The Tale of Four Tax Returns, a short video documentary from PBS last week, really highlights many important aspects of our taxcode from the perspective of four very different real life taxpayers.
Top left is Jennifer Rosado, a low-income single mother with children. Two years ago, in 2010, she was making poverty level wages of $12,800 and the refundable tax credits she received made the difference for her family between living below the poverty line and above it. It is important to stress the difference between those tax credits and traditional welfare--she had to EARN the income through work in order to receive those credits. After two years she has worked her way into a higher paying job and she is currently on the phase-out portion of the Earned Income Credit. Her tax scenario looks a lot like the Ashley Sawyer case study in the VITA test.
Lower left is Danny Rangel, a Navy veteran now working as electrian, whose income of about $30,000 also qualifies for VITA tax preparation assistance. Unlike Jennifer, Danny has no children, so he is paying a substantial amount of his income in federal taxes. If we consider both income and payroll taxes, he paid a larger share of his income in federal tax in 2010 than Mitt Romney did. The difference becomes even more stark if we consider the other taxes he pays (sales taxes, excise taxes on gas and other items, property taxes passed onto him in the form of high rent). His tax scenario looks a lot like the Rose Hudson VITA case study.
The two taxpayers on the right are on the other end of the income spectrum. Eric Schoenberg, the wealthy investor in the lower corner earns eight times as much as Seth Hahn at top right, but both taxpayers earn well above the median income. Their financial positions are similar to those to which many Union College students aspire. Their very different tax circumstances reveal a lot about the complexity of the unfairness built into our tax system.
The show's transcript is available here. The video, which provides a Rashomon-style multifaceted perspective on our tax system, is embedded below.