For us urban economists, the Census Bureau is our one-stop shop for data
Still, I’d argue that you could maybe get away with “approximately 70% of households are getting 25% of the tax cut.” But as I mentioned in another thread, I have little faith in estimates of the “cost” of a tax cut. I think it’s more useful to look at exactly what the cuts in rates are (or the increases in tax exemptions or tax credits) and what effect these changes will have on the relevant populace. The change in federal tax revenue certainly isn’t irrelevant, but we’ve always gotta remember what we’re doing is forecasting years into the future. Meteorologists have infinitely better tools for forecasting than economists do, and they only forecast five days into the future!
Personally, I believe that we’ll see marginally lower tax revenues if the president’s proposal goes through, similar to what we saw in 1982 (or 83? I can’t remember off-hand and I don’t have the data handy). But we’ve gotta remember that tax revenues are always increasing, given a constant tax rate, due if only to GDP growth and inflation.
If you look back at the CTJ link you cited, it is 40% who earn between $29,000 and $77,000. However, a relevant point is another 40% of households earn below $29,000…so those under $77,000 account for 80% of the folks (which is why the top quintile is all those above $77,000…yea!). So, what we have as I noted above is the bottom 80% getting a 22.5% share of the monies from the tax cut and the top 20% getting a 77.5% share.
Note added to Philster in preview: As a fellow “rich” guy, I feel your pain…Not!
Oh goodness, a number I pulled out of my ass (estimating that 90% of households make less than $77K) was incorrect. In reality, it’s roughly 80% of households that make less than $77K, and they will receive an astounding 20% of the G.W. Bush tax scheme. That George, he’s a real friend of the working man.
Half-empty, half-full. Depends on your perspective, don’t it?
Which is why, in a progressive tax structure, he pays a far lower percentage of his income in federal taxes than I do. And in reality, a fast food worker probably pays little or no federal income taxes at all. That’s because we’ve made the well-founded policy decision that people in the Fast Food income bracket can’t afford to pay much or anything in income taxes, while high rollers such as myself are financially capable of sustaining higher rates of taxation.
Not really. I admit to being nitpicky here, but I think it’s important to be clear about what a progressive tax structure actually does and doesn’t do.
What it very clearly does not do is make distinctions based on “affordability” of taxes.
It’s important to distiunguish between people and households. Some households are a single person. Some include two working spouses plus working children. The bigger the household, the greater the income, on average. In particular, households earning < $75,000 tend to be smaller than households earning > $75,000.
So, if 77% of households earn < $75,000, then considerably less than 77% of people live in households with total earning < $75,000.
The reason why it’s an important distinction Minty is because the fastest growing demographic right now are retirees.
Because of the tax-advantages of home sales, and IRA rollovers, the advent of affordable and sophisticated financial planning, and the growing sophistication of people in these matters, there is a nice big growing chunk of the populace that can be categorized as “low income wealthy.”
The taxation of Social security, real estate, managing appreciated assets, ownership of annuities and charitable trusts and municiple bonds, etc, etc, allow a good chunk of the populace to shelter most of their income so that they are in the 15% tax-bracket, though they have more money than God, and make more than Croesus.
It wasn’t when I wrote that. In fact, the 10% bracket was created for 2003, though it’s purportedly retroactive to 2001.
Yes, and by reducing the bracket, my hypotehtical taxpayer will pay even less in federal taxes. This is a good thing, and is exactly what I set out to do. What’s your beef?
Note also that by reducing the first bracket, you reduce the effective taxation rate on taxpayers in higher brackets as well, as it drops the rate on everybody’s first chunk of income. Fast Food Guy won’t benefit a whole hell of a lot since he’s already paying little or nothing in federal income taxes, but there are a whole lot of households that are trying to raise families on $40-50,000 a year. If, as I proposed, you drop the marginal rate on their first $46,700 a year from 15% to 7.5%, you’ve substantially reduced that family’s tax burden. This too is a good thing.
Again, the 10% bracket did not exist when I was writing.
Don’t be ridiculous. Even for 2003, the 27% bracket applies to income (assuming married and filing jointly) between $46,700 and $112,850. Indeed, the U.S. Census shows that mean household income in 2001 was roughly $58,000, while median household income was $42,228. Thus, the 27% bracket applies to a whole hell of a lot of middle income earners.
I’m certainly not opposed to cutting taxes all the way up to the top of that 27% bracket; what I’m oppposed to is that Bush’s tax cuts–income taxes, estate taxes, dividends, you name it–are all so heavily skewed towards the very top income levels.
Where’s the disconnect here? Income in the Fast Food bracket is taxed at lower rates than income in the Hot Rockin’ Lawyer bracket. You would suggest this is for some reason other than that I am better capable of paying taxes than Fast Food Guy?
I’m perfectly aware of the distinction between households and persons, which is why I used “households” rather than “persons.” The fact of the matter is, it’s difficult to properly count the income of all persons in the United States and assign what income is relevant to whom. Then, to make any sense of the numbers, you have to figure out some way of normalizing the figures. After all, a one person household making $40,000 is significantly better off than a five person household making $50,000. The Census Bureau skips the whole convoluted mess and does not estimate household income by size of household, at least not anywhere in Summary File 3 of the 2000 Census. Urban economists, demographic researchers, and so forth typically either ignore it and deal with household income statistics by themselves, or try to make weighted guesstimates for the relevant income bracket. I prefer the former method. Data regarding household income by age of householder is available, however, which is particularly relevant to me because I prepare tons of market studies for proposed senior housing, both low-income and market rate.
Certainly, less than 77% of people in the U.S. are in households earning less than $75,000. The fact that larger households (read, greater than one person) can potentially have two or more income sources alone makes this an obvious fact. Just how much significantly less this is, well, that’s hard to estimate from Census Bureau figures alone, and I’m loathe to use other data sources in conjunction with the census. Maybe it’s more like 50 or 60% of persons are in households earning less than $75,000, I dunno. We’ve gotta remember that although the tendency is for higher income households to have more members, there are plenty of low-income families out there too. As I said earlier in this post, my preferred method is to just skip the whole sordid mess and only speak in terms of households, rather than persons. But if you’ve got a data source as good as the Census Bureau that can tell us just how many people were in households of given income brackets, I’d love to hear it!
Yes, but seeing as you reposted it without comment when it was no longer correct, I thought that pointing out the innacuracy was valid.
Well, here’s the beef. If you play around with hypothetical taxpayers in some of the tools at yahoo taxes, or the turbotax website, or if you look at or prepare a lot of returns, you’ll realize that this isn’t really true.
The true working poor may in fact be in a 10% tax bracket on a Federal basis. However, if you actually do their taxes you’ll find that they don’t pay anywhere near 10%. In fact, it is safe to say that they pay token taxes if any at all from a Federal standpoint. Which is as it should be, I think.
So, I would argue that lowering that tax bracket has no real effect on the taxes paid by the working poor. What it does is giveeverybody else but the working poor a break on those first dollars earned.
The tax break you propose doesn’t help the working poor. They are not unfairly burdened by Federal taxes. What kills them are the mandatory payroll deductions for things like SS, Medicare, unemployment et al for which crappy programs they pay a disproportionate and onerous percentage of their income. While well-intentioned, your tax break doesn’t address the issue you would like it to.
While I have no problem with this, a family of four on 50k isn’t doing bad. Assuming reasonable deductions they too are paying very little in taxes. I’m all for tax relief but I would submit that in this area the taxes are pretty fair and reasonable.
Again, this is cool with me. I thought the idea was to help out the working poor though.
What it seems to me is that the Bush tax cuts don’t do anything at all to help the working poor. This is not unusual because unless you’re going to adjust the payroll programs and entitlements which are the third rail of politics, there’s not much that can be done in terms of tax relief other than things like the $300-$600 give back.
The dividend tax cut to me is a very good idea. I think we’re the only country that taxes dividends in this fashion, so repealing it is good for domestic investment and is also an incentive for more reasonable and sustainable valuation methods for stocks. There’s all kinds of good reasons why it’s excellent for the economomy and the capital markets, and it even addresses accounting standards. You can’t fake a dividend.
I support the estate tax change. The way estate tax laws are right now, it’s relatively easy to avoid most estate taxes altogether with good planning. Who gets caught are those who fail to plan, and fewer people are doing so.
Repealing the estate tax also repeals the free step up at death increase in cost basis that beneficiaries recieve on appreciated assets.
Take that away, and there is no incentive to hoard appreciated assets any more. Without that incentive people are free to diversify away the risk of these concentrated assets which is a good thing. As they do so, that creates tax revenue.
Whether or not you are for higher taxes for the wealthy I think these too repeals are good, and present a healthier and more competitive and logical system of taxation that benefits the taxpayers and incents them to behave sensibly.
I personally wouldn’t mind a higher top tax bracket as a trade-off for these two good things, because they are good.
The two areas that I feel most need to be addressed within our tax structure is the system of institutionalized breaks that allow for the “low income wealthy” phenomenom which is growing in my opinion, and the onerous burden of payroll taxes upon the working poor.
While the title of this thread may include the words “working poor,” please note that it’s not my thread, nor was “working poor” the primary focus of my off-the-cuff tax break. I’m aware that the working poor (however you define that amorphous chunk of people) pay very little in federal income taxes. And while I would reduce the amount they pay even further in any tax cut, as you should be able to see from the fact that my pan cuts rates all the way up through the 27% bracket, the bulk of my cuts fall squarely on the middle class, who get a relative pittance under the Bush plan.
As for the “low income wealthy,” sorry, I don’t really care when it comes to income tax, which is, after all, a tax on income. If I win $50 million in the state lottery next month, I will be quite wealthy, even after paying off all the taxes. I will also immediately retire, and will never earn an income again. (Bear with me, assume I’m going to keep all that cash in a heavily-guarded, non-interest bearing mattress.) No income means no income tax. The solution to your perceived problem is a wealth tax, which is another kettle of fish entirely. Very Bolshevist.
Jackmanii, allow me to repeat myself, so that you may pay attention to the actual point: Roughly 80% of households make less than $77K, and they will receive an astounding 20% of the G.W. Bush tax scheme. Do you have any comments on that fact?
You jumped on the tax plan as not helping the poor, but as you concede the lowest bracket was reduced by 50%. The $300 give back also primarily benefitted low-income households and tax-payers.
You are looking at this thing through “I hate Bush and Republican” goggles and seeing a skewed image through your ideological filters.
Take off the blinders and free your mind.
Bush has made tax cuts that help the poor. He is making tax cuts that help the wealthy. The middle class are given a smaller break, or left alone for the most part.
That’s the blinderless reality.
Not at all. I’m talking about the people who net large amounts of income yet have an agi that places them in low tax brackets, because of tax loopholes.
I do. It sounds almost exactly proportionally right, as roughly 20% of the population pays 80% of the taxes.
I already have commented on that aspect, something you may have missed in your righteous outrage.
First of all, “the actual point” of this thread was a government move to demand extra documentation from some applicants for the earned income tax credit, i.e. the prospect of added red tape for lower income taxpayers in the face of a relative tax cut windfall for the wealthy. The discussion then moved on to the Bush tax cut itself, pro and con, and I raised the point that it would be wise to critique the plan without resorting to inaccurate jargon. At which point you leaped in with your amazing out-of-the-ass trick. After seeing those figures refuted, a lesser mortal might have gracefully acknowledged his error, but I see you are above all that. :rolleyes:
I previously said “There are numerous logical reasons for opposing the plan, including the way in which the windfall is shared and the fact that we can’t remotely afford it.”
Instead of obsessing over the mere fact of the preponderance of the cut going to the higher income brackets (something Scylla et al can easily counter by arguing that those who pay the most taxes should get the biggest tax cut), I would note the points that jshore raised earlier, and point out further that with less money going to the states, there will be a disproportionate impact on those with comparatively lower incomes due to program cuts at the state level. In arguing that we can’t afford these big tax cuts, it should also be noted that with a massive hike in the federal deficit and need to service all that debt, there’s less money for a lot of worthwhile programs, many of which “the rich” can do without a lot more easily than the “not-rich”.
So there you go. If I have offended you by insufficiently hewing to the orthodox anti-Bush line, I humbly apologize.
No. They may pay roughly 80% of the federal income tax but they don’t pay 80% of all taxes.
If you take everything off the table except the most progressive taxes in the nation (federal income tax and gift and estate tax) then I agree that it is hard to come up with a very progressive tax cut (although by cutting, say, only the bottom rate or two, you can come up with one that is a lot more progressive than the one Bush has proposed…at least for all of those folks who are not so poor that they already pay some reasonable amount of income tax).
But, I don’t think we should start by saying that we want to cut tax burdens by only cutting the most progressive forms of taxation that we have.
One thing I am glad to hear you say is that you would be willing to accept a higher top income tax rate in return for a cut in the dividends tax. As I recall, I wondered from the very beginning of the dividends tax debate that if it was really about correcting some bad incentives in the tax system and not about giving tax breaks to the wealthy, then why couldn’t it be coupled with something such that it was revenue-neutral with the cuts in taxes recouped by other increased taxes on the wealthy or high income folks? Then, we could have a debate more focussed on the merits of this issue of whether the dividends tax is distortionary. My guess, however, is that many of those who are enthusiastic about cutting this tax now would be considerably less so under the terms I outlined. [E.g., it would be hard to imagine the WSJ editorial page going along with this sort of compromise.] Glad that you are not one of them.
