Do you have any evidence that anybody does? The CBO gives us data on the effective federal tax rates on various people here and the highest effective rate (that for the top 1%) is 33%. Note that this also includes 6.4% in corporate taxes which are assigned on the basis of stockholding, which is probably an oversimplified assumption since some of these taxes are probably passed on to consumers. (Conservatives often like to claim all of them are when they argue for lowering corporate taxes, although this is probably unrealistic.)
Of course, this 33% doesn’t include state and local taxes but I can’t imagine they add enough to get the top 1% close to the 50% mark…In fact, Citizens for Tax Justice shows the top 1% paying state and local taxes at an effective rate of 8% on average over the nation. So, that gets you up to 41% total, and again, that is with over 6% coming from the assignment of the corporate tax to shareholders.
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Hi I’m a Left/Right +0.2 Libertarian/Authoritarian -4.26 Agree
Let’s take someone making $200,000 in NYC
New York City 3.90% (4.5% over $100,000 + 3.53% under $100,000)
NY State 7.00% (7.5% over $100,000 + 6.453% under $100,000)
Federal 28.00%
Social Security 6.20%
FICA 1.45%
TOTAL Income Tax: 46.55%
Now let’s add property taxes and sales tax
Sales tax NYC 8.625% let’s say one uses only 12% on buying things and dining out, and such. That adds 1% to your total tax liability (I’ll include federal taxes on cell phones, and regular phones in here).
NYC property tax rate (actually low for the region) is $8.29/$1,000 therefore a $400,000.00 apartment (this is a really cheap apt in NYC) would add 1.66% taxes to the mix. A more reallistic $750,000.00 apartment would add 3.10% to the tax liability.
Therefore someone making $200,000.00 in New York City (a lot of money, but not exactly Mr. Moneybags) pays a little under or over 50% taxes, anyone making more than that definitely pays more than 50% in taxes.
You’re wrong. And Bill O’Reilly ain’t known for his accuracy with facts. The CBO calculations include payroll taxes and excise taxes (which I assume the federal gas taxes full under). Furthermore, I linked to the CTJ study that looks at state and local taxes. Go back and read my post again and look at the cites I linked to.
Thanks, pervert. The only things I would add is that I did link to the CTJ cite that calculates nationwide that the top 1% pay state and local taxes at an effective rate of 8%. Also, I would re-emphasize that the 33% number for the effective federal tax rate is before the Bush tax cuts (which will apparently lower it to about 28%) and includes that way of accounting for corporate taxes by assigning them to shareholders.
Such a thread would be so boring and lifeless that it’s hard to contemplate!
Seriously though, my point in linking to CTJ here was just to get the local part of the total effective tax on the top 1%. I agree that taking a more holistic approach to the tax system might be good. The devil is in the details. It is easy to invent flat tax systems using a high deduction as you point out in order to keep it progressive in the sense that folks at the bottom don’t end up paying more than they do now. I think it is harder to invent a flat tax such that there is not a net transfer of money from the middle class to the rich relative to the tax code now.
Yes, but these numbers are deceiving because data on what share of the taxes are paid by certain groups depends on what share of the income is earned by the groups. So, the fact that the top 1% pay 26% of the taxes (and I’ll trust you on this number for now…I’m not sure if it is ALL taxes or all FEDERAL taxes) is because they have a huge share of the income (something like 20%). So, what you are really mainly talking about is how much inequality there is in our society. The progressive nature of the tax code then makes the share of taxes somewhat higher than the share of income for the top 1% but it is a rather small effect in determining the fact that the top 1% pay way more than 1% of the taxes. A similar story applies to the amount that the top 50% pay although it is true that there is more progressivity near the bottom end of the scale than the top. (I.e., the difference in effective tax rate of a lower class vs. a middle class person is more dramatic than that between a middle class person and upper class person.)
(1) You are looking at marginal tax rates, not the total tax divided by the total income. Because taxes are graduated and there are deductions and stuff, it is not correct to say someone in the 28% tax bracket pays 28% of his income in tax. He pays 28% on the last dollar that he earns but he pays less on some…often most…of the dollars.
