2019/01/31/bernie-sanders-proposes-big-estate-tax-hike-including-77percent-rate-for-billionaires.html">in 2019 proposed</a> going after wealth but targeted instances when it’s being transferred to someone else – which is what makes it constitutional. He wanted to lower the threshold at which the estate tax applies from $11 million – which <a href="https://www.taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax">touches just 1,000 estates a year</a> – to $3.5 million, where the threshold stood in 2009. He would also levy a new 77% rate on estates over $1 billion. </p>
<p>Although this would bring in significantly less than his colleagues’ proposals, it is far superior because it both addresses the root of the problem – wealth disparities – and can be implemented immediately. And it wouldn’t pose a constitutional problem.</p>
<p>[<em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>.]</p>
<h2>A rising tide</h2>
<p>I agree with all three lawmakers that the United States should return to economic policies that <a href="https://www.economist.com/free-exchange/2014/03/04/does-raising-all-boats-lift-the-tide">seek to lift all boats</a>.</p>
<p>Although American wealth and productivity has surged in the last 40 years, most Americans <a href="https://www.latimes.com/business/lazarus/la-fi-lazarus-economy-stagnant-wages-20180831-story.html">have not fared nearly as well</a> as the <a href="https://inequality.org/facts/wealth-inequality/">richest have</a> – and <a href="https://www.propublica.org/article/you-may-be-paying-a-higher-tax-rate-than-a-billionaire">are paying higher tax rates</a>. In 2020 alone, <a href="https://www.forbes.com/sites/chasewithorn/2020/12/16/the-worlds-billionaires-have-gotten-19-trillion-richer-in-2020/?sh=52eb3f857386">America’s billionaires saw their wealth increase $560 billion</a>, even as tens of millions <a href="https://www.bls.gov/news.release/empsit.nr0.htm">were unemployed</a> or <a href="https://philanthropynewsdigest.org/news/one-in-seven-americans-rely-on-foodbanks-report-finds">depended on food donations</a> to get enough to eat. </p>
<p>The U.S. tax system is at least partly responsible for these gaps. A wealth transfer tax – rather than one that taxes wealth – seems to be the best approach to both pass legal muster and help solve the problem.</p>
<p><em>This is an updated version of an <a href="https://theconversation.com/elizabeth-warrens-wealth-tax-would-reduce-inequality-the-problem-is-its-probably-unconstitutional-156349">article published</a> on March 2, 2021.</em></p><img src="https://counter.theconversation.com/content/147893/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Beverly Moran does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new report found that America’s top billionaires paid very little income tax despite tremendous gains in their wealth.Beverly Moran, Professor Emerita of Law, Vanderbilt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/859472017-11-01T10:16:36Z2017-11-01T10:16:36ZWhy tax cuts make us less happy<figure><img src="https://images.theconversation.com/files/192677/original/file-20171031-18689-17oyhxd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Why so grim? Oh, tax cuts.
