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Taxes: About "fair shares" and the like
Posted by: McQ on Monday, July 21, 2008

As the "tax the rich" and "the rich aren't paying their 'fair share'" mantra heats up among the class-warfare Democrats (that, btw, would be most of them), a simple graphic tells the real tale.


The obvious point, obvious to all those who get beyond the "fairness" rhetoric, is the "rich" pay much more than their fair share. In fact, the rich pay the bulk of the income taxes collected.

And, in fact, according to the last numbers I heard, the bottom 50% of income earners pay 3% of the income taxes collected.

So, unless you have a completely warped sense of fairness, it seems that those we consider rich pay more than their fair share when it comes to the total of income taxes collected.

Some would argue they only pay a small share of their income in taxes and thus it doesn't hurt them as badly to pay taxes.

Well, I'm not sure how the zero income taxes paid by the bottom 50% of income earners hurts them more, are you?

The other argument is that payroll taxes hurt the poor much worse than the rich. There's a very simple solution to that problem which, of course, politicians are going to ignore.

But there is something else to think about here. Who are these rich? 80% of all businesses in the US are small businesses, many of them sub-chapter S corporations which means that their business income is reported through their personal income tax.

They are also the job generators out there. As they grow so do job opportunities. But as with most businesses, when things get tight, when costs increase with no offsetting revenue, the easiest way to weather such increases is by reducing headcount. That is a direct, bottom-line cost.

So if your small business is facing increased taxation because your S-corp. is in that upper 5% of income earners, yet business income isn't increasing (and won't increase) enough to offset the promised taxes, what are you going to do?

If the Democratic plan to make taxation "fairer" by increasing the already burdensome taxes on 'the rich' comes to fruition, 7% unemployment may be considered by some as "the good old days". Such a plan may be good politics in an election year, but especially when facing recessionary pressures, it is dumb economics. And trust me, the laws of economics will indeed play out over the smoke and mirrors of politics when all is said and done.
 
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Add to that the estate tax and especially the fact that Social Security, as a program, is also very progressive/redistributionist (someone who, all else equal, pays twice as much in Social Security taxes receives far less than twice as much in benefits).
 
Written By: KipEsquire
URL: http://www.kipesquire.com
Anyone ever discuss the difference between wealth and income? I mean, the really, really wealthy have relatively modest ’income’. But they have wealth a plenty. When I hear the John Kerry’s and Ted Kennedy’s talk about people paying their ’fair share’ I often wonder what percentage of their ’wealth’ they are actually paying in taxes.

Cue Dale - this is where I start calling for the FairTax.
 
Written By: meagain
URL: http://
Mr. Obama talks about offsetting the automatic increase in taxes when the Bush tax cuts expire by giving a tax cut to the middle class. All other things aside, which is more likely to happen; the automatic tax increase or it with a congressional move to cut taxes for the middle class. And BTW; I never qualified to receive any of the rebates or college tax credits for my children. I always thought I was middle class, but I now know I am rich. Yea, that’s why I drive a 1998 F-150 and my wife a 2000 Dodge Intrepid.
 
Written By: AMR
URL: http://
Let me just speak the words that no Democrat [at this time] dare not speak: they have no problem with how taxes are paid, with 60% of taxes getting paid by 5% of the country; what they hate and want to see changed in the name of "fairness" is that the 5% make 36% of the wealth. If they could take all that wealth from those "undeserving" rich people, and give it to the poor, or better yet, the government, that knows so much better on how to care for those downtrodden poor people.

There is however a caveat in taking that money from those undeserving rich people. They and their friends aren’t undeserving, so they must be allowed to keep their wealth. Because some animals are more equal than others ya know.
 
Written By: Warrior Needs Food Badly
URL: http://
If you do a simple (1:1 proportion) adjustment for share of income, the numbers now are not necessarily out of line.

In 1990, the top 1% paid 25% of taxes on 14% of revenue. In 2006 they had 21% of revenue — an increase of 50% — and paid 39% of taxes, versus 37.5% if you increase the 1990 share by 50%. If you do the same for the top 5% of earners (33% increase from 27% to 36%), you get 58.67% of taxes versus the actual 60%.

There is surely a slight increase in the tax burden for the rich, but in terms of tax rate it doesn’t look nearly as big as if you look at the 39% or 60% numbers.
 
Written By: Michael
URL: http://
Are there any global statistics on this, because from what I have heard only through conjecture from bloggers, is that Amercia is the most progressively taxed country - in the regard of these statistics in this post - in the entire industrialized world.
 
Written By: Jimmy the Dhimmi
URL: http://www.warning1938alert.ytmnd.com
Michael,
I don’t think the point of the post is to say "Bush is screwing the rich" but to counter "Bush is screwing everyone else in favor of the rich". Your points are still valid.

McQ,
I think "fairness" is a subjective value and there fore you can’t use numbers to show it clearly. Although I agree with your sentiments, the real issue is how much the government spends, not so much where it gets it from. If spending were cut to a fraction of its current level, I would have less problems with even a more progressive scheme (though preferably, even that would be a tax cut)
 
Written By: anomdebus
URL: http://
I dispute the numbers. They don’t contain the lost opportunities that the rich are not entitled to, that the poor have access to, like college money etc.
 
Written By: Neo
URL: http://
I always enjoy finding out I’m secretly ’the rich’, and keep hoping my friends, co-workers, family and neighbors don’t discover my dark secret.
 
Written By: looker
URL: http://
I think "fairness" is a subjective value and there fore you can’t use numbers to show it clearly.


Settle the semantics and call it whatever you want. How about bullsh!t? I propose that it is bullsh!t that the government taxes the bottom 50% of the populace at 2.87% (2005), and some have the nerve to say that it is the poor who are being treated "unfairly" (or whatever word you prefer). Further, the bottom 50% do not seem to understand that when you already pay very little or no taxes in the first place, you will not directly benefit from a tax cut. Forget trying to explain indirect benefits such as job growth, quality of life improvements, etc., especially when one party is dependent upon their continued lack of fortune and denies what is fact.
Although I agree with your sentiments, the real issue is how much the government spends, not so much where it gets it from.
How about if the government gets 100% of your income? Is it an issue then?
 
Written By: Is
URL: http://
Is,
If you want a response, some civility will be required and some charity requested.
 
Written By: anomdebus
URL: http://
The obvious point, obvious to all those who get beyond the "fairness" rhetoric, is the "rich" pay much more than their fair share. In fact, the rich pay the bulk of the income taxes collected.
For 2007, OMB data show that 45.3% were individual income taxes ($1.2 trillion), 33.9% were social insurance and retirement receipts ($870 billion), 14.4% were corporate income taxes ($370 billion), 3.9% were other taxes (i.e., $26 billion in estate and gift taxes, $26 billion in customs duties, and $48 billion in miscellaneous receipts), and 2.5% were excise taxes ($74 billion).

