Tax Time

[Paul Stevens]

In honor of tax time, I am posting an iteresting little chart.

Taxpayers % of total % of total % of total federal
income earned income taxes paid taxes paid
Top 1% 17% 36% 23%
Top 5% 31% 57% 40%
Top 10% 42% 68% 52%
Top 20% 59% 83% 69%
Bottom 80% 41% 17% 31%
The total taxes paid column includes payroll, gas, income and sin taxes.

[Jason Menard]

Reformatted for easier reading:
<pre>
Taxpayers % of total % of total % of total federal
income earned income taxes paid taxes paid
Top 1% 17% 36% 23%
Top 5% 31% 57% 40%
Top 10% 42% 68% 52%
Top 20% 59% 83% 69%
Bottom 80% 41% 17% 31%
</pre>
[ April 11, 2004: Message edited by: Jason Menard ]

[Stan James]

Interesting. I'm a bit of a billionaire basher, so I guess that looks ok to me. How about you?
Newsweek had an analysis of where the Bush admin is taking us on taxes, and they concluded it is becoming more and more a payroll tax as other income - interest, capital gains, inheritance, etc - escapes taxes. The very rich may pay a high rate on their salaries, but skate by on the perks that only they can afford to start with.
The AMT is the one that will jump out and bite people like me. So far nobody has the political guts to admit it exists, let alone fix it.

[Thomas Paul]

The people at the top should pay more because they can pay more. It's hard to get $15,000 in federal taxes from someone earning minimum wage. The more interesting statistic would be what % of their income do the top 1% pay in taxes. If a person makes $20,000,000 in income but pays $1,000,000 in taxes then they are being taxed at a rate of 5% even though the amount they pays dwarfs what most other people pay.

[Jason Menard]

Originally posted by Thomas Paul:
The people at the top should pay more because they can pay more.

I'm not sure what kind of logic that is. The only fair tax system would be one where everybody paid an equal percentage of their income. Anything else is unjust. A person making $100,000 who contributes 15% of his income is still paying more than the person who makes $20,000 and contributes 15% of their income, although such a system would be just and equitable. Our progressive tax system is just plain wrong. This redistribution of wealth from the haves to the wanna haves, just because they are successful and "can pay more", is ridiculous. There's just nothing I look forward to more than spending a small fortune on educating myself and working hard to make it in my chosen occupation, just so I can have the privilege of moving up a tax bracket.

[Paul Stevens]

I don't have a major problem with the well to do paying more. (There are limits though) My problem comes when tax cuts come. The BS that comes out. You cannot give income tax cuts to those that do not pay income tax.
I am all for simplifying the tax code but I am not sure that a flat tax or national sales tax are good alternatives.

[Warren Dew]

Originally posted by Stan James:
[QB]Interesting. I'm a bit of a billionaire basher, so I guess that looks ok to me. How about you?

The top 1% is far from billionaire level. If you look at taxes as a percentage of real income, I bet it falls back down at that level - people like George Soros and Warren Buffett tend to keep their fortunes in holding companies, rather than under their own names, so they can take advantage of all the corporate tax breaks that has made corporate tax receipts so scrawny. I believe it's Warren Buffett who is on record as saying his percentage tax rate is only about the same as his secretary's.
So I guess I'm not too happy about it, because the real burden doesn't actually fall on the ultrawealthy, but on the upper middle class - say, maybe AGIs between $50k and $500k. The highest effective marginal tax rates are at around $100k on people who are having deductions and credits phased out - in that range, you can easily get a marginal tax rate above 85%.
Me, I'd rather see a straight percentage tax at a lower numerical level, but get rid of all the special deductions, including home mortage interest (and I own my home, so this is a biggie for me). Right now, the tax system just provides too much of a disincentive to work harder and earn more in the upper five digits to low six digits.

[Thomas Paul]

Originally posted by Jason Menard:
I'm not sure what kind of logic that is. The only fair tax system would be one where everybody paid an equal percentage of their income. Anything else is unjust.

