Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.

An article in The Hill today describing the results of a new poll inaccurately reports that voters want “a lower tax bill” for wealthy individuals and businesses. If anything, the poll shows the opposite.

In tax policy, it’s critical to distinguish between marginal tax rates and effective tax rates. Marginal rates are the rate paid on a person or corporation’s last dollar of income. Effective rates are the overall share of income paid in taxes.

Effective tax rates are the better measure of what taxpayers actually pay: They take into account the numerous tax breaks that individuals and corporations use to lower their tax bills, and the fact that people in top tax brackets have income in lower tax brackets.

The Hill article fails to sort out this very basic distinction, then proceeds to make a number of apples-to-oranges comparisons that paint a misleading picture of what wealthy people and corporations are paying in taxes now and what people want them to pay. For example:

– The article’s lede asserts that, “three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates.” That’s not what the poll reveals. The poll apparently asked respondents to identify the “most appropriate top tax rate” for families earning more than $250,000, a vague formulation that is very likely to prompt most respondents to say how much of their income these families should pay in taxes — in other words, what their effective rate should be. Fully 60 percent of respondents who expressed an opinion said that the “most appropriate” rate for families earning $250,000 or more should be 25 percent or higher. That is, in fact, higher than what the average effective income tax rates are today for all levels of income. And it is significantly higher than many extremely wealthy households now pay. Read more

The Obama administration unveiled its corporate tax reform plan last week, which would lower the top rate from 35 percent to 28 percent, billing it as an effort to help make the American corporate tax code more competitive. Republicans have long crowed for corporate tax reform, saying America’s high marginal rate stifles competition, but they have blocked efforts (including Obama’s) to close many of the loopholes and schemes corporations use to avoid paying taxes.

General Electric, one of the nation’s largest corporations, found itself at the center of the corporate tax debate last year when the New York Times discovered that it paid nothing in taxes, despite billions of dollars in profits. GE responded to the outcry by promising that its 2011 rate was “slated to return to more normal levels” because of the recovery of GE Capital, its financial arm. But according to an analysis from Citizens for Tax Justice, the company’s 2011 effective tax rate was just 11.3 percent. Even worse, over a 10-year period from 2002-2011, the company paid $1.9 billion in taxes on $81.2 billion in profits, giving it an effective tax rate of just 2.3 percent for the decade:

– From 2006 to 2011, GE’s net federal income taxes have been negative $2.7 billion, despite $39.2 billion in pretax U.S. profits over the six years.

– Over the past decade, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 2.3 percent.

In the 10-year period CTJ examined, GE’s highest tax rate came in 2005, when it paid 27.5 percent, below the top tax rate in Obama’s reform plan. Four times in that stretch, its tax rates was negative, most notably in 2010, when the company received more than $3 billion in tax refunds, giving it an effective rate of negative 64.2 percent (click the image to make it larger):

While GE is one of the worst offenders, it isn’t alone. The U.S. does indeed have one of the world’s highest marginal corporate tax rates, but the effective rate that corporations actually pay is much lower. In 2009, in fact, only Iceland had a lower effective rate, and only two countries collected less in revenue as a percent of GDP. As investor Warren Buffett noted on CNBC this morning, “It is a myth that American corporations are paying 35 percent or anything like it…Corporate taxes are not strangling American competitiveness.”

In outlining his priorities for Alabama, Gov. Robert Bentley (R) vowed to shrink the size of government and oppose tax increases to balance the state’s budget. But to do that, Bentley is asking the federal government to let him lower the number of children who could qualify for ALL Kids, the state’s public health insurance plan for children:

“We don’t have the money,” Bentley said Sunday. [...]

ALL Kids this year covers about 84,000 children and of those, about 15,800 are between 200 percent and 300 percent of poverty. The popular children’s health insurance program is normally a bright spot in terms of Alabama’s ability to provide health insurance to its neediest residents, and the program has been hailed nationally for its success. [...]

Although the federal government picks up 78 percent of the cost of ALL Kids, Bentley said he asked the U.S. Department of Health and Human Services to allow the eligibility change because the state can’t afford its 22 percent share.