So for the top 5%, 60% of 45% of the total federal reciepts are in the form of income tax which is about 27% of the total federal tax reciepts, and as you pointed out this group earns 36% of the income (27 is less than 36). The other 55% of federal revenues are from far more regressive taxation schemes, like SS and Medicare, excise and use taxes, and corporate income taxes that are passed on to the consuming public, which would represent a greater burden for those NOT in top 5%. Same result for the top 1%, 25% of the income tax burden represents 11% of the total tax burden compared with 14% of the income, and while they may be over represented in income taxes compared to other groups, they would be severly underrepresented in payroll taxes, and the other regressive tax schemes that make up the majority of federal tax receipts.

So based on the numbers you present, it would appear that this group is underpaying, quite the opposite of the point you thought you were making.

Hint, whenever someone talks about tax fairness, and includes only ONE kind of tax, they are trying to fool you.

This sophistry is most analgous to doing this to your readers.


Think of how often people talk about taxes, but actually, and exclusively, mean income taxes, and without this exclusion, whatever point they were making falls flat. This is like saying that the US population is 100% female, but do this by excluding men from the counted group and then failing to mention this exclusion.

I’m wondering if people who repeat this argument know they are dupes.

I guess the responses to this will answer that question.



 
Written By: mythbuster
URL: http://
The other 55% of federal revenues are from far more regressive taxation schemes, like SS and Medicare, excise and use taxes, and corporate income taxes that are passed on to the consuming public, which would represent a greater burden for those NOT in top 5%.
One more time, for those that are slow on the uptake:
In fact, the rich pay the bulk of the income taxes collected.
I’ve already noted there’s a very simple solution to the mandated payroll taxes which politicians won’t touch. And making the rich pay more income tax won’t solve that problem either. It is an entirely separate issue which Obama addresses by saying the caps should be raised or there should be means testing.

But in terms of an income tax, which both Obama and the Dems differentiate from what you’re claiming, the numbers stand.
 
Written By: McQ
URL: http://www.QandO.net
mythbuster, I’m not sure what you’re getting at. The article linked in the WSJ states "the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years."

So they are clearly talking about INCOME taxes. Period.

As for your second paragraph, maybe I’m just slipping into an after lunch food coma, but it makes no sense to me...
So for the top 5%, 60% of 45% of the total federal reciepts are in the form of income tax which is about 27% of the total federal tax reciepts, and as you pointed out this group earns 36% of the income (27 is less than 36)
Pardon my French, but WTF?
 
Written By: meagain
URL: http://
are in the form of income tax which is about 27% of the total federal tax reciepts, and as you pointed out this group earns 36% of the income (27 is less than 36)
Duh - it’s obvious they make 36% of the income, so they ought to pay 36% if not more, of the income tax. 27% is less than 36%, has your education failed you?
The other 55% of federal revenues are from far more regressive taxation schemes, like SS and Medicare, excise and use taxes, and corporate income taxes that are passed on to the consuming public, which would represent a greater burden for those NOT in top 5%.
The government, with the regressive other 55% tax burden should find a way to CHARGE the rich more for using exactly the same government services the other 95% are using because, well, THEY’RE RICH!

They ought to bear a greater cost for this burden. I understand they get the same National Defense, the same Social Security, the Same White House, the Same Senate, the Same FAA, FBI, CIA, HUD, FHA, FDA, DOT, DOJ, EPA, ETC, (which MAY be an obscure Federal Agency, so I’ll list it again in small letters) etc, THEY OUGHT TO PAY MORE for it all because THEY MAKE MORE!

Don’t you see how that’s fair?
What’s important is that people who paid diddlly 2.5% of their income get refunds, tax credits and economic incentives IDENTICAL to people who paid over 30% of their income so it’s fair for everyone.

It’s all so clear I’m surprised it has to be explained to you wingnutz.
 
Written By: looker
URL: http://
In fact, the rich pay the bulk of the income taxes collected.
Hint, whenever someone talks about tax fairness, and includes only ONE kind of tax, they are trying to fool you.
 
Written By: mythbuster
URL: http://
Duh - it’s obvious they make 36% of the income, so they ought to pay 36% if not more, of the income tax. 27% is less than 36%, has your education failed you?
Sorry (not about the Duh part...but the rest) what I really meant was they make 36% of the income, so they ought to pay 36% of the FEDERAL TAX BURDEN.

I realize this would cut into some of the regressive 55%, but hey, what’s important is that the rich pay their fair share of keeping the country running for everyone, and cutting that regressive 55% would allow us to cut corporate, excise, and use taxes which would trickle back down (like a tax cut!) to the other 95% of the country who are out there making less money because those greedy rich people are absorbing so much of the income and keeping it for themselves.
 
Written By: looker
URL: http://
Hint, whenever someone talks about tax fairness, and includes only ONE kind of tax, they are trying to fool you.
More sorries, fraid I just can’t wear my idiot liberal hat any more today.

When people talk about you having to pay more for the SAME SERVICES because you have more money with which to pay, they are trying to cheat you.
 
Written By: looker
URL: http://
Hint, whenever someone talks about tax fairness, and includes only ONE kind of tax, they are trying to fool you.
Hint - when someone talks specifically about a particular tax, they’re not talking about other taxes, they’re talking about that tax. And, as I said, those numbers stand.

Speaking of trying to fool people, if your concern is with payroll tax fairness, then address that tax as a fairness problem. I already did that in the body of the post.
 
Written By: McQ
URL: http://www.QandO.net
For 2007, OMB data show that 45.3% were individual income taxes ($1.2 trillion), 33.9% were social insurance and retirement receipts ($870 billion), 14.4% were corporate income taxes ($370 billion), 3.9% were other taxes (i.e., $26 billion in estate and gift taxes, $26 billion in customs duties, and $48 billion in miscellaneous receipts), and 2.5% were excise taxes ($74 billion).

So for the top 5%, 60% of 45% of the total federal reciepts are in the form of income tax which is about 27% of the total federal tax reciepts, and as you pointed out this group earns 36% of the income (27 is less than 36).
This is not a good line of reasoning.

1. The "rich" pay 45% of all INCOME taxes.

2. This is only 27% of the TOTAL tax burden (Your calculation of 27% here is incorrect. You excluded the social security payments made by the "rich", who are taxed up to the first $90,000 of AGI, but the argument is invalid without it).

3. The "rich" have a portion of INCOME of 36% and are therefore undertaxed (because 27 is less than 36).

You are intentionally making an apples to oranges comparison, conveniently switching back between income and total tax burden. Yes, the rich pay 27% of the TOTAL tax burden via the income tax; however, they do not make 36% of the TOTAL that is taxed (all individual earnings, corporate income, etc). They make 36% of the INCOME against which income tax is calculated.

Consider that CORPORATIONS have a share of 100% of the CORPORATE INCOME, but their share of the TOTAL US tax burden is only 14.4%. Well, 14.4 is less than 100. Should they have to pay all of the total tax burden so that they do not underpay? The "rich" are not making corporate profit, but for some reason we should consider this source (and all others) of US tax receipts when calculating the "fairness" of their share of individual INCOME tax?
 
Written By: Is
URL: http://
Is,
If you want a response, some civility will be required and some charity requested.
I apologize. I’m a new parent and was up all night. I reread my post, and it was a bit hostile. I agree that the government overspends, but where this money comes from is an issue. Shouldn’t all income demographics be equally screwed by the government?
 