Why? Why should a person making minimum wage pay the same tax rate as a person making $250,000 per year? How is it unjust that you charge a higher tax rate to the person who can actually afford to pay? Could you please explain what form of justice requires that we have a tax rate that a person making minimum wage has the food taken out of their mouth.
But this still doesn't answer my original question which is what percentage of their income do the rich actually pay in tax?
[ April 11, 2004: Message edited by: Thomas Paul ]

[Paul Stevens]

Originally posted by Thomas Paul:

But this still doesn't answer my original question which is what percentage of their income do the rich actually pay in tax?
[ April 11, 2004: Message edited by: Thomas Paul ]

Who cares? It is their money. This is where you lose me. They obviously pay there share so who cares.

[Paul Stevens]

Where does your state rank?

[Thomas Paul]

Originally posted by Paul Stevens:
They obviously pay there share so who cares.

Not so obvious to me. Suppose we had two taxpayers in America. One makes $1 and the other makes $100,000,000. We tax the person who makes $1 at 50% and the person who makes $100,000,000 at 1%. The person who makes $1 pays 50 cents in tax. The person who makes $100,000,000 pays $1,000,000 in tax. It would appear just by looking at the numbers that the wealthy were paying their fair share ($1,000,000 compared to 50 cents) but the poor person is paying a higher rate and in fact has lost half of all their income to tax. Is that justice in your opinion?

[Jeff Langr]

Income tax is unfair at all levels. The tax code is a ridiculously oppressive tool. In 1913, tax forms and instructions combined to make 4 total pages: http://winke.com/wts/wts./1913f1040.htm.
Read at your own risk:
http://www.strike-the-root.com/4/langr/langr3.html
I agree with Mr Paul that there should be special consideration for those living below the poverty line. Other than that, however, why should I pay a higher rate than someone earning, say, $50,000? "Because I can afford it" is an answer motivated by government greed. Or socialism.
Perhaps if the federal government hadn't significantly overstepped its constitutional bounds and grown to such obscene proportions, with waste in every possible corner, we wouldn't have such a huge tax burden to begin with. There wouldn't be so many of us whining about it.
-J-

[Thomas Paul]

Originally posted by Jeff Langr:
There wouldn't be so many of us whining about it.

I'm quite sure you would still be whining about it.

[Thomas Paul]

Originally posted by Jeff Langr:
Other than that, however, why should I pay a higher rate than someone earning, say, $50,000? "Because I can afford it" is an answer motivated by government greed. Or socialism.

I think because you can afford it is a perfectly good reason. I agree that a country built around pure socialism would be awful just as a country built around pure capitalism would be awful. But some socialism is not evil and throwing the word around as if it was a curse is just a discussion breaker.

[Jeff Langr]

Originally posted by Thomas Paul:
I'm quite sure you would still be whining about it.

Of course I would! I'm a curmudgeon, it's my job to complain.
-j-

[Bhau Mhatre]

I'm a curmudgeon, it's my job to complain.

Tax be upon the curmudgeonry!

[Paul Stevens]

Originally posted by Thomas Paul:

Not so obvious to me. Suppose we had two taxpayers in America. One makes $1 and the other makes $100,000,000. We tax the person who makes $1 at 50% and the person who makes $100,000,000 at 1%. The person who makes $1 pays 50 cents in tax. The person who makes $100,000,000 pays $1,000,000 in tax. It would appear just by looking at the numbers that the wealthy were paying their fair share ($1,000,000 compared to 50 cents) but the poor person is paying a higher rate and in fact has lost half of all their income to tax. Is that justice in your opinion?

Doesn't matter. That isn't how it works. I am not going to debate on your contrived version. Your example does not reflect reality.
We know that the person making 1 mil pays 30%-40% the person making less pays nothing and may even get money. Both cases are fine. But don't complain when a tax cut comes and the person who did not pay does not get a cut.
The point is still who cares if one person makes 1 mil and another makes 30,000.

[Jeff Langr]

Originally posted by Thomas Paul:
I think because you can afford it is a perfectly good reason. I agree that a country built around pure socialism would be awful just as a country built around pure capitalism would be awful. But some socialism is not evil and throwing the word around as if it was a curse is just a discussion breaker.