</span> <span class="attribution"><span class="source">AP Photo/Pablo Martinez Monsivais</span></span></figcaption></figure><p>Republicans recently <a href="https://www.nytimes.com/2017/09/27/us/politics/trump-tax-cut-plan-middle-class-deficit.html">announced</a> their tax plan and are hoping to <a href="https://www.bloomberg.com/news/articles/2017-10-26/senate-gop-wants-to-pass-tax-plan-by-thanksgiving-cornyn-says">turn it into law</a> before Thanksgiving. While details are in flux, it would likely eliminate the estate tax, lower the top marginal rate and slash corporate rates, producing, in sum, what the president has dubbed a “<a href="http://nypost.com/2017/09/29/trump-touts-his-giant-beautiful-massive-tax-cut-plan/">gigantic</a>” tax cut.</p>
<p>Each of these elements, if passed, would make the tax code less progressive and reduce government revenues in ways that ultimately makes it harder to pay for programs and services. Since the purpose of public policy should be to improve citizens’ lives and well-being, the obvious question to consider in evaluating this plan is whether it does that. Or put another way, will the tax plan make most Americans happier?</p>
<p>Research on <a href="http://www.nber.org/reporter/2008number2/blanchflower.html">happiness economics</a> suggests two vantage points to use in considering this question. </p>
<p>The first concerns how progressive a tax system is. Simply put, are societies happier when the wealthy bear a proportionately higher share of taxes? The second is the total level of taxation. That is, whether higher taxes make people more or less happy because the government takes more of their earnings and spends it on services like health care or infrastructure. </p>
<p>Let us consider each in turn.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192715/original/file-20171031-18738-12v1p4j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">While everyone hates filing their taxes, research suggests paying more (if well spent) can make us happier.</span>
<span class="attribution"><span class="source">a katz/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>The importance of ‘tax morale’</h2>
<p>A <a href="http://journals.sagepub.com/doi/abs/10.1177/0956797611420882">recent article</a> in the peer-reviewed journal Psychological Science suggests that countries with a more progressive tax system are in fact happier than those where tax rates are flatter.</p>
<p>In this piece, three psychologists compare the progressiveness of a nation’s tax system with various measures of happiness. They find clear and unequivocal evidence that progressive taxes “are positively associated with subjective well-being.” In other words, a country’s citizens are happier when the wealthy bear a larger share of the taxes. </p>
<p>This conclusion holds not just when using simple correlations. It also holds under sophisticated statistical analyses that control for other national factors, such as GDP per capita and income inequality, as well as for individual factors like income, gender, age and marital status.</p>
<p>One reason for this is that the link between income and happiness is strongest for the poor and middle class. Nobel Laureates Angus Deaton and Daniel Kahneman demonstrated that happiness increases with income until a certain threshold is reached at which the returns in terms of well-being <a href="http://time.com/money/4070041/angus-deaton-nobel-winner-money-happiness/">progressively diminish</a>. That means that while income lost to taxes harms the poor and middle class – who tend to spend most of what they earn – it does not trouble the affluent – whose satisfaction with life is much less affected by a marginal increase in tax burden.</p>
<p>Another reason might be what scholars call “tax morale.” This refers to the extent to which people accept a moral obligation to pay taxes as their contribution to society. In turn, this implies a belief that a tax system is fair.</p>
<p>Existing research clearly indicates, and <a href="https://www.vox.com/2017/4/14/15297488/tax-poll-rich-pay-more">common sense suggests</a>, that <a href="https://link.springer.com/article/10.1007/s11127-011-9848-1">tax morale is higher the more progressive a system is</a> – that is, a <a href="https://www.washingtonpost.com/news/wonk/wp/2017/03/29/even-republicans-think-the-rich-arent-paying-their-fair-share-in-taxes-but/?utm_term=.6800249d70ed">“fair” system</a> is one in which the rich pay a disproportionate share – and that <a href="http://kie.vse.cz/wp-content/uploads/Lubian-Zarri-2011.pdf">people with greater tax morale are happier</a>. So, logically, if progressive taxation increases tax morale, and tax morale increases happiness, more progressive taxes mean higher levels of happiness.</p>
