In an earlier thread there was discussion about the tax rates of the wealthiest Americans. According to Citizens for Tax Justice they are about the same as those of middle class Americans. In the thread MemoryLeak challenged the accuracy of the chart and there was some back and forth before I ultimately realized I was in over my head. I did get enough of the gist of his claim that I’m now wondering if there is something wrong with the analysis. I’d like to be able to use the chart in arguments (or the similar one from the Center for American Progress) but obviously not if their accuracy is in doubt.
So the basic question is this, “Do the superwealthy pay about the same percentage in taxes as middle class Americans?” I don’t have a position on the question right now but I will try to contribute to the discussion as much as I’m able. Hopefully some of our more informed posters will share their expertise.
Nope. They pay much less. They shelter their earnings, earn by investing which is not taxed much at all anymore. I could add earn by fortunate association with particular birth canals but that’s starting to go into another line of topic.
(Of course they “earn” much more than they actually produce in value but that’s another issue again)
The working poor, as well as middle class, pay almost 14% payroll deductions for soc sec and medicare, when employer contribution is logically included (this total is temporarily 12% instead of 14% as part of the GOP-opposed Obama stimulus). This is paid only on the first $107,000 of income, so higher-income people don’t feel this tax, even if much of their income is “earned.”
Also, a large percentage of working poor’s discretionary spending is subject to sales tax, while less of the rich’s is. All in all, it is no exaggeration to call the overall taxation worse than “flattish” as it stands.
Depends on what taxes they pay. If they get their income from dividends and capital gains and they pay the dividend and capital gains tax then they pay less than average as a % of income, those are taxed at 15%. If they are paying the federal income tax then overall their tax rate is about the same since that goes up to 35%. The superwealthy who pay the federal income tax pay a higher income tax rate but pay less in FICA taxes as well as various other regressive taxes (fuel taxes, sin taxes, property taxes, sales taxes) so it ends up being a fairly flat tax as a % of income.
The fact is that the “superwealthy” do not work for wages. The highest taxes are paid by high-salaried individuals who are subject to the “alternative minimum tax”.
Well, there are 2 important assumptions that have to be taken into account:
Are we talking about total federal taxes or total federal plus state taxes? The link in the OP assumes the latter, but it should be noted that the federal tax rate cannot adjust itself to adjust itself to the wide variety of state tax law out there. Some states emphasize sales, tax, some property tax, and some income tax,
The issue of taking FICA into account. There is no other tax that promises direct cash payments in benefits based on how much you have paid in. Maybe unemployment insurance is in the same category, but the point remains-- FICA is not like other generic taxes, since it guarantees a cash payment based on the amount contributed.
At any rate, we’ve been debating this for at least 10 years. the CFTJ is an advocacy group, and like any such group they are pushing an agenda and are not objective.
There is only one trend in taxes. The poorer you are, the more you pay a “revenue tax,” because there’s no deductions you can really take. The wealthier you are, the more you pay a “savings tax,” because you have plenty of deductions. Of course, the wealthier you are, the more you save, so surely you will pay more taxes, even after deductions, apart from some sweet spot somewhere which probably pays very little, relatively speaking.
I have heard it said that some are upset the poor pay almost nothing in taxes. I propose we remedy this situation by making everyone, from the largest megacorp, to the wealthiest individual, to the poorest schmoe, use the 1040EZ form with a standard deduction—and no others. All income is reported, no separate capital gains tax nonsense to complicate matters. That should make things nice and fair, right? Plus imagine how much simpler the IRS could be, really efficient and streamlined. Just a nice, simple revenue tax. Why, look at how easy the poor have it under such a scheme!
Do you think there is an issue with how accurately the charts gauge the sources of income of the various groups?
The CFTJ chart is based on both federal and state taxes. The CAP chart only on federal. I’m interested in the veracity of both.
It’s a tax so we have to take it into account somehow. Both charts do so assuming that the employer side also falls upon the employee. While you raise a good point it’s not a direct benefit. That is, you can’t use it to help support yourself now like you can with, say, vouchers subsidize housing.
Of course they aren’t objective. But are they honest to the point that their numbers accurately describe the tax situation?
I doubt the CFTJ numbers are wrong, although the CAP numbers don’t seem to quite match up.
I don’t think it’s any mystery that sales taxes are regressive. That’s what hits poor people. And we all know about FICA and why it is the way it is-- it was a messy political compromise. Best you can say is that it’s a form of forced savings since even though you aren’t getting your own money back later, what you do get back is based on how much you put in. It’s a lousy savings plan for rich people, and maybe a not so bad one for the poor.
One might argue that another way to look at tax burden is the total taxes a person pays over his lifetime, less cash payments returned to him. That, of course, misses the day-to-day issues people have, but I still think it rounds the picture out.
But if anyone wants to bitch and moan about rich people paying about the same rate as middle class people, then bitch at the states, not at the federal government. That’s where the regressivity comes from.
Not really. Over the last few decades the federal income tax rate, corporate tax rate, dividend tax rate, capital gains tax rate and estate tax rate have all been cut while FICA taxes have gone up. SS and medicare taxes have gone up by about 2% of gross income in the same period. There is regressive movement on the federal level too.
Is this really that hard a concept? let’s say you are a cabinet maker. You have a contract for $10,000 if kitchen cabinets. Should you pay tax on that whole revenue, or just on what your income is after you deduct the cost of the wood, hardware, stain, the wages you paid your helper, the cost of equipment you bought, and other expenses directly incurred in making it?
Let’s say I have a job. Should I pay tax on my income, or just on what income is left after I pay for food, shelter, clothing, a car, gasoline, my education?
You didn’t answer the question. But if you want to keep the questions going: if you bought an investment for $9k and later sold it for $10k, would you expect to pay tax on the whole $10k?
Exon Mobil had $383Bn revenue in their most recent annual results. They made $53Bn pre-tax profit ($30Bn after tax). If they pay tax on revenue, would you change the corporate tax rate? Or would you somehow expect them to pay $134Bn in taxes, resulting in their going out of business? Or, more realistically, gas prices would have to be increased by 40 - 50% so that they can afford to pay the taxes. So who ends up paying this tax in the end? The consumer.
I think my point was pretty clear. But since it seems it wasn’t, let me restate it in a clear fashion: if you expect me to pay a revenue tax, you better be prepared to pay a revenue tax.