Greetings Thomas,
Note that I didn't throw it around as a curse in my posting (perhaps in my column I did). Nonetheless, I do view socialism as problematic, for many reasons. If you feel this negates my opinion, that's your prerogative. I believe instead that humans do a better job of taking care of one another through charity.
No "ism" works in groups larger than 1, so there's no such thing as a pure ism. I'm a bit more realistic than that. As I mentioned, I think it's fair that we take care of the people who truly need it--a smidgen of socialism, if you will. (So, perhaps I'm not as down on socialism as you paint me.) But once everyone is past that level, it is patently unfair to penalize people because they are more successful. Particularly since most of that extra tax money goes to waste or greed.
"Because I can afford it" is not a justifiable reason to take more from someone. Let's put it this way: I pay my supposed "debt" to society through taxation. Now consider someone who isn't working, period, and living off the government trough. With your reasoning, the government could justifiably insist that they pay their debt through indentured servitude. After all, they have the time on their hands and can certainly afford it.
Granted, that may be a stretch of an analogy, but my question is: where does it stop? Who should decide how much tax is too much, and how much is too little? Who should decide who makes too much money? Your philosophy promotes the spirit of pure socialism: "because I can afford it" suggests that the government should be able to take as much as they want, up to the point that I am just above the poverty level.
If poverty is a problem (it is), let's fix that problem so we don't have the need for so much taxation. The answer is not raising taxes, it's not a federal education program, it's not federal housing, it's not a federal "war on drugs." None of these things, which have all been tried, have put one dent in poverty. They've only wasted trillions of dollars. The answer is more locally funded and run programs, but primarily it's more emphasis on strong community. The answer is not a larger federal government.
-Jeff-

[fred rosenberger]

The commonly stated problem with a flat tax is that it cuts deeper into the pockets of those who earn less. yes, in terms of strict mathematics, everyone pays the same rate, but taking away 30% of 20,000 hurts a LOT more than taking away 30% of 20,000,000.
The commonly stated problem with variable tax rates (i always forget which is progressive and which is regressive) is that it seems unfair that if you earn more, you should pay a bigger chunk to the government.
So, here's my solution, for what it's worth (probably not much). Also, note that i'm just making up numbers, i'm not saying this is the exact numerical solution.
figure out some minimum amount poeple need to survive on. Note that this is NOT the same thing as the poverty line. for example, say it's $25,000.
my solution would be to not tax ANYTHING on that amount. then, EVERYTHING after that amount is a flat rate, say 10%.
you earn $25,001? ok, you owe a dime. you earned 3,000,000? lets see, 10% of 2,975,000 = $297,500. thanks - NEXT!!!
tax forms could be done on a post card. we'd eliminate a ton of beuracracy, life would be so much simpler.
i'm sure there's something wrong with my plan, and i'm sure somebody here will tell me what it is!!! ;-)

[Jeff Langr]

I'm sure someone will find a problem with the numbers Fred!
Does that number include enough to fund a big screen TV? Doesn't every American deserve a big screen TV?
Also, don't forget all the additional taxes that burden people of lower incomes. Utility taxes, property taxes, personal property taxes, taxes on gasoline, taxes on telephone lines, taxes on cigarettes, beer taxes, taxes on liquor (gotta love the idea of sin taxes, to further burden those who probably need to escape more), sales taxes, hotel taxes, vehicle registration fees, tourist taxes, federal excise taxes, refuse taxes, cable TV taxes, dog license fees, hunting license fees, marriage license fees, public school fees (above & beyond what your taxes pay for), road/bridge tolls, restaurant taxes, stadium taxes, environmental recovery fees, and so on.
All these taxes serve to whack the poorest people the most (although I understand that poor people can get out of some of them). Wait, I forgot the lottery--a virtual tax on the poor.
Can we get rid of all these too?
The problem is not that you can't come up with enough money using whatever scheme you might come up with. The problem is that the government spends too much.
-Jeff-

[Jeff Langr]

Originally posted by fred rosenberger:
i'm sure there's something wrong with my plan, and i'm sure somebody here will tell me what it is!!!