Written By: Is
URL: http://
Is,
Apology accepted and consolation extended..

As long as the government tries to make everybody happy, how the check is divided doesn’t make much difference: those who would pay more are going to expect more and those who pay less figure they have more coming to them than they put in. At best we can get people not to expect a free piece of the pie.

I was trying to avoid using actual number since someone might try to push me into specifics, which I don’t have time to go into detail. However, let us say that we can cut the federal budget to 1/3 of its current budget (a libertarian can dream). Even if the richest 1% paid all the income tax, they would pay 85% of what they pay now. If it were spread to the riches 5%, it they would pay 55% of what they pay now (note for simplicity’s sake, the relative balance of taxes is assumed to be constant)

In the end, I think the statists are less concerned with inequality (per se) than getting more money for their feel-good programs.
 
Written By: anomdebus
URL: http://
"Hint, whenever someone talks about tax fairness, and includes only ONE kind of tax, they are trying to fool you."

Which is no doubt why you only included one kind of tax, the income tax, when you wrote of the tax paid by the rich, as if they don’t pay any of the other taxes.
 
Written By: timactual
URL: http://
The other 55% of federal revenues are from far more regressive taxation schemes, like SS and Medicare, excise and use taxes, and corporate income taxes that are passed on to the consuming public, which would represent a greater burden for those NOT in top 5%.
I’m not too sure about all of this. There is a cap on what can be taxed for SS ($100K or thereabouts) but the tax rate for SS and Medicare is fixed, not regressive. You pay the same (combined) 7.65% if you make 30K a year or 80K. (And there is no limit on Medicare.)

Excise taxes? Well I suppose the poor smoke more cigarettes. That’s the stereotype, isn’t it? What do the rich smoke ... cigars? How does that pan out? And do the rich wind up paying more tax on vermouth and brandy versus the tax paid on malt liquor or not? I need to get the stereotypes straight first, then maybe I can figure out how regressive excise taxes are. (Except for gasoline. I have that stereotype nailed, as we all know the rich drive wasteful SUVs and the poor drive subcompact death boxes. Since the rich use more gasoline, obviously they pay more in fuel excise taxes — even without taking into consideration all those private jets!)

Use taxes - This is tied to sales tax, right? Do the rich spend more or less money buying stuff than the poor do?

Corporate taxes passed on to the consumer - See above. These last two points in particular seem to be nonstarters. The rich are still consumers. Simply because someone has money doesn’t mean everything in the world is automatically gratis. Just the opposite, really. If people know you have money, odds are you’re going to get soaked.

The first year of my marriage, both of us in college on academic scholarships and working part time at Wal-Mart, me and the missus paid NO taxes. In fact, I think we got a check for a couple of hundred dollars from Uncle Sam. Many years later, earning much more money and carving out our place in the world, the missus and I seem to experience a harder pinch each time we move up a rung in the tax brackets. The system discourages success.
 
Written By: Ronnie Gipper
URL: http://
I’m not too sure about all of this. There is a cap on what can be taxed for SS ($100K or thereabouts) but the tax rate for SS and Medicare is fixed, not regressive. You pay the same (combined) 7.65% if you make 30K a year or 80K. (And there is no limit on Medicare.)
It is regressive, because Payroll taxes are regressive taxes by definition...

"A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases."

If you make $102k or less, you pay 15.30 of your wages in Payroll Taxes. If you make $204k, that RATE is now 9.1%, and if you earn $2M in Wages, the rate would be 3.6%. The more you make, the lower the rate, the defining characteristic of a regressive tax. Oh, and don’t forget, for people who’s earning are not wage based, investment income and the like, no matter how much they earn, they pay a rate of 0%.

So that’s established, right?
Use taxes - This is tied to sales tax, right? Do the rich spend more or less money buying stuff than the poor do?
Same logic as above. They pay the same use tax, it’s just a greater proportion of the lower earner’s total income, making a higher rate the less someone earns, again, by definition regressive.

Excise taxes? Well I suppose the poor smoke more cigarettes. That’s the stereotype, isn’t it? What do the rich smoke ... cigars? How does that pan out? And do the rich wind up paying more tax on vermouth and brandy versus the tax paid on malt liquor or not? I need to get the stereotypes straight first, then maybe I can figure out how regressive excise taxes are. (Except for gasoline. I have that stereotype nailed, as we all know the rich drive wasteful SUVs and the poor drive subcompact death boxes. Since the rich use more gasoline, obviously they pay more in fuel excise taxes — even without taking into consideration all those private jets!)
No, sorry, you are missing it completely.

Even if the higher wage earners and lower wage earners paid about the same per dollar spent on excise taxes, excise taxes are regressive since lower income people spend larger portions of their income on taxed items. Consider any of the examples you cited, gas, liquor, tobacco products; The proportion of the income of the lower wage earner is greater, therefore the effective rate, relative to their total income is higher. If you make $2M a year, and spend a wild $30k on liquor, cigars, and gas for your Hummer, that’s still only 3% of your income on which you are paying excise taxes. Now take someone earning 60k, who spends $6k on those items, and is paying excise on 10% of their income. The lower wage earner pays a higher RATE than the higher wage earner, by definition regressive. Sure, you could have anomalies like a rich guy spending 20% of their income on booze and smokes and gas for their yachts, but you have those anamolies on the lower side as well, where people spend inordinate amounts on those items.

So that’s established, right?
Corporate taxes passed on to the consumer - See above. These last two points in particular seem to be nonstarters. The rich are still consumers. Simply because someone has money doesn’t mean everything in the world is automatically gratis. Just the opposite, really. If people know you have money, odds are you’re going to get soaked.
Corporate taxes are passed on to everyone, high and low wage earners alike, the difference here being what proportion of one’s income is spent on consumption. This a simple savings equation, lower wage earners spend a greater portion of their and higher wage earners save and/or invest a greater portion of their income, because less of it is required to be spent to meet their needs. Corporate taxes are regressive because lower wage earner must spend a greater portion of their income than higher wage, and thus pay these pass pass through taxes on a greater portion of their income.

So that’s established, right?
The first year of my marriage, both of us in college on academic scholarships and working part time at Wal-Mart, me and the missus paid NO taxes. In fact, I think we got a check for a couple of hundred dollars from Uncle Sam. Many years later, earning much more money and carving out our place in the world, the missus and I seem to experience a harder pinch each time we move up a rung in the tax brackets. The system discourages success.
You need a better accountant.
 
Written By: mythbuster
URL: http://
So that’s established, right?
The rate is fixed. You’re playing games with the numbers. For Medicare, it remains fixed. For SS, it remains fixed, but only for the first $102,000.

