I sent the PDF linked in an earlier post to a libertarian leaning friend of mine who favors flat tax. I thought his response was interesting
any thoughts on his real numbers vs the graph?
That his numbers are not “real” but pulled out of some orifice?
First of the EITC is included in those numbers and is what creates that factoid about the lower 40% “not paying any income tax”; second his comment that the wealthy can’t be “only paying 22.7% federal income tax, since the tax bracket is acutally 35%” is idiotic since that is the marginal rate, not the total rate, and does not apply to capital gains or qualified dividends which is a larger portion of income for the wealthiest than is that which is subject to the 35% rate.
As to his claims about his own rate as an individual who is self-employed compared to his friend (if that’s what you mean as “real”) - assuming that he is indeed privy to his friend’s tax return and honestly relayed it - well in general comparing two particular points that differ in significant ways beyond income level means less than comparing the complete data sets across the whole country, donchya think?
Besides the fact that I think he mistaken (at best) about his friend’s Federal tax (the average for that tax bracket is 20-21% of federal taxes and it is hard to see how his friend gets off for 11%, heck payroll taxes alone are almost 8% on the first $106.8K, so he’s at @ a 7% burden in payroll taxes alone!) is the fact that he misses the point that the pdf is talking about complete tax burden. Your friend seems like someone who is either an idiot or a liar or both, honestly.
It’s your assertion, not mine. I’m not going to Google it up for you. Smells like teen horseshit to me, but if you want to back it up you are welcome to do your own research and present your evidence. Otherwise…
Again, so you assert. However, my own recollection puts the 28% figure earlier in his administration, and rising by the end, and it certainly didn’t start out that low. Feel free to back up your numbers with a few of those cite thingies.
Income tax rates haven’t changed since 2003? Again, feel free to demonstrate this via more than your word alone. You can also backup your assertion about the capital gains rate (and here I’m actually not sure, so this one is merely a query for info).
-XT
Here’s an interesting article from 538 recently. The issue: how much does America redistribute wealth from the more wealthy to others with less? The answer? Of all the first world nations America is the least redistributive. That does not mean there is no redistribution of wealth, but less than any where else.
How do we look at taxes historically? This table shows taxes as a share of GDP. Total tax receipts as a share of GDP actually pretty dang flat since 1944.
Highest marginal rate? Well Reagan’s era started off at just over 69%, dropped to 50% for most of his years until dropping to 38.5 and then 28% for the final year. Damari is correct xtisme; your recollection wrong. 538 puts that in a broader context too.
Note that by the end of Reagan the top bracket began at $29.75K.
Make of this what you will.
And this table is also informative, showing total Fed tax rates for various quintiles since 1979. For the middle quintile and overall we near a historic low on that time scale. Please note the difference between what the top marginal rates were and what the top 1% actually paid during those time periods. The top marginal rate on income was very high for 1979 and 1980 but the top 1% still, on average, paid at a 37 and 34.6% rate.
And this table helps illustrate the point even more. Of the top 400 gross income taxpayers in 2006 only 233 paid a 35% marginal rate; the other 167 were 28% or lower and of those 27% were at a 26% or lower marginal rate.
Enjoy the “cite thingies.”
I’m not sure what you’re saying here. Total taxes for the two lowest tax brackets is 2% and 5% and that includes sales tax. I don’t see where EITC and the other programs to help the poor are included in this graph. I would say he’s probably correct that the poor pay no federal income tax, in fact many get more back than they paid in. That doesn’t mean they pay no taxes at all. Isn’t that correct? I’m not making a value judgment on that, just clarifying the facts.
I can see that.
Well, since the graph includes all taxes then his comparison isn’t irrelevant. Just not as comprehensive.
Wow, it’s funny how posting something like that gets this kind of response. Why is it you seem to trust these graphs so much and my friend must be an idiot to question it? He may be missing some valid points with his libertarian view but he’s hardly an idiot and he not a liar. His comments about his friend may be rough estimates based on a casual conversation.
If you can tolerate my ignorance without calling me an idiot, can you explain what you mean by federal taxes vs payroll taxes? Federal tax would be federal income, SS and medicare right? His friend pays 1/2 of SS and medicare if he’s on salary where he is self employed and pays all of that.
EITC is run through the income tax code. The amount of Federal income tax that someone pays is determined both by their marginal rate and by having the EITC run through it. Their total Federal tax paid then includes that total (even if it be zero) and other Federal taxes they pay, such as payroll taxes. It is that total, inclusive of the effect of the EITC, that is in the right hand column.
Yes. The point of the graph is that those who are being trotted out as - Oh Noes - not paying any income tax at all, may indeed, because of the effect of the EITC, not be paying income tax, but are still paying a solid amount of Federal taxes … and of total taxes of all sorts. Your friend however isn’t getting that; he is conflating the bit about the EITC resulting in no income tax with a false claim that the lower income brackets end up “paying zero in taxes” or are net receivers even.