(2) The social security tax only goes up to incomes of ~$87,000.
(3) You are assuming that the person’s income is all income subject to tax at the regular rates, rather than some capital gains income that has been subject to lower tax rates (e.g., 20%) for a number of years, and capital gains and dividend income that is only subject to 15% tax rate (?) under the latest Bush tax cuts.
In short, this kind of back-of-the-envelope calculation is how people come up with claims that they are laying X% of their income in taxes. If they actually looked at the percentage they were paying, they would find that it doesn’t agree with these naive calculations for the reasons that I explain.
I’d fear that the sun would not rise in the east tomorrow if we didn’t have the link.
It’s not all that hard to invent such a tax system. You just jack up the deductible and jack up the tax rate until the numbers work out. And if it was really, really, really, necessary (may the libertarian gods forgive me), put in 2 brackets.
Truth be told, I wouldn’t be all that upset with the current federal income tax rates if we just got rid of all the deductions and loopholes (lowering the overall rates to keep it revenue nuetral). Index the sucker to inflation, and then don’t tinker with it every freakin’ year for some political purpose or other. People and businesses could make plans without having to take the tax code, and potential future changes to the code, into consideration every time they did something.
Jshore, I over simplified in my explanation, and I agree that this could cause you to question the numbers. Therefore I an attaching a calculation of a person who makes $200,000 in NYC and does not have dependents or a mortgage, or any other deduction.
$200,000.00 (No deductions except for City and State Taxes)
$49,707.00 Federal
$14,438.00 State
$8,181.00 Local
$5,394.00 Social Security
$2,900.00 FICA
$80,620.00
40.3100%
Granted it is only 40% and not 50%, but I was also generous in some of my other numbers. $4 to 5K a year in property taxes (yes even when you rent you pay those, as the landlord just passes this cost to you) and 3K of sales/use/vice/federal excise/etc tax a year are not unreasonable for someone in this bracket. Therefore the total tax liability of someone like this is in the mid-40% range, and I find that excessive. YMMV.
Absolutely. As I mentioned you did. I was only trying to suggest that this number is an average and probably varies some. It’s probably not accurate to simply add tghe 8% average from CTJ to the 33% figure for CBO.
Although, it is probably not accurate to simply double the 8% figure either.
I’m not so sure anymore. The more I think about these things, the more I’m inclined to support some form of VAT tax.
If you only tax those transactions which take advantage of a time difference in the transfer of goods (credit card purchases, purchase order transactions and so forth) I think you would limit the tax to those above the lowest levels of society. You could limit the tax to transactions of a certain size if necessary. Personally, I prefer the voluntary form, but the systematic changes necessary to implement it are herculean.
Unfortunately, as John Mace mentioned it may actually be more important to implement some guarantees that the tax would not be changed every election cycle. And of course we’d need to reimplement the PAYGO system and expand it to cover states and local governments.
That’s still an effective federal tax rate of 25%, which seems way high to me. I see you assume no deductions, which explains it. I think this proves that you can pay 40% in taxes if you try really, really hard, in the most taxed place in America.
Some things we can deduce from the example. This guy’s fairly expensive house is paid off (no mortgage deduction). He doesn’t donate to charity. He lives by himself. He is not self-employed. He does not have an IRA or 401K. No investments.
Definitely. Though I don’t always (or even usually) agree with you, its obviously that you know your stuff and you have a lot of conviction.
My numbers are definitely rough…take them with a huge grain of salt…and even as rough as they are, they don’t take into account at all the new tax cuts which will probably significantly change the percentages.
I understand your point that the rich pay such a disproportionate share of the taxes because they also enjoy a disproportionate share of the income (paying roughly 26% of the taxes while enjoying roughly 20% of the income). God knows that percentage of total income the top 7% of earners who pay over 50% of the taxes get…60% of total income?
At any rate, my point was to give some context to the arguement that the rich don’t pay taxes, or don’t pay enough taxes. Perhaps they do, perhaps they don’t…the issue is too complex to be broken down to a simple question from the OP: “The rich are too highly taxed”. Thats kind of why I said I couldn’t really answer the question without a ton of qualifiers. In the end, I still say that we are ALL taxed too much because the government is simply too large and bloated (more so now under Bush in fact, which to me is ironic).
