The Firefly Challenge: Prove 40% tax rate!

Great Debates
21

The information you are looking for is here:
www.enth.com/ask.asp?query=E380D318-6B86-11d3-9783-00105AA70303

Not that it’s going to do you any good.

I don’t think the question can be answered as it’s asked.

If you are going to look at the average American (278,000,000 or so) You are going to find that they are not all taxpayers in the normal sense. You have illegal aliens, children, college students, welfare recipients, retirees, the Almish, and who knows who else skewing the curve.

If you count these folk in the average American pays far less than 40%.

According to Ibbotson and Associates data for 1997 the AVERAGE household in which at least one person is employed has a federal and state marginal tax-bracket of 30.02%

I didn’t have time to look up the mean which I assume would be a lot lower. What they actually pay in taxes is another matter.

If you check out my link, I’m guessing you’ll find the Federal Gross receipts are somewhere around 20% GDP. Revenue from income tax will probably be about 10%.

It’s embarassing that while I have access to Ibbotson through my work, I don’t have an agreement with them that allows me to publish their data, so I can’t post it here. Also because of licensing legalities, I can’t disclose the exact nature of my career (think accountant.) Suffice it to say that I work with this stuff every day.

THe 40% figure is probably optimistic. I’m sure it is if it’s applied to all residents of the US. You might be able to make it fit depending on how you define your question RT.
As you state it now, it’s too vague to be answered.

THis is about as close as I can come. The average citizen contributes about $2700 to Uncle Sam in taxes.

There are 4.2 people in an average US household or, $11,340 in taxes payed by household. If we divide that by RT’s average income number (which really isn’t correct, but since RT cited it that means RT should accept calculations based upon it :slight_smile: )

We get 29.842% Federal taxes as a percent of income.

Take social security, medicare, sales, gasoline, local, luxury, property, new cars (leasing makes average new car turnover once every 5.3 years (big taxes here)) taxes, and a bunch of other stuff I’m probably forgetting, and Your well over 40% (I didn’t bother to figure this out, but it seems pretty damn likely and ought to be good enough.

This of course doesn’t PROVE anything, which IS the OP.

THe data these numbers are based on is remarkably liquid, and you can slice it up any number of ways, to prove whatever you want to the uninitiated. The way this data is generated is also highly suspect and subject to large deviations from reality, but it is best guess.

Well RT, do I win?

22

Woohoo! Great table, Unc, thanks!

Okay, my numbers were off some. According to this link, posted above by Unc, in 1998 the homeownership rate in the U.S. was 66.3% (having risen steadily over the last few years). In California it was 56.0%. The low was the District of Columbia, with 40.3% homeownership, and the high was Minnesota, with 75.4% homeownership.

I didn’t think to see if that link broke it down by city – and on this 'puter I’ll lose what’s here in the box if I go back to the link right now. I wonder if maybe I heard that 60% renters figure I mentioned above as being just in L.A. County.

This thread nags at me that I have to get the tax stuff together and to the accountant. I HATE that job. The only good thing is that this year Eldest Son is finally 14, and thus is paying taxes on his college fund at his rate rather than mine. Can’t wait for Middle and Youngest Sons to get there, too!

-Melin

Siamese attack puppet – California

Still neglecting and overprotecting my children

23

If it’s required by the government, it isn’t really private.

Call it matching contributions, call it income tax, it’s still the same amount of money. Why should it matter what it’s called; shouldn’t what it is matter?

24

Guess that depends on what your definition of is is.

25

Thanks, Lib - you took the words right out of my mouth!

Scylla - thanks for the link on GDP. That’s useful all over the place, not just here.

What it’s good for here, is to be able to say that all taxes, combined, consumed less than 29% of GDP in 1998. Now this includes earnings by, and taxes on, corporations as well as human beings, but the point still stands that, of each dollar that an American entity (human or otherwise) earned in 1998, less than 29 cents was gobbled up by the tax man.

While the tax burden is distributed less than evenly, my contention can be refined to: it’s not distributed so unevenly that the American citizen of median income is having to pay 40 cents of each dollar in taxes in order to subsidize rich people, poor people, corporations, or whoever.