A flat tax will not occur without significant revolt. There are far too many vested interests in the tax code being the way it is: complex and unfair by definition. IRS employees, tax accountants, HR Block, Quicken, downtown fancy lunch restaurateurs, home builders, lawyers, congress, and many other groups will do anything in their power to keep the tax code oppressive. It's too threatening to their power and/or livelihood as a flat tax.
-Jeff-

[fred rosenberger]

I don't think it's fair to call the lottery a virtual tax on the poor - maybe on the uneducated. I play the lottery and enjoy it, knowing i will not win. i consider it my "license to dream" tax.

The problem is that the government spends too much.

That's a whole 'nother Oprah. how much the government spends has nothing to do with what a fair tax system is...

A flat tax will not occur without significant revolt.

so let the revolution begin!!! it has to start somewhere, right???

[Jeff Langr]

Originally posted by fred rosenberger:
you earn $25,001? ok, you owe a dime. you earned 3,000,000? lets see, 10% of 2,975,000 = $297,500. thanks - NEXT!!!

A dime? That is so unfair. Why not just raise the taxes on the rich? That guy making $25,002 should pay my dime.
I kid you not, I've heard pretty much this sentiment. There is so much anger and resentment in this society over people who make more money. A good friend of mine makes probably around $40,000. He insists that someone making $60,000 should pay a higher percentage of taxes than he. Of course, the guy making $30,000 feels the same about him, yet he thinks he pays more than enough.
Tax policies centered around jealousy and resentment are a bad idea.
The one good thing about a truly socialist, progressive tax is that the wealthy people who rail against "tax cuts for the rich," such as our presidential candidate himself, would no longer drive around in their limos, live in their multiple mansions, and pay people to pick up their groceries. They'd have to dwell with us lesser scumbags, and shop at WalMart like the rest of us.
-J-

[Thomas Paul]

Originally posted by Paul Stevens:
We know that the person making 1 mil pays 30%-40% the person making less pays nothing and may even get money. Both cases are fine. But don't complain when a tax cut comes and the person who did not pay does not get a cut.

That simply is not true. The poor person will pay a higher percentage of income in taxes because they are hit with SSN and Medicare which top out. They will also pay a higher percentage of their income in sales tax. Plus not all income of the wealthy is taxable while virtually every penny earned by the poor is taxable. So the question still remains, whar percentage of real income do the wealthy pay in taxes?

[Thomas Paul]

Particularly since most of that extra tax money goes to waste or greed.
Most? Can we cut the hyperbole? My experience is that government is hardly more wasteful than a typical corporation.
With your reasoning, the government could justifiably insist that they pay their debt through indentured servitude. After all, they have the time on their hands and can certainly afford it.
I guess you have never heard of workfare.
Who should decide how much tax is too much, and how much is too little? Who should decide who makes too much money?
The government of the people, by the people, and for the people.
If poverty is a problem (it is), let's fix that problem so we don't have the need for so much taxation.
Do you honestly think that most of your tax dollars are going to poverty?

[Thomas Paul]

Tax policies centered around jealousy and resentment are a bad idea.
So why are you promoting jealousy and resentment of those who are taxed at a lower rate?

[Jeff Langr]

Hi Fred,

Originally posted by fred rosenberger:
I don't think it's fair to call the lottery a virtual tax on the poor - maybe on the uneducated.

I'm not going to equate being poor with being uneducated. Certainly, the poor have a larger percentage of uneducated people. And there's no arguing that the lottery takes a larger toll on the poor. I don't believe the government belongs in the business of promoting or running gambling, in any case (particularly since it shuts out legitimate competition, thus establishing yet another government monopoly).

how much the government spends has nothing to do with what a fair tax system is

Technically, no. But if the federal government spent only on what the constitution said it was allowed to (Article I, Section 8; Amendment X), we would not likely be having this conversation, since you wouldn't necessarily need an income tax. (You can find expositions on how the federal government can be funded without income tax. In fact, gee, it was, up until 1913.)
The federal government has grown, in power, size, control, corruption, and greed, constantly since Lincoln (who started such evils as corporate welfare). You are correct: it will take a revolt to turn it in the other direction.
-Jeff-

[Jeff Langr]

Originally posted by Thomas Paul:
So why are you promoting jealousy and resentment of those who are taxed at a lower rate?