And it’s a fixed percentage, not a fixed dollar amount. 7.65% of $30K is less than 7.65 of $100K.
... investment income and the like, no matter how much they earn, they pay a rate of 0%.
This is simply false. Investment income is still income. In a tax sheltered annuity, you don’t pay taxes on it until you take the money out, but you still have to take the money out (or face stiff penalties) once you reach age 70 1/2. I wish you didn’t have to pay taxes on investments.
... it’s just a greater proportion of the lower earner’s total income, making a higher rate the less someone earns, again, by definition regressive.
I’d have to see some actual numbers on this. I don’t doubt that the "poor" have less free spending money than the "rich" but I doubt that the percentages are that out of proportion. In other words, the utility bills for a family of four living in a small house are most likely proportional to the utility bills of family of four living high on the hog in Bel Air (that is, the utility bills:income ratio is proportional.)

Your argument seems to be that the poor spend more on consumables than the rich. I’m just not convinced that it’s a provable point. How many "rich" people happily publish the details of every last penny they spend?

I may spend $40 on a cheap wristwatch. Ben Affleck collects $10,000 watches for fun. It may not be "fair", but it’s a disparity I’m willing to live with if it means I have the opportunity to improve my own lot in life. And hey, Ben and I both pay the same percentage of sales tax. And that’s okay too.

(The fact that you acknowledge the necessity of an accountant as one gains wealth is rather a tacit confession on your part that income taxes are conspicuously progressive, no?)
 
Written By: Ronnie Gipper
URL: http://
http://www.optimist123.com/optimist/2007/06/tax_cuts_for_th.html

His charts include both income taxes and payroll taxes. From my reading, it looks like indeed the top quintile pays more than its "fair share" of taxes, though that has to be the case to keep progressivity, no?

http://www.optimist123.com/optimist/2007/07/growth-versus-c.html

a related post.

Lately I have been thinking that a system of a flat tax coupled with a base tax credit would be useful not only in simplifying the tax code, but also for political discussions. Say the tax rate is 18% with a base subsidy of US$ 15,000. (I am making those up off the top of my head.)

Then politicians and the public would have easy benchmarks to argue about.

Obama: increase taxes to 19% and increase the base subsidy to US$ 18,000.
McCain: decrease taxes to 17% and reduce the base subsidy....



 
Written By: Harun
URL: http://
Sorry, I should have used links not just cut and paste.
 
Written By: Harun
URL: http://
Change of perspective here: Dems don’t look at taxes as to what they take from you. They believe and act as if they are entitled to take as much and whatever they want with total immunity. They are all lawyers afterall. They look at Government and taxes as a distributor of benefits. So if rich man gets a 10% reduction in tax he gets a benefit of x. If poor man gets a 25% reduction in tax he gets a benefit that is still smaller than x. Therefore it’s unfair.
 
Written By: KH
URL: http://
Mythbuster:

You cannot roll payroll taxes into the picture without talking about the individual benefits that they entitle someone to. In theory the amount one pays in for FICA is proportionate to the benefits one should receive down the road (yes, there are exceptions).

Someone making 200k a year doesn’t pay the SS tax on anything over roughly 98k right now, but that person also doesn’t get any benefits beyond the level of his taxation. So comparing the income tax burden to the FICA tax burden is not a fair comparison. The rich person who pays full income taxes on his 200k income does not receive the same proportionate benefit as he does on his FICA taxes.

 
Written By: Grimshaw
URL: http://
Grimshaw,
It is worse than that, the more you pay into FICA, the less you receive as a proportion of benefits.

I did the math here a couple years ago.

Tue Jul 22 11:23:31 EDT 2008
 
Written By: anomdebus
URL: http://
Why stop with taxes? The cost of food is obviously regressive, as is the cost of clothing, shelter, amusement, blah blah ad inf. Obviously God hates poor people.
 
Written By: timactual
URL: http://
The rate is fixed. You’re playing games with the numbers. For Medicare, it remains fixed. For SS, it remains fixed, but only for the first $102,000.

And it’s a fixed percentage, not a fixed dollar amount. 7.65% of $30K is less than 7.65 of $100K.
The rate is NOT fixed, it has two levels, 15.30% for the first $102k and 2.9% for every dollar after that, the very definition of regressive, a tax that goes down as income goes up.
This is simply false. Investment income is still income. In a tax sheltered annuity, you don’t pay taxes on it until you take the money out, but you still have to take the money out (or face stiff penalties) once you reach age 70 1/2. I wish you didn’t have to pay taxes on investments.
The payroll tax rate on investment income is ZERO, I think you missed that this is what I was referring to here...

"If you make $102k or less, you pay 15.30 of your wages in Payroll Taxes. If you make $204k, that RATE is now 9.1%, and if you earn $2M in Wages, the rate would be 3.6%. The more you make, the lower the rate, the defining characteristic of a regressive tax. Oh, and don’t forget, for people who’s earning are not wage based, investment income and the like, no matter how much they earn, they pay a rate of 0%."

Perhaps it would have been more clear if the last sentence read this way..

"Oh, and don’t forget, for people who’s earning are not wage based, investment income and the like, no matter how much they earn, they pay a payroll tax rate of 0%."

Sorry, I thought it was self evident that’s waht I was talking about, or are you arguing that investment income is subject to payroll taxes???
Your argument seems to be that the poor spend more on consumables than the rich. I’m just not convinced that it’s a provable point.
To be precise, my argument is that the poor spend a greater portion of their income on consumables than the rich, and therefore a greater portion of their money is subject to these kinds of taxes, as such it is by definition a regressive tax.

Have you tried to prove or disprove it?

This is really pretty basic, anything you spend that is not an investment, is either a consumable or a service product, so to research this question, one needs to find an answer to two questions. By income, how much of their income do people invest or save, and how much of their income do people spend. This can be answered by the Federal Reserve Study that shows that savings (ie; money not spent on consumption) is 3% the lowest quintile, rising by a rate of about 8% for every $10k in income, to 25% for the highest quintile, 44% for the top 5% and almost 50% of income is saved by the top 1%.
I may spend $40 on a cheap wristwatch. Ben Affleck collects $10,000 watches for fun. It may not be "fair", but it’s a disparity I’m willing to live with if it means I have the opportunity to improve my own lot in life. And hey, Ben and I both pay the same percentage of sales tax. And that’s okay too.
I am not making a qualitative judgement on the fairness of people having the means to purchase more than another, I am making a quantitative statement that the portion of income spent at all decreases as income increases, and therefore consumption type taxes are defacto regressive.

If Ben Afflect spends 10k on a watch, great for him, and if you spend $40, good for you too, but at the end of the day, Ben is still saving a far greater portion of his income than lower income people, thus subjecting a greater portion of lower incomes to these taxes, thus (am I getting through yet) making these kinds of taxes regressive in nature.

We have only one progressive federal tax in America, the income tax, and that accounts for less than half of federal revenues, while virtually every other tax is regressive, including most state and local taxes. So when people whine about the wealthy being soaked, and talking EXCLUSIVELY about income taxes, it’s pure propaganda. When you combine federal, state, and local taxes, the progressive portion only accounts for less 1/3 of total revenues, so again, regressive taxes that hit harder the less you make, make up a far bigger piece of the tax pie than income taxes, so the only reason to focus on the prgressivity of income taxes, is to create false imagery of wealth being punished.
You cannot roll payroll taxes into the picture without talking about the individual benefits that they entitle someone to. In theory the amount one pays in for FICA is proportionate to the benefits one should receive down the road (yes, there are exceptions).
Of course I can, a tax is a tax. If it is involuntary, whatever benefits may or may not be promised based on those dollars are irrelevant, and further, every cent of the SS taxes are used to pay current benefits and the rest goes to the general fund, not one cent is put away to fund future benefits. I am no fan of SS, and I am also no fan of most of the general fund spending either, but any wand waved over these dollars as if they will go away is purely rhetorical.
Why stop with taxes? The cost of food is obviously regressive, as is the cost of clothing, shelter, amusement, blah blah ad inf. Obviously God hates poor people.
Reductio ad absurdum.