The poor people don’t have enough income to significantly affect the balance, so the only way for Americans of median income to be paying that sort of tax rate would be if average Americans paid higher tax rates than rich people or corporations. (Make that argument, please; it would do my populist heart good. ;))

Scylla:

Emphasis mine. Marginal tax rates are higher (substantially so, usually) than overall rates. For instance, my marginal federal income tax bracket is 28%, which means that if I had earned another $100 in 1999, $28 of that would have gone to pay Federal income tax. But a lot of the earlier dollars were taxed at 15%, and the first $10,000 or so (I’m at work, away from my tax files) wasn’t (income) taxed at all. So my overall Federal income tax rate is much lower than my marginal rate of 28%; if I remember tonight, I’ll tell you how much lower.

Ryan - what matters is who paid it. There’s two reasons for this: (1) if we start attributing taxes paid by one entity to another, it’s real easy to double count; and (2) as long as one entity - an employer, for instance - has different motivations from another (the employee, say), then a tax paid by the employer isn’t logically attributable to the employee. If, one day, the employer was no longer responsible for those taxes, would the money go straight into the employees’ paychecks? Of course not; they’d try to keep as much as they could. This isn’t to say that corporations are evil; it’s just that they don’t exist with the primary purpose of benefitting their employees; they exist to make money for their stockholders. Any dollar that they would have the right to keep if they didn’t have to pay it in taxes is, for that reason, appropriately considered their taxes, not the employees’.

What’s required? I work for the gummint, FWIW, and while I have health insurance through them, I don’t have to. Just because I never see the money doesn’t make it a tax.

26

RT:

You may have missed the part where I divided receipts from income tax by population, multiplied by family size and divided by your income figure. This places the average household federal tax burden at about 30% by your own figures. We only need another 10% from all other sources to hit your 40% bogie. I see that extra 10% as a gimme.

Speaking of gimmes, where’s my moula?

27

Scylla - it took me awhile to see which part of your post you were referring to. OK, you’re taking the mean tax burden and applying it to the median household.

That may seem like a cavil, but the median income is well below the mean income, and the median tax burden is well below the mean tax burden. So it makes a big difference. I’d guess, off the top of my head, that the median family with $38,000 of income probably pays about 10%, overall, in Federal income tax. (Better numbers tonight, if that idiot meeting doesn’t run too late.) Then you start adding state income tax, sales tax, payroll (Soc.Sec., Medicare) tax of 7.65%, property taxes, and whatnot.

BTW, the ones I’ve listed are the big ones for the vast majority of us, outside of Federal income taxes. Tobacco taxes, liquor taxes, gasoline taxes, car taxes, etc., are down in the white noise, as that table I linked to last night showed. The SS/Medicare payroll tax is their biggest single tax of a family of four with an income under about $35,000, IIRC.

So no moola yet. But you’re right about the problem being vague, so let’s make it more specific. Household with median income ($38,885 in 1998, according to this Census Bureau page); married; you get to choose how many kids they have, and how the income is apportioned between husband and wife, if it matters; I’ll even let you decide whether they own or rent. From their income, deduct their Federal and state income taxes, their 7.65% payroll tax, their mortgage/rent payments (including property tax if they own), electric/gas bill, and what they spend on gasoline, and assume that they spend the rest, paying 5% sales tax on those purchases. (If you think the 5% is too low, and have figures that back up a higher number, speak up.)

Play with that; if you want me to narrow it down some more, I can. But I’ve burned my lunch hour already.

28

Here’s some generally useful info, FWIW. For state income tax purposes, how about if we assume they live in Virginia? It’s a medium-tax state; not too high, not too low. (If you prefer another choice, feel free to offer an alternative.) On the other expenses:

According to this Census page, the median housing cost if you rent was $543/month in 1995; if you owned, $593/month. But if you own, you get to deduct interest and property taxes, which would be the bulk of that $593; say $500/month on Schedule A. And the same page gives different medians for different kinds of power consumption; taking a weighted average, I got $54/month. (Let’s ignore any difference between 1995 and 1998, unless you really want to get into that.) For gasoline, let’s assume 25,000 miles/year @25 mpg @$1/gallon, and 50 cents/gallon of that is tax. (Unless you’ve got a better number.) So that’s $1000/yr. on gas, of which $500 is tax.