Nice spin. I'm not. I'm promoting the idea that the tax code is unfair at all levels.
-J-

[Jeff Langr]

Originally posted by Thomas Paul:
Most? Can we cut the hyperbole? My experience is that government is hardly more wasteful than a typical corporation.

That's the corporation's business. What the government does with my money is my business. I'm talking about entire needless programs and ventures all around the world. And "hardly more wasteful" counts as reverse hyperbole.

I guess you have never heard of workfare.

It's abhorrent. But then again, it's also abhorrent for people to suck up money that they don't deserve.

The government of the people, by the people, and for the people.

But mostly, the politicians in power.

Do you honestly think that most of your tax dollars are going to poverty?

Of course not. Where'd you get that idea?
-J-
[ April 12, 2004: Message edited by: Jeff Langr ]

[Paul Stevens]

Originally posted by Thomas Paul:
That simply is not true. The poor person will pay a higher percentage of income in taxes because they are hit with SSN and Medicare which top out. They will also pay a higher percentage of their income in sales tax. Plus not all income of the wealthy is taxable while virtually every penny earned by the poor is taxable. So the question still remains, whar percentage of real income do the wealthy pay in taxes?

Nice try. But all you have to do is look at the chart and you will see. Don't try changing the debate and adding in state taxes this is about federal taxes. Both SSN and Medicare as well as the federal gas and any other federal tax are in the chart. The bottom 80% pay 31% of all (Indiviual) federal taxes. That leaves 69% for the top 20% to pay.
I have already stated I don't have a problem with that. You however don't feel that the top 20% pay enough.

Plus not all income of the wealthy is taxable while virtually every penny earned by the poor is taxable.
Care to provide proof of this statement? At the federal level it is absolutely false. You are just wrong. The bottom 50% (< 27,682 as of 2000 data) of wage earners pay less than 4% of federal income tax. Exactly what INCOME is not taxable at the federal level?
I am not going to debate state's taxation. You happen to be in a heavy tax state. Your choice.
Your arguments don't hold water. The "rich" are paying their share. What number do you think they should pay?

[frank davis]

Originally posted by Thomas Paul:
Plus not all income of the wealthy is taxable while virtually every penny earned by the poor is taxable.

Lots of poor pay ZERO in federal taxes.

[frank davis]

Originally posted by Paul Stevens:

The "rich" are paying their share.

No, the rich are paying their share AND the most of the share of others.

[Thomas Paul]

Nice try. But all you have to do is look at the chart and you will see. Don't try changing the debate and adding in state taxes this is about federal taxes. Both SSN and Medicare as well as the federal gas and any other federal tax are in the chart. The bottom 80% pay 31% of all (Indiviual) federal taxes. That leaves 69% for the top 20% to pay.
You aren't reading what I write are you? As I pointed out above, the poor could pay a higher percentage of their income in taxes even if they pay substantially less than the rich. What I want to know is wht percentage of income do the rich actually pay. You say that it is unfair that the rich are taxed at a higher rate but that only applies if the rich actually are paying a higher rate!
I have already stated I don't have a problem with that. You however don't feel that the top 20% pay enough.
If you don't have a problem with their being a different rate for the rich and the poor then it is just a discussion of what is the right rate. That would be oif more interest to an economist than it would to me.

Plus not all income of the wealthy is taxable while virtually every penny earned by the poor is taxable.
There are plenty of different ways that the wealthy can accrue income and not pay tax, pay lower taxes, or defer taxes. Even at my tax rate I am aware of that!
I am not going to debate state's taxation. You happen to be in a heavy tax state. Your choice.
You get what you pay for.
Your arguments don't hold water. The "rich" are paying their share.
What is "their share" and do you have proof that they are other than your opinion that 20% is the right number?