<p>This is not good news for Americans, however. </p>
<p>The U.S. tax system is <a href="http://journals.sagepub.com/doi/abs/10.1177/0956797611420882">one of the least progressive</a> in the Western world and is <a href="https://www.brookings.edu/blog/up-front/2012/04/13/just-how-progressive-is-the-u-s-tax-code/">considerably less so</a> than it was just a few decades ago.</p>
<p>And this is also bad news for the Republican tax plan – if the GOP and President Donald Trump want to make Americans happier. </p>
<p>The highly respected Tax Policy Center’s <a href="http://www.taxpolicycenter.org/publications/preliminary-analysis-unified-framework">detailed analysis of the plan</a> shows that benefits are heavily skewed toward the wealthiest. The current proposal will benefit the 1 percent handsomely, increasing their incomes by <a href="https://www.forbes.com/sites/anthonynitti/2017/09/29/despite-promises-to-the-contrary-trump-tax-plan-heaps-biggest-benefits-on-the-rich/#36929c7555eb">more than 8 percent</a>. Meanwhile the working and middle classes receive minimal benefits, if any – and they <a href="http://www.businessinsider.com/trump-tax-reform-plan-analysis-study-rich-rates-2017-9">may even see their taxes increase</a>. </p>
<p>While nothing is certain until the ink is dry, their bill most likely will result in a more regressive tax system that likely will make most Americans less happy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192682/original/file-20171031-18686-1xaxlwl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">No one likes paying taxes, including the president.</span>
<span class="attribution"><span class="source">AP Photo/Mary Altaffer</span></span>
</figcaption>
</figure>
<h2>What taxes do</h2>
<p>But what about connection between the total tax burden and the national level of happiness?</p>
<p>Surely no one likes being taxed, but taxation is the mechanism by which society provides a great many things that people do like, such as Medicare, Medicaid and Social Security, not to mention good schools, good roads and safe neighborhoods.</p>
<p>“Big government” programs <a href="https://www.psychologytoday.com/blog/the-economy-happiness/201511/why-is-denmark-the-happiest-country-in-the-world">benefit everyone</a> for the obvious reason that <a href="https://academic.oup.com/sf/article/77/3/1119/2233857/Do-Social-Welfare-Policies-Reduce-Poverty-A-Cross">they reduce poverty</a> and alienation, thus lowering the social problems such as <a href="https://books.google.com/books?id=7RouAgAAQBAJ&dq=crime+rates+welfare+state+messner&source=gbs_navlinks_s">crime</a> and <a href="https://link.springer.com/article/10.1007/s11205-008-9252-5">suicide</a> that these conditions produce. </p>
<p>In turn, it seems obvious that virtually all people, regardless of social class or political ideology, are happier when there is less poverty and less insecurity. <a href="https://www.psychologytoday.com/blog/the-economy-happiness/201511/why-is-denmark-the-happiest-country-in-the-world">Much peer-reviewed academic research</a> has documented just that. </p>
<p>Whether <a href="https://www-cambridge-org.proxy.library.nd.edu/core/journals/perspectives-on-politics/article/assessing-the-welfare-state-the-politics-of-happiness/25B7F407E09233323C46106F2EB75AF4">looking across countries</a> or <a href="http://www.journals.uchicago.edu.proxy.library.nd.edu/doi/abs/10.1017/S0022381610000241">across U.S. states</a>, people – both rich and poor – tend to be happier in places where government provides a greater array of social protections and services. Hence, the closer we approach what Europeans call social democracy – and Americans call New Deal programs – the more people <a href="https://academic-oup-com.proxy.library.nd.edu/sf/article-lookup/doi/10.1093/sf/sou010">tend to find life satisfying</a>.</p>
<p>If taxpayer-funded government programs make people happy, then we should find a link between the level of tax burden and happiness. And in fact, that’s what we find by <a href="http://www.oecd.org/tax/tax-policy/tax-database.htm">examining a wide range of countries</a> in the Western world.</p>
<p>For example, Denmark, generally considered <a href="http://worldhappiness.report/ed/2017">the world’s happiest country</a>, also has the highest tax burden of any of industrial democracy, with about <a href="http://www.oecd.org/tax/tax-policy/tax-database.htm">half of all income</a> going to the tax man in 2014. Conversely, the <a href="http://worldhappiness.report/ed/2017/">least happy</a> are also the least taxed, namely South Korea and Turkey, which pay 25 percent and 15 percent, respectively. Yet, despite their low taxes, <a href="http://worldhappiness.report/ed/2017/">South Korea</a> ranks just 58th in happiness, between Moldova and Romania, while Turkey ranks even lower at 69th, just below Libya.</p>