Anything important missing? I think I’ve hit the big stuff, but I’m not 100% positive.

29

Sam Stone wrote:

Since when do sales taxes apply to car payments or house payments?

30

when you bought your car the tax was figured in to the price and is included. But there is ad valorum tax that you pay yearly in most states.

But you are paying your payments with post tax dollars. but that is a different issue.

31

If you lease a car, you pay 7% GST on every lease payment. If you buy the car, you pay 7% GST on the purchase price of the car, which you have to factor as part of your car payment.

I screwed up on the house payment - there is no tax. However, in Canada we can’t deduct home mortgage interest like you can.

32

tracer - I kicked the rent/house payment and electric/gas bills out (as well as payroll and income taxes) before figuring sales taxes.

Mr.Z is right about car payments: you pay the sales tax up front, so if we pretend that we’re paying sales tax on the car payments instead, it’ll work out even.

33

The way I figured the sales tax on the house and car, is I took that the tax was charged on the purchase and added to the life of the loan. Then I ammortized the sales tax and figured a monthly amount for the tax and then multiplied by 12 to get the yearly number.

Jeffery

34

RT:

Does it all add up to two trillion?

35

Hey RT, can we include local taxes? Here in NYC, I lose a decent chunk of money to them, maybe around 2%. Also our combined sales tax (state and local) is 8.25%. Now I know that New York may be higher than most places, but I think a fairly high percent of U.S. citizens live in urban areas which most likely have a local tax.

Just something to throw in the pot.

PeeQueue

36

PQ: local taxes? Absolutely. If it’s a tax, and you pay it, you get to include it. I mentioned them early on, but I’ve been inconsistent about it. My apologies.

Jeffery: I’ve bought houses in two different states; I don’t remember a sales tax either time, though I could be mistaken. I’ll dig out the papers and see what taxes I had to pay.

Lib: does what all add up to two trillion?

37

A couple of doodads I promised earlier today:

Scylla - it turns out that about $10,000 of my wife’s and my income is in the 28% range. A bit more than that, due to exemptions and itemized deductions, isn’t (Fed. income) taxable at all; the rest is in the 15% bracket. Overall, we paid a Federal income tax of a shade over 12% of our total income, and we’re not hurtin’, thanks.

The median family making $38,885 in 1998 (the year we’re using), if they had no kids and no deductions (to maximize their Federal tax) would pay $3956 in Federal income tax, for a rate of 10.2%.

Now it’s true that that’s only one piece of the overall tax picture, but it’s the biggest single piece. The median family will pay another $2975 (7.65%) in SS/Medicare taxes; after that, state income and sales taxes, and local income tax (if any) kick in, and then into the white noise of gas taxes and whatnot. But after the Feds are through with them, they’re still below 18%. Even if they live in NYC, they’re probably not gonna make 40%; in New Hampshire, they might not get as high as 20% if they don’t smoke and are light drinkers.

I’ll see if I can’t finish this up tomorrow. :slight_smile:

38

This is gonna seem silly. It’s late and I’ve been on this board most of the day when I should have been working, but the $38,000 is useless isn’t it? The OP states the “average” American, not the median. Mean is average, median is Mister Halfway. Right? Or am I going insane?

39

Quoting, rather than repeating, myself:

‘Average’ isn’t a hard-and-fast term, in other words. Since an arithmetic mean (the one where you add up n numbers, then divide by n) is the average most frequently employed, ‘average’ tends to be more identified with that than with any of the others. But if I’m a teacher and I tell you I’m going to ‘average’ your grades tonight, it doesn’t mean to you that I’ll count your final exam and a ten-minute pop quiz equally, as would be the case with an arithmetic mean; you’ll intuitively grasp (without the nomenclature) that I’ll use a weighted mean instead. So the definition of ‘average’ depends on circumstances and appropriateness.

40

To quote Groucho in A Night at the Opera, “Which question do you want me to answer first?” :wink:

Hadda stick that in… :slight_smile: