Friend,

When it comes to taxes, there are a LOT of myths. Often, these myths are used by politicians to muddle the conversation and destroy necessary reforms.

So, where can people turn to learn the truth about taxes? 

The answer is Tax Foundation. For over 80 years, our mission has remained unchanged: to improve lives through tax policies that foster greater economic growth and opportunity.

Our nation is financially sick. We’re $38 TRILLION in debt. Without clarity on taxes, we may be doomed to financial ruin.

I’m not providing this information for trivia nights. I am providing you with these facts because, deep down, I believe the truth will prevail in key policy battles in the future. 

However, I am making an urgent plea to you.

Can you donate $10 or more today to Tax Foundation to help us educate lawmakers (and everyone) on the importance of simplifying our tax code? I am looking for 100 new donors before the end of the month, and I hope you can support our mission.
 

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8 Common Tax Myths

Tax Myth 1: The rich don't pay any taxes in the US.

Here are some shocking stats for people who complain that the rich don’t pay their fair share: 

• Half of US taxpayers pay 97 percent of all income taxes.
   
• The top 1 percent of earners alone pay over one-third of income taxes!

Tax Myth 2: US income taxes on the rich were much higher in the 1950s.

In the 1950s, the top 0.1 percent of households faced average effective income tax rates of 21.0 percent, versus 20.7 percent as of 2014.

While income tax rates have come down since the 1950s, changes in the tax base(how much and what types of income are subject to the tax) mean the effective tax rates on the wealthy (the rates they actually pay) haven’t changed nearly as much.

Tax Myth 3: The state and local tax (SALT) deduction protects against double taxation.

The One Big Beautiful Bill Act raised the cap on deducting state and local taxes from $10,000 to $40,000, subject to a phasedown for high earners.

The key argument from those in favor of the SALT deduction is that it’s an essential protection against “double taxation.”

The problem with that logic is that each level of government provides its own distinct package of services, which are each paid for separately via federal, state, and local taxes.

When different levels of government levy taxes for distinct sets of services, the argument for a policy like the SALT deduction doesn’t hold up.

Support Tax Foundation and create a world where the tax code doesn’t stand in the way of success >>
 

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Tax Myth 4: Major corporations pay no tax.

This misconception stems from two factors: a misunderstanding of how corporate income is defined and a misunderstanding of how corporate income is taxed.

There’s reason to believe that many of the corporations you think of as being profitable won’t actually turn a profit this year. That’s because companies report what’s called “book income” on their financial statements, which follow typical US accounting standards and are designed to make companies appear as profitable as possible to shareholders.

So, next time you hear about a “profitable” company paying no income tax, chances are that it had a combination of both zero or negative book income and either net operating losses, significant foreign profits, sizable capital investments, or all of the above.

Tax Myth 5: Business taxes only affect business owners.

In fact, empirical studies show that workers (i.e., labor) bear more than 50 percent of the burden of the corporate income tax.

The higher the business taxes are, the higher the cost of investing is, and the less likely business owners are to invest in things like equipment, buildings, and training that will make their staff more productive.

Tax Myth 6: Expensing is a loophole.

When businesses calculate their income for tax purposes, they should subtract their costs because the corporate income tax is intended as a tax on business profits — i.e., revenues minus costs.

Allowing companies to fully and immediately deduct their investments — what’s known as “full” expensing — encourages investment and, in the long run, grows the economy at a relatively low cost to government revenues.
 

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Tax Myth 7: Tax cuts pay for themselves.

Under normal circumstances, the revenue lost by cutting taxes will be greater than the revenue gained by growing the economy or reducing tax evasion.

The degree to which tax cuts pay for themselves depends on a number of factors, including how high the tax rate is that’s being cut, how much it’s cut by, and how responsive taxpayers are to that particular tax change.

Tax Myth 8: Other countries pay tariffs.

Tariffs may shield domestic industries from foreign competition in the short term, but they do so at the expense of others in the economy, including domestic consumers and other industries, which often rely on the goods being tariffed.

The result of tariffs is that domestic taxpayers end up paying in the form of higher prices and reduced economic output.

When tax policy is based on these myths, economic disruption follows. Our mission is to educate voters and policymakers to prevent this from happening.

If we fail, make no mistake, our economic future is at stake. 

Our experts are continuously analyzing the day’s most relevant tax policy topics and are relied upon routinely for presentations, testimony, and media appearances on tax issues spanning every level of government.

Please support Tax Foundation today by donating $10, $35, $50, $100, or more.

And for your tax benefit, we are a 501(c)(3), which means you can make a tax-deductible gift!

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Our tax model is the best predictor of changes in tax policy that experts have relied on for decades. With your support today, we can continue to be the leaders in US tax policy. 

Thank you, 


Daniel Bunn
President and CEO
Tax Foundation

Tax Foundation is a 501(c)(3) nonprofit educational organization. Any donations made to Tax Foundation are tax-deductible to the full extent allowable by law.