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<p>We cannot of course generalize from a few examples, nor can we assume that taxation (and the spending taxation allows) are the only causes of happiness. To make strong claims about the nexus between taxation and well-being requires the rigorous and systematic analysis found in the peer-reviewed academic literature.</p>
<p>In “<a href="http://www.cambridge.org/us/academic/subjects/politics-international-relations/political-economy/political-economy-human-happiness-how-voters-choices-determine-quality-life?format=PB#02kj7KOTYZtHu66G.97">The Political Economy of Human Happiness</a>,” one of us (Radcliff) examined individual-level data on 21 countries over three decades and found that people are happier as tax burden increases.</p>
<p>This held even when accounting for other factors known to affect happiness such as income, health, employment status, gender, age, race, education, religion and so on. Similarly, the national or aggregate level of happiness went up or down with the level of taxation (again, controlling for other factors). </p>
<p>The same positive connection between tax burden and happiness was reported in <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1747-1346.2011.00290.x/abstract">a 2011 paper</a>, while <a href="https://academic.oup.com/sf/article/92/4/1241/2235843/Assessing-the-Impact-of-the-Size-and-Scope-of">another article</a> found that life satisfaction varies positively with the total amount of governmental “consumption” of the economy, that is the level of taxation.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=464&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=464&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=464&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=583&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=583&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192735/original/file-20171031-18735-1aw355v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=583&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Supreme Court Justice and Republican Oliver Wendell Holmes argued taxes were necessary to keep society civilized.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Justice_Oliver_Wendell_Holmes_at_desk.jpg">Library of Congress</a></span>
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</figure>
<h2>The price of a ‘civilized society’</h2>
<p>While details of the Republican tax plan could change drastically, it is certain to reflect core Republican values like lowering tax rates and smaller government.</p>
<p>Republicans tend to <a href="https://www.nytimes.com/2015/05/16/business/economy/republican-presidential-candidates-rally-around-flat-tax.html?_r=0">favor a flat tax</a> because they argue it’s fairer. And they want to reduce the tax burden overall because they think people are better off with more money in their pockets and fewer government services. Scholarly research by us and others suggest they are wrong on both counts, at least in so far as human happiness is concerned.</p>
<p>The familiar aphorism, usually attributed to Justice Oliver Wendell Holmes, notes that “<a href="https://en.wikiquote.org/wiki/Oliver_Wendell_Holmes_Jr.">taxes are the price we pay</a> for a civilized society,” a sentiment chiseled into the side of the IRS building. </p>
<p>We believe research into the economics of happiness would take this sentiment one step farther: Taxes are the price we pay for a happy society.</p><img src="https://counter.theconversation.com/content/85947/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Republican tax plan would ultimately make the current system less progressive while reducing the overall burden, two things research shows make countries less happy.Michael Krassa, Chair, Human Dimensions of Environmental Systems and Professor Emeritus of Political Science, University of Illinois at Urbana-ChampaignBenjamin Radcliff, Professor of Political Science, University of Notre DameLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/848672017-09-28T21:12:08Z2017-09-28T21:12:08ZTrump’s tax plan would weaken faith in fairness of US tax system<figure><img src="https://images.theconversation.com/files/188074/original/file-20170928-1460-5zew90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump unveiled his tax cut in Indianapolis.</span> <span class="attribution"><span class="source">AP Photo/Michael Conroy</span></span></figcaption></figure><p>President Donald Trump and GOP leaders <a href="https://www.nytimes.com/2017/09/27/us/politics/trump-tax-cut-plan-middle-class-deficit.html?mcubz=1">just released a plan</a> to significantly change the taxation of individuals and businesses in what would be the biggest overhaul of the tax code in decades. </p>