Your statement is true, and entirely irrelevant, the cost of everything is by nature, regressive, since the cost of anything will be a greater portion of the income of a person with a lower income than another. I am not, and have not, argued that this reality be changed by policy. I am merely pointing out that these TAXES are in fact regressive.

As far as God goes, I have also not mentioned quality of life or happiness, which one does not require wealth to achieve, and further, if you want to get ecumenical about it, there is certainly a body of thought that suggests earthly poverty and heavenly wealth is better than the reverse.

I am just trying to point out additional information about taxation in general that make the theory of the heavy burden of the wealthy less credible.

 
Written By: mythbuster
URL: http://
The rate is NOT fixed, it has two levels, 15.30% for the first $102k and 2.9% for every dollar after that, the very definition of regressive, a tax that goes down as income goes up.
This is turning into a "is too — is not" dispute. One last time: Medicare remains fixed regardless of income, SS remains fixed up to $102K. An employee’s SS deduction is 6.2%. Come to think of it, the employer pays a matching 6.2%. For the S-corp folks McQ mentions, they pay a combine 12.4% out of their income, so I suppose that makes SS progressive up to $102K. Hmm.
Perhaps it would have been more clear if the last sentence read this way..

"Oh, and don’t forget, for people who’s earning are not wage based, investment income and the like, no matter how much they earn, they pay a payroll tax rate of 0%."
Yeah, it’s just taxed at around 20% - 30%. That’s much more regressive.
To be precise, my argument is that the poor spend a greater portion of their income on consumables than the rich, and therefore a greater portion of their money is subject to these kinds of taxes, as such it is by definition a regressive tax.

Have you tried to prove or disprove it?
My point is I don’t think you can prove or disprove it, and I’m skeptical about your premise. Take my example of two families of four, one living in a modest house and one living in a grande manse. The "poor" family has a smaller house to heat and cool, a smaller yard to tend, no house staff to pay, etc. It seems to me that consumables are scalable.
(am I getting through yet)


No. Because the fact remains that Mr. Affleck’s income tax rate is higher than Mr. Gipper’s. Do I pay more in SS? Not really, no. We pay the same amount on the first $102K of income. Sure, you can toy with the figures, and divide $11,680 by $20 million to "prove" that Mr. Affleck’s SS deduction is only .06%. The simple truth is any "savings" the rich have in terms of "no SS deduction beyond the $102K mark" is more than made up for by the income tax.

Rather than wait for your return volley of the same arguments warmed over followed by my own response in kind ad infinitum, I’m just going to have to agree to disagree here.
 
Written By: Ronnie Gipper
URL: http://
The rate is NOT fixed, it has two levels, 15.30% for the first $102k and 2.9% for every dollar after that, the very definition of regressive, a tax that goes down as income goes up.
Actually, you’re wrong, as proven by your own definition: "A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases."

That’s not what’s happening with payroll taxes. Instead, they are fixed as income increases, and then at a certain point the SS part stops being "contributed" (as the government defines it). That’s not regressive, that’s simply a flat tax on all income under a certain level. After that level another tax kicks in (e.g., AMT, higher tax bracket), which reduces the regressiveness, if any, of the tax on income above that level. In order for the SS tax to be regressive it would either have to be a flat amount (such as gas, cigarette, or other "sin taxes" considered to hit poor people hardest), or the actual rate would have to rise as income rises.
You cannot roll payroll taxes into the picture without talking about the individual benefits that they entitle someone to. In theory the amount one pays in for FICA is proportionate to the benefits one should receive down the road (yes, there are exceptions).
Of course I can, a tax is a tax. If it is involuntary, whatever benefits may or may not be promised based on those dollars are irrelevant, and further, every cent of the SS taxes are used to pay current benefits and the rest goes to the general fund, not one cent is put away to fund future benefits.
Ah, but who will receive more of the benefits from SS taxes, people whose entire income is subject to the tax, or people who on see part of their income affected? Just because we all know that anyone under 45 is highly unlikely to see any benefits whatsoever doesn’t change the fact that SS taxes are supposed to be an investment. Neither does it change the fact that people have been receiving those benefits for the past sixty years. Furthermore, those SS taxes also go to pay for things like SSI, AFDC, TANF, etc. which are benefits that are not used by people who have income above the SS taxation level.
I am no fan of SS ...
But, apparently, only because the rich don’t pay enough under it. If we assume that you’re right, and that the SS tax is regressive, then why not advocate eliminating it altogether? I mean, you have your argument all prepared: "It’s not fair to the poor. Get rid of it!"

And, really, how much does it help the poor if we were to make the SS tax more progressive? The poor would still be taxed the same, which as a proportion of their income is too much according to you. So, again, why not advocate getting rid of it altogether instead?
Why stop with taxes? The cost of food is obviously regressive, as is the cost of clothing, shelter, amusement, blah blah ad inf. Obviously God hates poor people.
... Your statement is true, and entirely irrelevant, the cost of everything is by nature, regressive, since the cost of anything will be a greater portion of the income of a person with a lower income than another. I am not, and have not, argued that this reality be changed by policy. I am merely pointing out that these TAXES are in fact regressive.

...

I am just trying to point out additional information about taxation in general that make the theory of the heavy burden of the wealthy less credible.
Less credible? How is the fact that the the top 5% of income earners (who rake in 36% of total income) pay a whopping 60% of all income taxes not credible? Regardless of whatever proportion of their income is paid in SS taxes, they are still funding a far larger portion of the government than they are using, aren’t they?

And if your answer is something along the lines of "they owe their high incomes to the benefits provided them by the government and the low-wage workers, blah, blah, blah ..." well then, shouldn’t they get what their paying for? By that I mean, if they are going to pay more for the government, how can someone who pays less begrudge the rich getting fewer benefits from the government?

After all, if you know that you’re income is going to get taken from you at an increasing rate as you earn more, then you basically have three choices: (1) do nothing, (2) defer the taxes, (3) avoid the taxes, or (4) demand something for the money you’re paying. If you choose (1), you’re probably not going to earn that much for very long. If you choose (2), you’re going to pay a lot of that income to tax lawyers and accountants. If you choose (3), you run the risk of going to jail. But if you choose (4), you not only get something for the money you spent, you gain influence over the national agenda which may earn you more in the long run.

In short, expecting the rich to continuously pay more and more income sounds great to the pigs in the house.
 