No, it is less than irrelevant. It is likely making false claims about “his friend”, it is comparing this likely fictional figure with a very specific circumstance of a self employed individual who by virtue of being both the employer and the employee has both sides of payroll taxes, ignoring the other taxes that were part of the point of the tables, and then trying to make some broad comment about the fairness of the tax code from it. “Irrelevant” is too generous of a word.
I think a moderately progressive tax system is optimal. I’d like to see a lot of loopholes closed - but I’d also like to see a lot of double-taxation removed as well (I’m taxed on my income when I earn it, then when I invest my savings, I’m taxed on any gains those investments actually make).
I will also say that higher tax rates are very much so a disincentive. I am not going to be motivated by a higher pay check if 50% or more would disappear in taxes. I’m much more likely to be motivated things like promotion in job title/responsibility, more vacation days, etc.
Missed the edit window:
And, tax systems do play a part in determining where I want to live. Am I better off being based in Tokyo, London, or Hong Kong? (Answer: for tax purposes, probably Hong Kong).
Taxes aren’t the only factor, of course - for example, I’d happily pay the higher sales tax in, say, Minnesota, in return for the generally excellent school system, vs states were taxes are low but so are the education standards.
But taxes do definitely come into the equation.
Sorry for having missed this on crossposting. And sorry if I come off as harsh.
I do not think he is an idiot for questioning it. I think he is an idiot for thinking that his understanding of what one friend pays (through casual conversation that has clearly given him a false impression … at best) compared to what he pays in a particular circumstance of being self-employed (and therefore paying the employer share of payroll taxes directly instead of indirectly via the employer) trumps and invalidates pooled national data. And either an idiot or disingenuous for ignoring the whole point of those tables, which looks beyond income tax to total Federal tax, and beyond that to the total tax burden.
You do seem to understand the difference between income tax paid, total Federal taxes paid (including but not limited to the various payroll taxes), and total taxes paid (including the various state and local taxes). And how what really matters most in a question of fairness is the latter, the total tax burden.
As far as his impression that he is double paying payroll taxes compared to his friend goes - he really isn’t. They are both employees of businesses that pay an employer share. He happens to own the business. You can either consider that a cost of the business or probably more fairly that every employee is paying that tax indirectly, but that tax is being paid out of money his friend’s employer expends as the cost of employing his friend to the same degree that it is being taken out of his income stream and no less so.
I dislike pat answers as much as anyone…:D…but if the government is taking in taxes more than you keep…that is not right. So 49%. That includes all taxes and their equivalent (like ‘fees’)
Vacation days off would work great. Consumers aren’t being saddled with the cost of the raise, you get more time to spend money and create jobs, and more people need to be hired to take up any slack. Seems like in a civilized country workers would have more time off:
How is that a double tax? Your earnings are additional income. If they taxed the balance of your savings account, that would be a double tax.
It is true that money is not as much of a motivator as people think, since you soon get used to whatever income level you are at and want more or are satisfied just as you would be at a lower level - assuming it is high enough to make life reasonably comfortable. However, remember your incremental tax doesn’t go from 0 to 50%, but from say 33% to 50%. Have you ever been in this situation? I’ve jumped brackets, and was very happy about it. You still get more money which at high levels is money for fun as opposed to money needed to eat.
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Thanks for clarifying that.
I get that. He’s very much in the everybody should pay something, and favors a flat tax with no deductions for anyone. He sees that as equal and fair. I’ll forward the marginal utility info to him. We’ve had plenty of talks on basic economy and I keep mentioning that the cost of basic essential services has to be considered when figuring what is equitable in a society. The person who works 40 to 50 hours at a regular job should be able to afford the basic necessities of life. If they can’t then we as a society have to try and fix it.
I don’t agree. It’s relevant when considering real dollars paid by individuals and considering perspective. I remember when I was self employed and struggling and the amount of tax paid, regardless of reasoning, seemed a little oppressive and not designed to encourage the entrepreneur trying to do something.
He’s the kind of guy that would rather have the option of not paying SS and taking care of himself and the truth is , he’d do a fine job at it. Already is. I think he understands the difference you explained he is just talking about total doallrs he is compelled to pay. another thought though. As the owner of the business who pays the other half of SS and medicare, doesn’t he have the advantage of being the one who will also see the benefit of those dollars paid, where an owner who has several employees never sees any return for those dollars. {Other than a hopefully growing business}
FAIR - FAIR is the national progressive media watchdog group, challenging corporate media bias, spin and misinformation. We need to raise taxes both on personal income and corporations. We need to shut the loopholes. We have to raise revenue .
Good thing he didn’t get an illness that left him unable to work, or died and left a wife and child before he could afford good life insurance.
When Bush took office, his pal Nordquist said it all. They wanted to destroy all entitlement programs. The old get them small enough to flush down the tub trick. But there was very little backing for such a proposal. A few selfish rich people and people who have trouble seeing the underlying motives were for it. Slashing taxes while starting wars would nearly bankrupt us . That would make the unthinkable seem like a semi logical step. We could not afford to have programs for the poor., the old or the unemployed.So Obama’s budget committee is likely to deliver what Bush wanted. They have to get re-elected and wont have the nerve to raise taxes. Perhaps he can do it in the second term. Time to be adults.