<p>Among its many elements is a proposal to change the way the government taxes so-called pass-through entities, something <a href="https://www.wsj.com/articles/trump-tax-cut-for-pass-through-businesses-spurs-debate-1493249166?tesla=y">first suggested in April</a>. </p>
<p>In a nutshell, the Trump proposal would dramatically lower the rates this category of filers pays. While the cut would not be as large as first proposed, it would still lead to very creative tax planning at best and outright evasion at worst, while <a href="https://www.bloomberg.com/politics/articles/2017-04-28/trump-plan-seen-turning-everyone-and-their-dog-into-an-llc">prompting more companies</a> to adopt this type of business structure to gain the huge benefits. </p>
<p>More fundamentally, we argue, this would cause faith in the fairness of the tax system – a <a href="https://books.google.com/books/about/The_Economic_Psychology_of_Tax_Behaviour.html?id=dh0qhqTOtb0C">cornerstone of our voluntary method of taxation</a> – to falter. The consequences of that could be dire.</p>
<h2>Just passing through?</h2>
<p>The universe of pass-throughs is very large, including anything from freelancers and corner grocery stores to medical partnerships and hedge funds that file under legal categories like sole proprietorships, partnerships and S corporations. </p>
<p>The name “pass-through” refers to how income “passes through” to owners. Pass-throughs avoid the <a href="https://ct.wolterskluwer.com/resource-center/articles/how-are-c-corporations-taxed">double taxation</a> that hits regular C corporations. More of U.S. business income <a href="https://www.amazon.com/Pass-Through-Business-Income-Analysis-Individual-ebook/dp/B007FRFC8Q">is actually generated by pass-through entities</a> than conventional corporations like Apple and General Electric. </p>
<p>Currently, owners of pass-throughs report both compensation and business income on their personal tax returns and pay the same tax rates on both.</p>
<p>To illustrate how this works, imagine a doctor’s sole proprietorship generates US$1 million of taxable earnings. Let’s say half of that would be considered reasonable compensation for the owner’s work, while the other half would be deemed ordinary business income. On her tax return, the doctor would report an income of $1 million, all of which would be taxed at personal income tax rates, for a federal levy of <a href="https://smartasset.com/taxes/income-taxes#vx3l58rVis">$396,000</a> (assuming a flat rate of 39.6 percent). </p>
<p>Under <a href="https://www.nbcnews.com/business/economy/trump-s-tax-cuts-would-boost-wealthy-s-pass-through-n805171">Trump’s proposal</a>, the tax rates on compensation and business income would no longer be the same. A new top rate of 35 percent would apply to compensation, and a proposed rate of 25 percent would apply to business income (the original proposal targeted 15 percent). Going back to our example, the doctor’s federal tax bill would be reduced to about $300,000, assuming she followed the rules. Not bad. </p>
<p>But she now has a very strong incentive to characterize her compensation as business income. If she reported her compensation as $0 and business income as $1 million, her tax bill would be reduced still further, to $250,000. Put differently, for every dollar of compensation she reports as business income instead of compensation, she saves 10 cents in tax. </p>
<p>Clearly, the potential tax savings are huge. Many owners of pass-throughs are going to be tempted to report reasonable compensation as business income.</p>
<p>And who wouldn’t be? The reward for cheating is just too large. And the likelihood of getting away with cheating is as high as it’s ever been because of the <a href="http://www.latimes.com/politics/washington/la-na-essential-washington-updates-trump-budget-to-slash-irs-funding-1489665882-htmlstory.html">reductions in enforcement in recent years</a>, a trend Trump <a href="https://www.atr.org/trump-budget-cuts-irs-funding-239-million">has shown no intention of reversing</a>. </p>
<h2>Defining reasonable compensation</h2>
<p>The history of taxation bears this out: If taxpayers are given flexibility in how to report their income, many will do what they can to lower their tax as much as possible. </p>