The state faces a $400 million deficit, and Williamson said cutting 15,800 children from the program would save the state $8.5 million. But meanwhile, the state House narrowly passed the governor’s economic plan that would increase tax breaks for businesses.

In his State of the State address, Bentley promised to “oppose any effort to raise taxes on Alabama families, and I will veto any tax increase.” Instead, his budget plan would continue the state’s history of corporate tax giveaways. In 2011, state and local tax breaks for the ThyssenKrupp AG steel mill in Mobile, Alabama topped $1 billion for the company to create 2,700 jobs — or $400,000 per job created.

Along with the children who will be left without adequate health care, Alabama will likely eliminate its participation in the Temporary Assistance for Needy Families (TANF) program next year because of budget cuts. That will cost the state $141 million in federal funds for Alabama families.

Joseph Williams moved more than 30 times as a child, living in homeless shelters, church basements, and the homes of family friends. Now Williams, a junior safety on the University of Virginia football team, is taking up a cause supporting the contract workers who are barely making enough to get by.

Williams is one of 18 Virginia students participating in a hunger strike — now more than a week long — to protest the poor wages paid to many of the university’s contracted service employees. The strike, organized by the school’s Living Wage Campaign, began on February 17 with the goal of getting a living wage for underpaid employees. “I know first-hand what the economic struggle is like for many of these underpaid workers,” Williams wrote in an essay explaining his participation:

In failing to implement a living wage for its lowest paid employees, the University of Virginia has also failed to uphold the moral standards to which it holds its students. We are engaging in this hunger strike to call attention to the administration’s moral hypocrisy and to finally produce results in the form of a Living Wage. Although I am exhausted, hungry, dry-mouthed, and emotionally taxed, I believe it is my responsibility as a member of the University community, and even more as a member of the human race, to stand up and speak for those whose voices have been silenced and whose livelihoods are marginalized by the policies of the current University administration.

Williams decried the pay disparity between “hundreds of contract workers who may make as little as $7.25/hour” and the university’s top administrators. According to the essay, six of the state’s 10 highest-paid employees are administrators at Virginia. Williams also told the story of one employee who, despite working 40 hours a week, couldn’t afford to pay rent or utility bills.

“We have taken every conventional route towards this goal, garnered wide student, faculty and community support – yet our pleas have been consistently ignored and workers are still paid unjust wages,” Williams wrote. Perhaps the hunger strike and the national notoriety it has received is changing that, though. According to local news reports, University of Virginia president Teresa Sullivan plans to meet with the strikers today.

2012 GOP presidential hopeful Rick Santorum took to the pages of the Wall Street Journal today to lay out his economic plan, reiterating his desire to cut the corporate tax rate in order to “restore America’s competitiveness.” During an interview on CNBC, billionaire investor Warren Buffett, in response to Santorum’s piece, noted that is is actually “a myth” that America’s corporate taxes are high. “Corporate taxes are not strangling American competitiveness,” Buffett explained, even bringing a chart to prove his point:

The interesting thing about the corporate rate is that corporate profits, as a percentage of GDP last year were the highest or just about the highest in the last 50 years. They were ten and a fraction percent of GDP. That’s higher than we’ve seen in 50 years. The corporate taxes as a percentage of GDP were 1.2 percent, $180 billion. That’s just about the lowest we’ve seen. So our corporate tax rate last year, effectively, in terms of taxes paid for the United States, was around 12 percent, which is well below those existing in most of the industrialized countries around the world. So it is a myth that American corporations are paying 35 percent or anything like it…Corporate taxes are not strangling American competitiveness.

Watch it:

Buffett is absolutely right to note that while corporate profits are at a record high, corporate taxes are at a nearly half-century low. When looking at the rate that corporations actually pay (as opposed to the statutory rate that only exists on paper), the U.S. has the second-lowest corporate tax rate in the developed world, and raises far less than other nations in corporate tax revenue.

During the interview, Buffett also responded to Gov. Chris Christie’s pronouncement that Buffett should just “write a check and shut up,” instead of calling for higher taxes on the rich. “It’s sort of a touching response to a $1.2 trillion deficit isn’t it? That somehow the American people will just all send in checks and that’ll take care of it,” Buffett said.