Make the rich pay their fair share!

Miscellaneous and Personal Stuff I Must Share
1

From the Department of “Be careful what you ask for”.

Politicians like to scream, “Make the rich pay their fair share!” After reading this, the rich will want to but the rest of us will not like it.

An interesting article in today’s WSJ, on page A12.

■ “The top 1% of income-tax filers provided 40.4% of the revenue in 2022, according to recently released IRS data.

■ “The top 10% of filers carried 72% of the tax burden.”

Read those numbers again: for those in the top 1%, they paid 40% of all federal income taxes collected. And for those in the top 10%, they paid 72%.

What about $50,000 income households?

:black_circle: If you earned above $50,000:
➤ you’re among about 38 million returns in 2022.
➤ you’re between the top 25% and 50%.
➤ 19% was your share of federal tax income.
➤ 10% was your share of the taxes collected.
➤ 8% was your average tax rate.

:black_circle: If you earned below $50,000:
➤ you’re among about 77 million returns in 2022.
➤ you’re in the bottom 50%.
➤ 11% was your share of federal tax income.
➤ 3% was your share of the taxes collected.
➤ 4% was your average tax rate.

What about $100,000?

:black_circle: If you earned above $100,000:
➤ you’re among about 23 million returns in 2022.
➤ you’re between the top 10% and 25%.
➤ 20% was your share of federal tax income.
➤ 15% was your share of the taxes collected.
➤ 11% was your average tax rate.

Gift link to get you past the paywall:

Source — “What the Top 1% Really Pays the IRS” ➜ What the Top 1% Really Pays the IRS - The Wall Street Journal ■

2

The goal for people who scream “Tax the rich!” is not more money for government, or more money to lower our national debt. They just… hate rich people, and want to punish them. It’s just class warfare, and it is nothing new; it’s been a thing for thousands of years.

3

Is that the whole story? Googling, the top one-percent of income-tax filers earn around $800,000 annually. Is that forty percent a fair contribution? Also, many rich people have most of their wealth in forms that aren’t subject to income tax and a lot of this isn’t taxed.

4

Just as much as when people complain about the completely fictional “welfare queen.”

And it’s not really class warfare until we drag the rich from their mansions in Greenwich and Beverly Hills and hang them from the nearest telephone pole.

5

You’re not wrong. It’s very much a sour-grapes type situation, not a realistic way to increase revenue growth.

Beyond that, there’s often (always?) abject confusion about the difference between wealth and income involved in these discussions. Someone may be worth a couple of million dollars, but have an income around 100k, for example. And people get those two confused all the time

Most of the really wealthy people scream about on here are typically people who own a large stake in a very successful business, not who necessarily have commensurate incomes.

6

There’s also this:

7

Per the US Bureau of Economic Advisors, in 2023 the top 5% of households made 23% of all the income. And the top 20% made 52% of all the income. See

then Excel table 3-A


An interesting Q about the WSJ article: By top 1% do they mean top 1% of all tax paid or top 1% of all income reported? Not necessarily even remotely the same thing, especially given the hefty complexity of fat-cat tax returns.

Also, at the upper ends of the income distribution, the top [small X]% of tax payers are not necessarily connected to the top [small X]% of income earners. e.g. the year Warren Buffet made 100,000 times as much as his secretary but (fully legally) paid less income tax than she did. His income tax was so small he’d be nowhere in the WSJ’s statistics. But his income was gargantuan.

In effect the top 1% of tax payers are the schmucks unable to hide their income (legally or illegally). There is a whole other tier of vast wealth and income above those folks who pay a comparative pittance. That’s the crowd that ought to be gone after. And IMO that is the crowd the WSJ is attempting to hide with their disingenuous article.

8

Ooo, I love it when you talk all sexy.

9

Adding to the confusion is that this analysis looks only at federal income tax, not the total tax burden on people at various income levels.

10

How do you say “à la lanterne!” in Luxembourgish?

11

Heh. (Historically speaking, we’d probably say “fir déi Gëlle Fra,” for the Golden Lady. Some say that’s what was said when a few Nazi criminals “disappeared” in the woods after the war, before they could be taken to trial.)

12

Was it though? This is that confusion I was talking about. Increases in net worth aren’t the same thing as income at all.