<p>For example, <a href="https://www.kitces.com/blog/s-corporation-to-reduce-self-employment-taxes-and-social-security-fica/">S corporation owners</a> have long tried to reduce their Social Security and Medicare taxes by calling their compensation business income. Unlike partnership earnings, the earnings of S corporations that are not paid to shareholders as “compensation” are not subject to Social Security and Medicare taxes. </p>
<p>This clearly creates a strong incentive to characterize as much “compensation” as possible as regular business income. The challenge for the Internal Revenue Service has been defining what constitutes “reasonable compensation” for S corporation shareholders. </p>
<p>The issue has been well-litigated over the years, resulting in a 2012 circuit court ruling that was <a href="http://www.lexology.com/library/detail.aspx?g=96c08c5a-486d-4c38-b71a-0c5b04d90ba3">deemed a win</a> for tax evaders. The court’s <a href="http://media.ca8.uscourts.gov/opndir/12/02/111589P.pdf">guidance</a> boiled down to saying each case is unique and offered no ready recipe for the income allocation problem.</p>
<h2>What happened in Kansas</h2>
<p>The state of Kansas offers a ready example of what happens when you change how pass-throughs are taxed.</p>
<p>In 2012, <a href="http://www.kansascity.com/opinion/readers-opinion/guest-commentary/article156418934.html">Kansas eliminated</a> its income tax on pass-through companies, whose owners previously had to report any earnings on their personal state returns. The response to this change, which took effect in 2013, was quick and large. </p>
<p>The center-right Tax Foundation <a href="https://taxfoundation.org/testimony-reexamining-kansas-pass-through-carve-out/">estimated</a> that it caused the number of pass-through companies in the state to double and resulted in $589 million in lost revenue in 2015 alone, based on an analysis of <a href="http://www.ksrevenue.org/pdf/taxexpreport15.pdf">Kansas tax expenditure reports</a>. A <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2958353">recent paper</a> examining the impact of the change concluded it resulted in “overwhelmingly” more tax avoidance. Kansas <a href="http://www.slate.com/blogs/moneybox/2017/06/07/kansas_reverses_the_disastrous_tax_cuts_donald_trump_wants_to_imitate.html">abandoned this experiment</a> earlier this year. </p>
<p>The reasonable inference from the S corporation history and Kansas’ experiment is what everyone is taught in their first economics class: People are rational and self-interested. They recognize and exploit opportunities to enrich themselves. </p>
<p>And the Trump administration’s proposed changes to pass-through rules would create a huge opportunity and greater incentives to recharacterize income. </p>
<h2>A blow against fairness</h2>
<p>Just as worrisome as the significant loss in revenue, however, is that Trump’s proposed change and the potential evasion could undermine the perceived fairness of the tax system. </p>
<p>The effectiveness of the U.S. system depends on voluntary compliance, and voluntary compliance, in part, depends on the belief by taxpayers that they’re not being treated like chumps. That belief is already being strained. </p>
<p>An <a href="http://www.cbsnews.com/news/poll-do-americans-think-their-tax-system-is-fair/">April CBS News poll</a> found that 56 percent of Americans think the income tax system is “somewhat” or “quite” unfair. And a 2011 Pew survey noted that 57 percent of respondents said their biggest complaint about the system is that the wealthy don’t pay their fair share. </p>
<p>Trump’s tax proposal would likely worsen the problem as more people try to game the system. <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.474.4504&rep=rep1&type=pdf">Research suggests</a> that this would create a growing perception of structural unfairness and lead more taxpayers to collectively challenge the system. If that happens, our tax system’s effectiveness would decline, and the consequences of that could be devastating.</p>
<p>Back in 2016, <a href="http://www.reuters.com/article/us-election-trump-hedgefunds-idUSKCN0QS0P120150823">Trump said</a> “hedge fund guys are getting away with murder” because of their use of the “carried interest loophole,” which allows them to significantly lower the taxes they pay.</p>
<p>Trump’s pass-through proposal amounts to encouraging more companies to do exactly the same thing. In our view, this is the manifestation of unfairness. </p>