Written By: MichaelW
URL: http://qando.net
Less credible? How is the fact that the the top 5% of income earners (who rake in 36% of total income) pay a whopping 60% of all income taxes not credible? Regardless of whatever proportion of their income is paid in SS taxes, they are still funding a far larger portion of the government than they are using, aren’t they?
Wow, you didn’t pay much attention at all, did you. The words and supporting documentation was right there, in front of you, and you just ignored it completely and repeated the same mantra, that people who make 36% of total income pay 60% of ALL income taxes as if that’s the end all, be all of arguments.

Virtually the only progressive tax we have in America is the federal income tax, almost all other taxes at the federal, state, and local level are regressive, so high income earners are NOT over represented in ANY of those taxes, and in that one progressive tax scheme, that top 5% that earns 36% of ALL income, is paying 27% of the total federal tax burden in income taxes. They are paying more of the federal tax burden in other ways, but those other ways, from a proportional perspective, put LESS of a burden on them than they do one lower income earners. Since these high earners save nearly 50% of their earnings (44% for the top 5%, 49% for the top 1%), any kind of sales taxes, consumption taxes, excise taxes, corporate taxes, are 2/3 less proportionally than median wage earners.

Oh, as it relates to total taxation, these high earners get the benefit of the regressive taxes because of their high savings, so the bulk of those taxes are shouldered by lower income earners, and their progressive contribution in federal income taxes to the total federal, state, and local tax burden for this group that earns 36% of the income is a whopping 16%.

The funny thing is that these folks that don’t spend half their money, are often big proponents of the "fair tax" at around 23%, which would, considering they save half their money, be an effective rate of 11.5% for them. So I wonder, if this group that earns 36% of the income, were paying 11.5% compared to what, about 25% now, who would make up the difference?

Oh yeah, it’s regressive.

 
Written By: mythbuster
URL: http://
Wow, you didn’t pay much attention at all, did you.
Wow, you didn’t like being proven completely wrong, did you?
The words and supporting documentation was right there, in front of you, and you just ignored it completely and repeated the same mantra, that people who make 36% of total income pay 60% of ALL income taxes as if that’s the end all, be all of arguments.
Funny how a simple fact is turned into a "mantra" because you don’t like it.
Virtually the only progressive tax we have in America is the federal income tax, almost all other taxes at the federal, state, and local level are regressive, so high income earners are NOT over represented in ANY of those taxes, and in that one progressive tax scheme, that top 5% that earns 36% of ALL income, is paying 27% of the total federal tax burden in income taxes.
And how much does the bottom 95% of taxpayers (who earn 64% of all income) pay under that rubric? Oh yeah, 18%. My math tells me that the difference between 64 and 18 is far greater than between 36 and 27. Let me know if you come up with something different.
They are paying more of the federal tax burden in other ways, but those other ways, from a proportional perspective, put LESS of a burden on them than they do one lower income earners.
According to you. As the Gipper pointed out, you have yet to show that higher income earners pay less of their disposable income in taxes (much less that they don’t pay much higher sales, property, etc. taxes). Sure they have more to invest, but they also pay taxes on those investments (at a higher rate than SS taxes).

For example, much of those savings come in the form of 401K’s, IRA’s and the like which simply defer taxes — i.e. they do pay taxes on that income down the road. Since that income comes out pre-FICA-tax, it’s not counted in the percentage of income taxes (the 60%) those higher earners do pay until down the road, but it is included as income despite the fact they can’t touch it. IOW, if you really want to know what proportion of income higher earners have to pay in ALL taxes, you have to look at their actual disposable income after paying FICA, withholding, income, sales, excise, etc. taxes AND what income they put away to be taxed later. Just because they have more to put away doesn’t mean they aren’t getting taxed on it eventually. But it does mean that their disposable income is reduced far more than you’re willing to admit.

Moreover, the money that goes into savings/investment isn’t hidden under a mattress somewhere, but instead it goes to funding new businesses, etc. that create more jobs. That creation of job allows for others to eventually earn the privilege of being taxed on ever higher portions of their own income, and thus the chance to fund an increasing portion of the government. And don’t forget that part of the money that goes to paying for those jobs created also gets paid as the employer’s contribution in FICA taxes (which can’t be written off as a business expense of course). So, in a way, all that money being invested does get taxed by payroll taxes.

Finally, none of your assertions address the fact that higher income earners pay many taxes for things they don’t use, like public schools (which they pay much more for), roads (since they tend to live closer to work), and social services. I don’t mean to suggest that paying for such things is bad, after all, I hope I never need the services of the fire department, but if my house is burning down I want them to show up. But it is interesting that you simply ignore the whole benefits side of the tax equation, of which the lower income earner derives more.
Since these high earners save nearly 50% of their earnings (44% for the top 5%, 49% for the top 1%), any kind of sales taxes, consumption taxes, excise taxes, corporate taxes, are 2/3 less proportionally than median wage earners.
Actually, as I tried to show above, they’re not. Once again, just because money is saved/invested doesn’t mean it’s not taxed. And that’s not even addressing the fact that you’re improperly comparing the proportion of income paid wrt ALL taxes, to the proportion of income paid on earned income — you know, the point of the post.
Oh, as it relates to total taxation, these high earners get the benefit of the regressive taxes because of their high savings, so the bulk of those taxes are shouldered by lower income earners, and their progressive contribution in federal income taxes to the total federal, state, and local tax burden for this group that earns 36% of the income is a whopping 16%.
I think if you re-read that last sentence you’ll realize it makes no sense.
The funny thing is that these folks that don’t spend half their money, are often big proponents of the "fair tax" at around 23%, which would, considering they save half their money, be an effective rate of 11.5% for them. So I wonder, if this group that earns 36% of the income, were paying 11.5% compared to what, about 25% now, who would make up the difference?
You’re numbers don’t add up because you keep assuming that the only taxes paid by higher income earners are income taxes.
Oh yeah, it’s regressive.
Only based on you’re weakly supported assumptions. But even assuming you’re right, as I did in part of my original comment, you still haven’t addressed most of the questions I posed. In fact, you assiduously avoided most every issue I raised in order to repeat, dare I say it, your "mantra."
 
Written By: MichaelW
URL: http://qando.net
Thanks Michael - a clear and lucid response.
 
Written By: meagain
URL: http://
This guy is a better than writer than I am, and makes the same point, so perhaps this can provide some clarification...
How the Right Gets Taxes Wrong
By Matthew Miller
April 13, 2004

It’s tax time, which means it’s time for conservatives to roll out their perennial complaint that the well-to-do are being asked to pay too much. They’re dead wrong, as every reasonable citizen will conclude in a moment, but first let’s hear them out.

“The burden is

If Cogan and Josten were laying out the full picture, it would indeed be cause for alarm – how can we have so few Americans pulling the cart and so many riding in it?

But the instinctive way conservatives have come to reason and argue about the federal tax burden is misleading and incomplete – as a look at the big picture on federal taxes shows. This will take a few numbers, but they’re guaranteed to change your worldview, so sit tight. (We’re leaving state taxes aside, by the way, because they vary so widely.)

Conservatives love to cite facts like these: The top 5% of taxpayers pay more than half of federal income taxes; the top 1% pay more than a third all by themselves; and the bottom 80% of earners pay less than 20%.