Everything I’ve read says that Buffett’s income is famously small. His investments may appreciate, but that’s not realized income, just appreciation of stock value. In 2008 for example, Buffett’s income was $175k. That’s “K” as in “kilo”.

His net worth is astronomically higher than that, and it may fluctuate by huge amounts, but it’s not income.

The trick is trying to figure out what the income is, versus changes in net worth. That stuff is a lot harder to find, because most articles on the web get it confused.

13

I’m sorry, but I’m not sure I understand what the problem is? Could you please explain it to me? You and/or the author of that article seem to have made a lot of assumptions about what I consider to be “fair”.

14

The main issue is that for the rich, paying more in taxes doesn’t hit them much or at all, lifestyle wise. A billionaire paying an extra 5% would make little to no difference; he’s living a top-0.0001% luxurious life.

Whereas to the poor or middle class American, paying an extra 5% could hit them very hard in the pocketbook, especially in the inflation-rampant era.

15

Correction: Increases in net worth are absolutely positively income from an economic perspective. What you are correct about is that they are not taxable income under US tax law.

My own numbers don’t approach Buffet’s, but my non-taxed asset growth dwarfs my taxable income. But I have the power to spend every one of those fresh non-taxed dollars I got. From a functional perspective, that’s totally income.

You could certainly imagine a tax regime that taxed capital gains (and deducted capital losses) on a year-to-year basis. You can also see how radically that would alter the balance of power (and of tax burden) between those few of us who own significant capital assets and those many of us who do not.

16

And that’s a good thing, and why it makes sense to tax the rich. Not to impoverish them, or to make them suffer, but to find the government programs we need with as little pain as possible.

And as the OP argued, we ARE taxing the rich much more than the middle. Is the differential as much as it could effectively be? As much as it should be to minimize total pain, without driving the rich out of the country? Arguably not. But that, imho, is the argument we ought to be having, not something about how to hurt other people.

17

Given that the rich are in complete control of both political parties and the vast majority of our media, and the wealth disparity in this country only grows and accelerates even as we become richer and more productive, the only class warfare that exists in the US is the rich oppressing the poor. The rich are immune from the justice system (they only get in trouble if they rip off other rich people) and every single economic decision looks out for their interest first. We’ve increased productivity many times over in the last 60 years and real wage growth has been almost nothing. All of that increased wealth has gone to the ownership class, driving wealth inequality to record levels - beyond the robber baron level, beyond the level that helped cause the great depression.

Painting the ownership class as some sort of victims of class warfare in the US is pure propaganda and complete bullshit. They’re the ones waging the class warfare and they’re winning.

18

This is just a data point.

19

Narratives like that in the OP almost always focus exclusively on federal income tax, because it’s the most progressive tax in the entire inventory, and completely ignore all the other taxes that people are subject to, most of which are regressive.

If you want an accurate accounting, you’d need to include information on all of the following:

  1. Accurate assessment of income, and not just federal taxable income. Investment gains in tax-sheltered retirement funds are income, but don’t count as federal taxable income, for example. Capital gains generally are income, but don’t count as federal taxable income. An accurate translation of unrealized gains to income is of course difficult, but ignoring it entirely ignores huge swaths of income, almost all of which accrues to people a long way up the food chain.

  2. An accurate assessment of total tax burden, including not just federal income tax but sales & excise taxes, property taxes, state and local level income taxes, and capital gains tax (if anyone actually ever manages not to avoid those).

  3. If we’re talking about ‘fair shares’, then some accounting for the diminishing marginal utility of money. A person’s first $10k of income is a lot more valuable than their 100th $10k of income.

  4. And again, if we’re talking about ‘fair shares’, then some accounting for the differing values of government services to rich vs poor must be considered. Judicial enforcement of property rights is worth a lot more to someone with vast holdings than it is to someone begging for change on the street. The massive subsidization of vehicular transport in the form of publicly built roads nets those with large commercial interests huge benefits compared to those who walk to work because they can’t afford a car.

Factor all those things into your equations, and then get back to me on how the rich are unfairly burdened by income tax.

20

The OP argued no such thing. We’re getting more taxes from the rich than we are from the poor, because that’s where all the money is. They’re still paying a smaller share of their income on taxes than the poor are.

What’s shameful is that the bottom 90% of the country is still providing a whopping 28% of the government’s income, despite having so little. We’re squeezing the poor.