<p><em>This is an updated version of an article originally published on May 1, 2017. Tim Gray, a freelance business writer and editor, co-authored the original piece.</em></p><img src="https://counter.theconversation.com/content/84867/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gil B. Manzon Jr. does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The administration wants to cut the tax rate on so-called pass-through entities, which is likely to lead to creative tax planning and outright evasion, damaging faith in the system.Gil B. Manzon Jr., Associate Professor of Accounting, Boston CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/777852017-05-19T00:24:21Z2017-05-19T00:24:21ZFactCheck Q&A: does Australia have one of the highest progressive tax rates in the developed world?<figure><img src="https://images.theconversation.com/files/169707/original/file-20170517-24341-1851nin.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The AiGroup's Innes Willox, speaking on Q&A.</span> <span class="attribution"><span class="source">Q&A</span></span></figcaption></figure><p><strong>The Conversation fact-checks claims made on Q&A, broadcast Mondays on the ABC at 9:35pm. Thank you to everyone who sent us quotes for checking via <a href="http://www.twitter.com/conversationEDU">Twitter</a> using hashtags #FactCheck and #QandA, on <a href="http://www.facebook.com/conversationEDU">Facebook</a> or by <a href="mailto:checkit@theconversation.edu.au">email</a>.</strong></p>
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<figcaption><span class="caption">Excerpt from Q&A, May 15, 2017. Quote begins at 0.50.</span></figcaption>
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<blockquote>
<p>Look, we just need to keep in mind that we have one of the highest progressive tax rates in the developed world at the moment. <strong>– Innes Willox, chief executive of the Australian Industry Group, <a href="http://www.abc.net.au/tv/qanda/txt/s4647567.htm">speaking on Q&A</a>, May 15, 2017.</strong></p>
</blockquote>
<p>When Q&A host Tony Jones <a href="http://www.abc.net.au/tv/qanda/txt/s4647567.htm">asked</a> if wealthy people should pay more tax, the AiGroup’s Innes Willox said that Australia already has one of the highest progressive tax rates in the developed world.</p>
<p>Is that true?</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"864088666997612544"}"></div></p>
<h2>Checking the source</h2>
<p>When asked for sources to support Innes Willox’s statement, a spokesman for the AiGroup clarified that Willox was referring to top marginal tax rates.</p>
<p>The spokesman referred The Conversation to <a href="http://www.oecd-ilibrary.org/taxation/data/oecd-tax-statistics_tax-data-en">OECD tax statistics</a>, and two charts built using that data, saying that:</p>
<blockquote>
<p>This shows that Australia has a relatively high top marginal tax rate (49%) but not the highest among OECD countries (Sweden is top, at 60%). The rub is that our top marginal rate cuts in at a relatively lower level of income than most other OECD countries (2.2 times our average wage).</p>
</blockquote>
<p>You can read his full response and see those charts <a href="http://theconversation.com/full-response-from-the-aigroup-for-a-factcheck-on-how-australias-top-tax-rates-compare-internationally-77798">here</a>. </p>
<h2>Is it true? Not exactly</h2>
<p>Looking at <a href="http://stats.oecd.org/index.aspx?DataSetCode=TABLE_I7">OECD data</a>, Australia’s highest marginal tax rate is higher than the OECD median. Out of the 34 OECD member countries in this data set, Australia ranks 13th for the top marginal rate of tax, meaning 12 countries have a higher top marginal rate, and 21 countries have a lower top marginal rate.</p>
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<p>However, a straight comparison like this can be misleading. More than half (19) of the OECD countries impose “social security contributions”. The <a href="http://www.oecd.org/ctp/tax-policy/revenue-statistics-19963726.htm">OECD defines</a> social security contributions as “compulsory payments that confer an entitlement to receive a (contingent) future social benefit”. It notes that they “clearly resemble taxes” and “better comparability between countries is obtained by treating social security contributions as taxes”. </p>
<p>When social security contributions are taken into account, Australia’s “ranking” in terms of top marginal rate of tax drops to 16 out of the 34 OECD member countries – making it still higher than the OECD median top marginal rate, but not by much. </p>
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<p>The other point noted by the AiGroup spokesman was that Australia’s top marginal tax rate applies at a relatively low level of income compared to most other OECD countries. </p>