If these facts are all you carry in your head, then it’s obvious that Ayn Rand was right: We’re a nation of freeloaders who enjoy the blessings of liberty thanks to a handful of generous giants.

But this is not the full picture. Any fair-minded person should want to know two other things: What percent of total income do these different slices of earners actually earn; and what share of total federal taxes, not just income taxes, do they pay?

The conservative worldview inexplicably ignores the payroll tax – predominantly the FICA deductions for Social Security and Medicare – as well as excise taxes on things like liquor, gasoline and tobacco. Those taxes take their biggest bite, proportionally, from lower-income Americans.

These regressive taxes have quietly and shockingly reached near-parity with the income tax as a source of federal revenue. This year, the income tax will account for 42% of federal revenue; the payroll tax will come to 41% (up from 16% in 1960).

If you count the portion of the payroll tax paid by employers, which economists agree effectively comes out of workers’ wages, four out of five workers pay more in payroll taxes than in income taxes.

When you look at who pays what based on total federal taxes, the United States doesn’t look much like an Ayn Rand novel after all.

The top 1% of American taxpayers earn 17% of the income and pay 23% of total federal taxes; the top 5% earn 31% of the income and pay 40% of the taxes; the bottom 80% of the earners make 41% of the income and pay 31% of the taxes. These numbers are from 2001, the most recent available data; Bush’s tax cuts have since made the burden on top earners lower. In other words, for all the conservative whining, we have a modestly progressive federal tax system.

Which brings us to the obvious question, one that could be posed to the president at his press conference tonight: Why do leading conservatives stress only part of the picture? Either they’re not that smart, or they think the rest of us – especially in the media – aren’t that smart.

I’ll let you make the call. But the conservatives I know tend to be very smart people.

Matthew Miller is a senior fellow at the Center for American Progress and author of “The Two Percent Solution: Fixing America’s Problems in Ways Liberals and Conservatives Can Love” (Public Affairs; 2003).
The idea that you can dismiss involuntary payroll taxes because of their stated purpose is preposterous. I could dismiss 3/4 of the general budget because of the stated purpose of those outlays, but it would be as much of a disingenous rhetorical trick as the former.

And then there’s state and local taxes...
The average state and local tax rate on the best-off one percent of families is 7.3 percent before accounting for the tax savings from federal itemized deductions. After the federal offset, the effective tax rate on the best-off one percent is 5.2 percent.

The average tax rate on families in the middle 20 percent of the income spectrum
is 9.9 percent before the federal offset and 9.6 percent after—almost twice the
effective rate that the richest people pay.

The average tax rate on the poorest 20 percent of families is the highest of all. At 11.4 percent, it is more than double the effective rate on the very wealthy.
So yes, higher WAGE earners pay a proportionally much greater share of INCOME TAXES, but when payroll taxes are taken into account, they are paying much closer to an even proportion relative to their income. And when the regressive excise taxes and consumptions taxes are taken into account, it is even less of the onerous burden claimed.

And then when state and local taxes are taken into account, the regressive shift is even greater.

And I find laughable that on one hand, you talk about the high income earners as engines of the economy and job creaters, and on the other hand you decry their having to pay for the education system that you say they get no benefit from.

Do they draft children out of preschool and put them in special employment training schools at their own expense, or do they hire their workforce with an expectation that they are educated in system that they, in part, funded? Youmention the fire department, well the same goes for education. I don’t need a public education system, unless of course I want to hire someone who has been educated.
And how much does the bottom 95% of taxpayers (who earn 64% of all income) pay under that rubric? Oh yeah, 18%. My math tells me that the difference between 64 and 18 is far greater than between 36 and 27. Let me know if you come up with something different.
Yes, I have (this is for 1997, some the numbers are slightly different, but the point is the same)...

Comparing who gets income and who pays federal taxes:

Those who earn less than $50,000 receive 25 percent of all income and pay 17 percent of federal taxes.

Those who earn $50,000 to $150,000 receive 45 percent of income and pay 44 percent of federal taxes.

Those who earn more than $150,000 receive 30 percent of income and pay 39 percent of taxes.

If the federal tax system is only modestly progressive, the state and local tax system, which depends much less on income taxes and more on sales and excise taxes, is substantially regressive. The property tax, too, is regressive, especially at the very top of the income distribution, where the family home is a much smaller part of total wealth than for the middle.

The point is not to say that income taxes are not progressive and that higher earners do not pay a higher portion of this particular tax, I acknowledge that they do, but the point is that as each regressive element of the total tax burden is included, that over-representation in income taxes is wiped away.
You’re numbers don’t add up because you keep assuming that the only taxes paid by higher income earners are income taxes.
No, I am not suggesting that higher earners pay NO other taxes, I am suggesting that since these other taxes are regressive, it reduces their total share of the burden, so while the top 5% earns 30% of the income and pays 60% of income taxes, it sounds onerous, but when you add other federal taxes, their proportion is 39%, not so onerous, and then when you add regressive state and local taxes, it comes down even further (because that’s the way regressive taxes work), and the only thing I don’t know for sure is exactly what the total distribution burden is after all of those taxes are taken into account, but since the taxes being included are regressive, we can be sure of one thing, that distribution does go down for the highest wage earners.

The sad thing is that I am not debating policy, I am merely suggesting that when someone is making an argument, they should include all of the facts, and not just the one’s that support their ideological point of view, because excluding relevant facts to support an argument is sophistry, or, in more direct terms, lying. Comparing how much different households pay in taxes by focusing only on the federal income tax is like contrasting how much food people consume by counting only their breakfasts.

It’s not class warfare to suggest that when considering the tax burden, you take the entire tax burden into account, but it is class warfare to suggest that because ONE kind of tax is over-represented by a group, that they carry a too-heavy burden that should be relieved.

Overall, our tax system is far less progressive than the federal income tax viewed in isolation. The share of the total tax burden carried by high-income families is much smaller than their share of income taxes alone. By focusing on income tax cuts, and on cuts at the top, at that, advocates of income tax cuts conveniently ignore the taxes that actually burden the majority of taxpayers.

If you want to argue that supply-side economic theory is the most effective way to stimulate long term growth for the nation as whole, then make that argument, and whatever the high income earners proportional representation is under this system should be irrelevant. If not taxing the wealthy at all, and placing the tax burden on those who don’t create jobs is the best for everybody, make that argument, but don’t make false arguments about what their burden really is.







 
Written By: mythbuster
URL: http://
Mythbuster, I wish I knew how to quit you.
... but don’t make false arguments about what their burden really is.
You seem to have that tapped, so agreed. I won’t make any false arguments about what the tax burden really is. You, on the other hand, may feel free to continue doing so.

The only data I can find on expenditures versus income is from the Bureau of Labor Statistics, and even they confess that their numbers are not all that reliable. As far as I can tell, their system for determining income involves a dartboard and a blindfold.

If you take a look at the "Income Before Taxes" table, you’ll see what I mean. The lower income brackets miraculously make more money after taxes than they do before. They also seem to spend twice as much money as they make.

For what it’s worth, this table does demonstrate scaling expenditures. As it so happens the more money you make, the more money you spend. Who’d have thought that? Oh yeah. Me.