I suppose, looking at it your way (I assume I’m looking at it your way here), a poor man who makes say $1000 and pays a tax of 10% (just an example) will have only $900 in his pocket afterwards. While a rich man who makes a million dollars and pays a tax of 30% will have $700,000, so that 10% of a poor mans money is a lot more hard hitting to the poor man than that 30% of a rich mans. And certainly, the rich man, paying $300,000 is putting in a hell of a lot bigger percentage than that $100 from the poor man, while it also effects him less…relatively speaking.
And if the rich man, through investments or other money making vehicles doubles his money the next year and makes $2 million, paying the same tax on it brings him home $1.4 million…an increase of $700,000 per year, while our poor man, doubling his income through a raise in salary perhaps, but paying the same percentage, gets $1800 take home per year…an increase of $900. From an absolute perspective, they both doubled their salaries. I realize btw that this is overly simplistic, and in reality the rich man is far more likely to double his income than the poor man is.
However, in relative terms its obvious that the rich man is a hell of a lot richer than the poor man is, using this simplistic example. But is this a problem? To me, no…its not. Society benifits a hell of a lot by that rich man doubling his income (if nothing else, society is $300k richer for it), even if the gap between the rich and poor widened in relative terms. I can see how others would disagree with this, of course.
But how do you judge if either is paying too much, not enough, or just right? And from what taxation vehicle? State? Federal? Sales? Property? Luxury? All of them factor into the equation in different ways depending on your relative income. What SHOULD our tax system be?
Should it be ‘fair’ in respect to the relative hardship it imposes on some arbitrary scale from poor to rich? Skimming through your CTJ cite, this seems to be what they are getting at.
How do you factor in the possible benifits to society that stems from those relative amounts of income after taxation? Certainly with his remaining $900 (or even $1800), the poor man will pay his rent, perhaps purchase some entertainment or small luxuries, and buy essentials like food, gas and electricity, etc. But what will that rich man do with his $700,000 (or even more so, that $1.4 million)? Or does this not factor in?
Is it a good thing to let that rich man have that additional money to enable him to either create new wealth or inject fresh capital back into the systems through his purchase of goods and services? Or should we tax him so that the relative hardship of the taxation equals that of the poor man on some sliding scale? Whats ‘fair’ and whats ‘good for society’?
Say we determine that to be an equal tax burden that the rich man should pay 90% of his income to equal that of the 10% the poor man pays (I know this is an exaggeration). Certainly society will get more money in the short term this way…but it will also most likely kill the goose that lays the golden egg by doing such things. Also, it will stifle investement and prevent new wealth from being generated, and in the long run will actually generate less in the form of taxes for society.
I know that most here don’t feel that it does (to say the least), or agree that the rich man, with his $700,000 will most likely invest a good percentage of that money to create new wealth (both for himself and for ‘society’ potentially), give some of it away to charities (admittedly as a tax rightoff so he keeps is taxable income down), spend some of it on luxury goods and services (providing someone, somewhere with a job and injecting fluid capital into the system as a whole). They only see the widening gap between the rich and the poor (from my simple example of both doubling their income to $1800/$1.4million respectively).
No, its not that bad. People don’t pay under their share of the income until you get down into the lower couple quintiles if I recall correctly.
Personally, I think the whole rich poor “gap” misses the point altogether. The notion suffers from thinking of the economy as a zero sum game. It also tends to treat economic activity as some sort of social resource. See the OP for a good example of this. Kind of like there was this huge pile of money out there somewhere. All we have to do is figure out how to get at it (who to take it from) and how to divide it up (who to give it to).
You raise a good point- I admit that this is a weak argument. This is one of the weakest arguments of all time. But to evaluate anything objectively you need a performance measure. Exactly how does one know if the rich are taxed too high? What would be the evidence that such a thing is true? The opinions of those taxed isn’t a reliable yardstick, I really don’t know of anyone who wouldn’t care to keep more of his money. So if there are better measurements than emigration, as in the Danes moving to London, let’s have them. The only other measurement I can conceive is whether the government is out of debt and running large surpluses- not the case at this time.