<p>Australia’s highest marginal tax rate applies to taxable income above A$180,000, approximately 2.2 times Australia’s average wage. The AiGroup spokesman was right to say this is relatively low, with the majority of OECD countries (20 out of 34) applying their highest marginal tax rate at income levels higher than Australia (that is, at income levels higher than 2.2 times the average wage). </p>
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<p>However, it is worth noting that based on the latest <a href="https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2014-15/?anchor=Individuals#Figure9">Australian Taxation Office statistics</a>, for the 2014-15 tax year, only 3% of individual taxpayers fell into the highest tax bracket. </p>
<p>Where Australia <em>does</em> rank amongst the highest in the OECD is the percentage of total tax revenue that is derived from individual income taxation. </p>
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<p>In 2014, 41% of Australia’s taxation revenue came from income taxation on individuals. This is the <a href="http://stats.oecd.org/index.aspx?DataSetCode=TABLE_I1">second highest in the OECD</a> (the highest being Denmark at 54%) and significantly higher than the OECD average of 24%. </p>
<h2>Verdict</h2>
<p>The statement made by Innes Willox that “Australia has one of the highest progressive tax rates in the developed world at the moment” is an exaggeration. </p>
<p>Australia ranks 13th in the OECD for the top marginal rate of tax, and 16th if social security contributions are taken into account. </p>
<p>However, Australia does rely more heavily on personal income tax (when compared to other taxes) than all but one other OECD country. <strong>– Kathrin Bain</strong></p>
<hr>
<h2>Review</h2>
<p>I agree that the statement is an exaggeration. 13th out of 34 is higher than the median, but it would be equally true to say that more than one-third of the OECD countries have a higher personal marginal tax rate than Australia.</p>
<p>It is always problematic to try to compare tax data across different countries. Although the OECD does try to make the data comparable the differences between tax and welfare systems can lead to misleading comparisons. </p>
<p>It is generally well known that certain Scandinavian countries, such as Sweden and Denmark, have a very high marginal tax rate. However those countries also tend to have a different approach to social and welfare spending. Australia does not have a dedicated social security tax: pensions and income support are paid from general revenue. This structural difference in the tax-transfer systems does limit the comparison. </p>
<p>Australia does have a high reliance on personal income tax, and the top marginal rate is higher than the median OECD level. Although the top marginal rate is relatively low at 2.2 times the median wage, the fact that only 3% of the population are in the top bracket says that we, in fact, have a relatively flat tax structure, with most taxpayers in lower tax brackets. <strong>– Helen Hodgson</strong></p>
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<span class="caption">The Conversation FactCheck is accredited by the International Fact-Checking Network.</span>
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<p><em>The Conversation’s FactCheck unit is the first fact-checking team in Australia and one of of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. <a href="https://theconversation.com/the-conversations-factcheck-granted-accreditation-by-international-fact-checking-network-at-poynter-74363">Read more here</a>.</em></p>
<p><em>Have you seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at <a href="mailto:checkit@theconversation.edu.au">checkit@theconversation.edu.au</a>. Please include the statement you would like us to check, the date it was made, and a link if possible.</em></p><img src="https://counter.theconversation.com/content/77785/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Hodgson receives funding from AHURI and the ARC. Helen is a member of the Social Policy Committee and a Director of the National Foundation for Australian Women, and is on the Tax and Superannuation Advisory Panel of ACOSS. Helen was a Member of the WA Legislative Council in WA from 1997 to 2001, elected as an Australian Democrat. She is not a current member of any political party. </span></em></p><p class="fine-print"><em><span>Kathrin Bain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The AiGroup’s Innes Willox told Q&A that Australia has one of the highest progressive tax rates in the developed world. Is that true?Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.