I would like to point out that information about investments (other than insurance and pension) is missing from this table. Also, the rich apparently drink and smoke more than the poor, thus shattering my stereotypes.
 
Written By: Ronnie Gipper
URL: http://
Re the article that explains it all

Here’s a question that is skewed from the beginning -
But this is not the full picture. Any fair-minded person should want to know two other things: What percent of total income do these different slices of earners actually earn; and what share of total federal taxes, not just income taxes, do they pay?
Because you have totally failed to explain how rich guy #1 gets any more benefit from government services for his money than poor guy #1 gets for his.
Whether, on a practical level, that be at the Federal, State, or Local level and whether he paid them as Payroll, excise or any OTHER kind of tax.
If they all get the same service from government why does the rich guy pay MORE for the service he gets? How is that FAIR?
Clearly my friend, you favor ’not from each according to his share of use’, but rather, from each according to his ability. Sounds like, um Karl Marx.

If the cost of the fire department of a town is $30.00 a year, and there are 10 people in town, and 1 guy earns $200.00 a year, and the 9 others each earn $11 dollars a year, and the fire department delivers EXACTLY the same service regardless of their income, then rather than each of them paying $3.00 a year to run the fire department, you want the 9 to pay something less than $3.00 and the 1 guy to pay considerably MORE than $3.00 to fund the fire department for EXACTLY the same service because he MAKES more. And you think that’s completely fair?


But wait, there’s more hidden in here -
- let’s talk about this line - because I love the reasoning in here -
The conservative worldview inexplicably ignores the payroll tax – predominantly the FICA deductions for Social Security and Medicare – as well as excise taxes on things like liquor, gasoline and tobacco. Those taxes take their biggest bite, proportionally, from lower-income Americans.
So....gasoline aside - I’ll grant that poor people have to drive to work and slave in my factories, and so we’ll allow that it’s hard on them to pay that gas tax (that the rich are also paying) in addition to the ever escalating price of the gallon they’re buying, and I feel for them on this one, because it has to hurt (and I’m NOT being a smart ass in this one spot).

But....gee....liquor? Tobacco? I don’t drink a whole lot, I don’t smoke at all. Let me ask Mr Myth is it MY fault, or the fault of the rich, that the ’poor’ buy things that ’take the biggest bite’ from lower-income Americans.
I don’t buy luxury yachts because I can’t afford them, not only the yacht, but the excise tax on it. Ya know there Myth, cigarettes and booze are bad for ya, cigarettes, they cause cancer ya know. I don’t get it.
If this is part of the biggest bite thing (cry boo hoo with me here) and it’s so big, WHY ARE THEY BUYING THINGS LIKE BOOZE AND CIGARETTES? Why should I concern myself for their bad habits?
I see the writer of your article secretly looking down his nose at these people and their bad habits from his liberal tower, "tutt tutt my dear chaps, we must allow the poor their vices, you see, for they are poor, and suffer, and cigarettes and booze are their only solace, aside from perhaps, torrid and exciting lower class sex, which we can’t directly tax".

You want the rich to pay a bit more because the poor voluntarily spend more of their meagre available money on items that carry a high excise tax cost and aren’t even GOOD for you?


Here’s another gem -
If you count the portion of the payroll tax paid by employers, which economists agree effectively comes out of workers’ wages, four out of five workers pay more in payroll taxes than in income taxes.
Woah woah woah stop the horse....So....economists agree that the fact that the government forced businesses to pay taxes on behalf of the employees TO the government that the business didn’t give that money (which was the due of the employees you know) TO the employees instead of taking the loss themselves?
WOW! So the problem isn’t the tax then, the problem is the cheap ass employers who refuse to cover the cost of the tax themselves. Who’d have ever thought THAT would happen? But it get’s better - Economists agree...theory as fact! Economist agree that money WOULD have gone to the employees, and so, therefore, it should have, and so therefore, if it did not, we can factor it in to demonstrate that the rich aren’t really paying that much more.

On with the argument about those rich bastards not paying their fair share already.

"IF you count the portion of payroll tax paid by employers".
You know as a side line and humorous story about this point Myth -
I’m self employed in a little bitty 1 man S-corp - GUESS who makes all the money for the S-CORP, why that would be...me...the employee, guess WHO matches the tax the ’employee’ pays? Why...Lord above! It’s the employee after all, because it’s my S-corp! Damn those economists were RIGHT, if I wasn’t payin it to the government on my own behalf, I’d be takin it home! And damned if my customers will let me pass that cost on to them either. Instead I’m paying it to the government because rich guys like George Soros, and John Kerry and Teddy Kennedy have found ways to make their ’income’ under taxed. Damn I’m sorry I disagreed with you on this point....gee....best not to discuss how many small self owned business are paying double for their Social Security and Medi-tax obligation because they own their own business, they’re probably RICH anyway, and they deserve to pay more.

Onwards and upwards here....

Let me help you clarify the next passage you wrote, because you left out a couple valuable points...I’ve re-inserted them.
So yes, higher WAGE earners pay a proportionally much greater share of INCOME TAXES (for exactly the same services) but when payroll taxes are taken into account, they are paying much closer to an even proportion relative to their income. And when the regressive excise taxes (for voluntarily purchased items like, cars, and even items like beer and unhealthy things like cigarettes) and consumptions taxes are taken into account, it is even less of the onerous burden claimed.
A little more help on another important point you were making
You mention the fire department, well the same goes for education. I don’t need a public education system, unless of course I want to hire someone who has been educated (and we all know, the ’poor’ didn’t benefit at all from that education, you see, they derived NO benefit from it, except to work in the slave houses of the rich for their pittance of a wage..)
More important points - my my my
If the federal tax system is only modestly progressive, the state and local tax system, which depends much less on income taxes and more on sales and excise taxes, is substantially regressive. The property tax, too, is regressive, especially at the very top of the income distribution, where the family home is a much smaller part of total wealth than for the middle.
The point is not to say that income taxes are not progressive and that higher earners do not pay a higher portion of this particular tax, I acknowledge that they do, but the point is that as each regressive element of the total tax burden is included, that over-representation in income taxes is wiped away.
I’d fisk this - but really it’s all just pure and complete crap because it’s not my f’ing problem if, for example, the people of Massachusetts want the Big Dig and I don’t live in Massachusetts.
How they pay for it is THEIR business and should have ABSOLUTELY nothing to do to with the equity of the FEDERAL tax system. If they don’t like their state and local taxes, THEY can do something about them and I cannot, but they shouldn’t be used as an excuse for beating the rich at the Federal level.
It’s not class warfare to suggest that when considering the tax burden, you take the entire tax burden into account
Ah, now see, but it is, because you added crap that has no place in the argument at all, added in things that WERE voluntary and not mandatory and tried to make them a substantial cost part of your argument and finally pretended that all business are huge operations, and not mom & pop shops many of whom are paying their own double social security and FICA into the system.

All so you could justify having the rich pay a significant proportion of ONE type of tax that isn’t voluntary at all.

You’re back to square one.
 
Written By: looker
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