The Republicans have said for years they want to lower taxes and that taxes are still too high. But they’ve had control of the Congress and the White House for three years- exactly why aren’t taxes at the rates that they think they should be?
Of course my opinion of John Ashcroft and the Patriot Act is pretty low. But that’s another topic and next time it’s raised I’ll have more to say.
Well, that **WAS ** the way it worked in California. Are you sure you understand Prop 13 and the pre-prop 13 situation in CA? There’s nothing magic about it. When your house was re-assessed, it was taxed at the same rate on the new assessed value. Infaltion and a booming real estate market in the 70s created situations where a person’s tax bill could literally double in one year.
I have no idea what you’re talking about here, and so can’t even begin to comment.
I disagree. If I thought it was a zero sum game, I don’t see why we would want to tolerate nearly the sort of income disparities we have…Or even had circa 1980 before the gap widened considerably.
I accept that it is not a zero-sum game. And, I except that there will be fairly large inequalities of income and wealth. But, I also don’t buy into the logic that we have to structure society so that those in the top 1% see their after-tax incomes go up in real terms by 200% between 1979 and 2000 while those families at the median see only an increase of 15% in real terms (and some of that gain may have been lost in the last few years…and I believe it was basically due to working more hours and not any increase in real wages). The claim of those on the right seems to be that if we don’t structure our society to allow, and indeed encourage, huge and ever-growing inequality then everyone will suffer. That is, in order for that median group to get their 15% growth in real terms, we have to have the top 1% seeing 200% growth in real terms. I just don’t buy this.
Oh, yeah, in line with the premise of the thread, I ought to say that I check “Strongly disagree” and my coordinates are (-7.25,-6.05). No real surprise there.
By the way, here is a link for some of the data on real incomes that I threw out in my last post.
I agree that these questions are not easy ones to answer…Obviously, there is a balance that must be maintained between various different factors. For example, I think that the “equal burden” criterion is one of the justifications for having a progressive tax system However, true application of the “equal burden” criterion (besides being impossible to figure out in any rigorous way) would result, IMHO, in an almost-confiscatory tax scale at the top and clearly at that extreme it would not be good for providing the incentives for people to work to create that wealth.
On the other hand, we are in an opposite extreme where the inequalities in wealth in our society are creating or excerbating lots of social ills in our society. Furthermore, as the authors of “The Winner Take All Society” argue, things can get quite inefficient when people are competing in “winner-take-all” markets where huge rewards go to the top few. So, in fact, we may be beyond that point where there is a trade-off between efficiency and equality to a point where there are ways we could get more equality and have more efficiency at the same time. At any rate, even if this were not the case, we are likely in a situation where we could get quite a bit more equality for quite a small hit in efficiency…to a point where almost everyone would be better off while only a few near the top would be worse off.
To what extent these changes can be brought about through the tax code and to what extent other remedies are needed is unclear. But, certainly we should not be moving in the direction we have been since 2001…of lowering taxes on the rich more than on everyone else (and causing budget deficits that will eventually have to be paid back and fiscal problems at the state and local level that result in higher taxes and higher fees for things such as college tuition, mainly hitting the lower and middle class).
But you see this still misses the point altogether. We don’t “structure society” for economic parity at all. society is structured for more or less freedom. Who are you, (for that matter who am I) to decide what a correct wealth gap is. It’s like making an argument that the nutrition gap between those who eat right and those who pig out is too great and then proposing laws to transfer nutrition from some of the population to other portions of it.
Its very easy to talk of “efficient allocation” of resources, but first you have to accept the premise that resources should be allocated.
We are part of We The People. You know, as in those who government is supposed to be run by and for? Of course we have the right to determine a proper wealth gap is since we have the right to decide what our rights are in the first place.
I would say it’s only necessary to understand that resources ARE allocated. There is nothing “natural” about who owns what. The property laws are developed by people. Enforcing them, like most things a government does, affects people’s lives. Ignoring those effects would be irresponsible. It would abrogate the government’s responsiblity to the general welfare.