[Thomas Paul]

Originally posted by herb slocomb:
Lots of poor pay ZERO in federal taxes.

If you mean by "poor" those earning no income at all then you are right. Everyone else pays some federal taxes. The earned income tax credit is simply a reimbursement of some SSN and Medicare taxes that the working poor make. Even if you buy goods with no sales tax, those goods have higher prices to pay federal rail subsidies and gas taxes.
[ April 12, 2004: Message edited by: Thomas Paul ]

[Paul Stevens]

Originally posted by Thomas Paul:
If you don't have a problem with their being a different rate for the rich and the poor then it is just a discussion of what is the right rate. That would be of more interest to an economist than it would to me.

This is the only thing we agree on.
I posted in a different thread at one time a discussion with Al Sharpton. He felt the top 1% should only pay 15% of federal income tax. The number is actually close to 40%.
You say you don't have an interest in the correct number. Yet you are willing to let politicians spin the numbers. I don't care that Bill Gates is worth billions or Warren Buffet. I don't care if a tax cut comes and they get more dollar wise than I do. They pay way more as well.
You keep bringing state taxes into this. You commented that you get what you pay for. Mine back at you is you pay for what you get as well. Don't complain to me that poor in New York have to pay for the opera, orchestra and the museums by higher state and local taxes.
SSN and Medicare are "lock boxes" remember. There is a magical account sitting there with your name on it and the money you pay no sites there until you use it. So you can't use them in your equations. That said, I feel that the cap should be removed from them. So we may have common ground there as well.

[Thomas Paul]

You keep bringing state taxes into this. You commented that you get what you pay for.
When I did I bring state taxes into it? I am quite happy to pay for the services I receive from my state. I just wish the federal government wouldn't take so much tax money from NY and send it to all the other states.
SSN and Medicare are "lock boxes" remember.
Do I look at Al Gore? I'm not a liberal so I don't pretend that SSN is anything other than a tax. The problem is that it is a tax that hits the poor harder than the wealthy.
So we may have common ground there as well.
I think we may have a lot more common ground than you think.

[Thomas Paul]

You say you don't have an interest in the correct number. Yet you are willing to let politicians spin the numbers.
It seems to me that it was some guy named Paul Stevens who started this thread by spinning numbers!

[Jeff Langr]

Originally posted by Paul Stevens:
SSN and Medicare are "lock boxes" remember. There is a magical account sitting there with your name on it and the money you pay no sites there until you use it. ... That said, I feel that the cap should be removed from them.

They aren't lockboxes, they're more like cookie jars that greedy politicians have raided numerous times. My cookie jars have the words "insolvency forthcoming" on them.
I disagree that there should be no cap on social security. In the words of the president who resided over a 12-year, horrible depression (imagine how that would be received today), "...we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age."
Anyone earning over the current cap ($87,000) shouldn't need this additional "protection." Why make sensible people, who can get far better returns by making their own investments, sink more money down a rathole?
-j-

[Jeff Langr]

Originally posted by Thomas Paul:
Your arguments don't hold water. The "rich" are paying their share.
What is "their share" and do you have proof that they are other than your opinion that 20% is the right number?

Good point. There is no way to prove any number is right. Even if everyone but the poor were taxed at 99.9%, someone would complain that taxes weren't high enough "on the rich."
The "right" number is either 0% or 100%. Those are the only ones that carry logically consistent arguments.
-J-

[Jeff Langr]

Originally posted by Thomas Paul:
I'm not a liberal so I don't pretend that SSN is anything other than a tax. The problem is that it is a tax that hits the poor harder than the wealthy.

So just what are you? Anti-war, anti-Bush, pro-Passion, pro-Jesus, anti-XP, pro-progressive tax. I think I got these right, based on my recollection of Mr Paul postings. My apologies if I got any of these incorrect. What is the thread of consistency?
Me, I believe in respect for others, no use of force, minimal waste, and capitalism. The income tax is a use of force.
I agree completely that taxes like social security ("SSN??"), and the dozens I mentioned earlier, are unfair to the poor. That's my basic point: all systems of taxation are unfair. And most of them are unnecessary.
-J-