These and several other posts in the thread ignore the fundamental concept of the time value of money. Money today is worth more than money in the future. Interest payments are not “extra money” that are necessarily causing anyone a loss or a gain. If interest payments are approximately equal to the rate of inflation, it’s a wash.
Ahhhh, I see, makes sense.
And…who holds stock in those institutions? It ain’t the poor, and yet we all are paying for the interest on the debt. The poor pay taxes too (less, certainly, but greater than none at all.)
Those who are already well off are the ones reaping the reward. It’s trickle-up!
The lower middle class and the upper middle class are paying a LOT in income taxes (and, as noted above, a lot of taxes are not merely the income tax.) A great deal of that money goes to wealthy investors. The money is certainly moving up the food chain, in very large amounts.
Trying to make it black and white oversimplifies the affair. People below the median income pay a LOT in taxes, and people in the top five per cent of the income scale take in a lot from investments (in part) in bonds.
(snipped)
No, they don’t.
Ravenman and I disagree with you
Again, the wealth transfer from the lowest 50% of income earners to the interest on bonds amounts to probably $6 billion in any given year. And this includes interest on the Social Security Trust Fund, the interest on bonds held in conservative 401(k)s, and so on.
Roughly 97% of the cost of the interest on the debt is paid for by the upper 50% of income earners.
Seriously, who is telling you this nonsense that taxes paid by the poor are making rich people richer? Was this a bumper sticker being handed out at an Occupy Wall Street protest?
I can only imagine you extrapolated these numbers from your previous claim, that the top 50% pay 97% of the income taxes. However, this is true only if income taxes are the sole source of federal revenue. Which of course just isn’t correct. Income tax isn’t even half of federal revenue.
About a third of federal tax revenue is payroll tax. I assert that the payroll tax is a de facto tax on wages, and should therefore be considered to be paid by the recipient of those wages. You may argue that the payroll tax is paid by employers, but most people would disagree with you that employers bear the actual burden of it. The fact that the tax is processed and submitted by employers is merely a technicality, meant to obfuscate the fact that wages are taxed twice while capital gains and corporate income is taxed at a lower rate than either of the two “real” income/wage taxes.
It’s a convenient system, which makes it easy to accuse the lower classes of not paying their fair share. But, there’s a reason why virtually every argument a conservative makes about the tax system eventually includes stats about income taxes while conveniently ignoring every other source of tax revenue.
Meanwhile, virtually all beneficiaries of the debt are rich. Even if the bottom 99% of the earners paid less than 1% of the taxes, the national debt would STILL be a vehicle to transfer wealth from the poor to the rich.
The debt is never going to be paid. In order to do so, we have to run a modest surplus for an extended period. It didn’t take Bush long to squander the last surplus by declaring “the surplus belongs to us” (apparently, the deficit belongs to nobody).
It isn’t important that it be paid. As long as the interest payments are a reasonable amount of the budget, all is well Balancing the budget does not put a single person to work, nor would paying off the debt.
"As Jean-Baptiste Colbert, Louis XIV’s finance minister, is said to have remarked: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
It’s an error to strictly map ‘poor don’t pay taxes yes they do’ debate onto Trinopus’ claim that federal debt service is a transfer from poor to rich.
First as has been pointed out sales and property taxes paid directly or indirectly (including renters in the second case) are state and local and not going to pay the federal debt.
Secondly as been pointed out wrt the payroll tax and actually poor people, that’s offset by the EITC for many. And even if ‘poor’ is whole lower 50%-tile, you can’t completely ignore that the payroll tax has the offsetting asset for the tax payer of future promised Social Security and Medicare benefits. That’s not as we all know some kind of individual promise let alone ‘lock box’, but a significant moral and therefore political commitment. And to the extent the SS Administration puts surplus payroll taxes into treasuries (that’s the difference between quotation of the US debt as 100% of GDP or in the 70’s%, whether you include the treasuries the govt itself holds) those bonds can only be redeemed, without new debt, using income taxes.
So federal income tax is in fact specially relevant to who is paying off the federal debt. It’s really not the same argument as who pays taxes at every level of govt for every purpose.
And, there’s a whole other key point neglected by Trinopus: it’s not a wealth transfer from bond issuer to holder to pay interest to the extent that interest is offset by inflation eating away at the real value of the principal of the bond. The real return on the bond is the correct measure. Currently the US debt has an average maturity in the ballpark of 5 yrs (conservatively long, probably a bit less). The yield on the 5 yr inflation adjusted treasury, ‘TIPS’ is -0.18% now, a slight real transfer from the holder to the govt. Why do bond holders accept that? Lack of a better alternative without taking more risk.
So in summary, having a national debt doesn’t play directly into the ‘income inequality’ debate. Of course there would be ramifications of an excessive debt, or excessive measures to run a fiscal surplus which would vary by income. Rich Greeks aren’t the ones mainly suffering.
Can we get blink tags to work in here? I threw in everything I could, but I still think it needs blink tags…
You assert, eh? Well, I assert that payroll taxes are a de jure tax on wages. So there.
I have stated as clearly as humanly possible in this thread that the poor pay payroll taxes. I will add that sometimes payroll taxes are a pretty substantial bite into paychecks, especially since they are not subject to tax deductions in the same manner as income taxes, and poor people without dependents don’t get a lot of help from tax credits.
I don’t argue any of this. I argue that PAYROLL TAXES PAY FOR SOCIAL SERVICES NOT FOR INTEREST ON THE DEBT TO ANY MEANINGFUL AMOUNT.
Are you directing this at me? Because I’m the guy arguing with other guys who make the erroneous claim that “the poor don’t pay taxes.”
Anyone who draws a Social Security check over the next several decades is benefiting from the interest paid on government bonds now held in the Social Security Trust Fund. Are they all rich?
You’re making the mistake of thinking that we’re talking about two different piles of money here. In the same way that deficits in the Social Security program contribute to the national debt, surpluses to the same social programs reduce the deficit. Much of the surpluses in the Clinton years fell under this category. There is no justification for saying “this particular dollar out of the billions raised in taxes came from that particular source,” except as an accounting fiction.
Imagine I denied that I’m spending 20% of my income at the bar, because I only drink on Fridays. After all, 100% of the dollars I earned from Monday to Thursday are not spent drinking, and Friday’s earnings are from my other job. Ridiculous, right?
I specifically mentioned in earlier posts how one could argue that the surpluses from FICA could be seen as contributing to the cost of debt service. But again, you utterly fail to provide any context for how much money this is.
In 2013, the OASDI trust fund took in $721 billion in FICA revenue, plus some other cats and dogs in income, and paid out $813 billion in benefits and other costs. In sum, the net asset to the Treasury was $38 billion. That surplus to the Treasury is debt that’s issued at a rather modest rate, to be repaid by future income tax payers, such that the debt that WOULD have been issued if not for this trust fund surplus would have been just marginally more expensive to service.
Never mind that the service on that debt, too, also would have been borne primarily by the 90 plus percent of income taxes collected by the top 50% of income earners, we aren’t talking about that much money.
But I’ve had enough illustrating my arguments with math. You tell me how much wealth transfer is occurring from the poor to the rich because of government bonds. Put some numbers behind it.
Again, ‘the poor don’t pay/yes they do’ is not directly relevant to the federal debt. To address later points, yes tax intake can viewed as fungible. We could have a VAT or carbon tax rather than the payroll tax, probably should IMO. However, there’s also the asset side of things, what citizens get or are going to get from the govt. SS and Medicare are relatively flat benefits. Funding them with their own ‘flatish’ tax is not just an ‘excuse to say poor people don’t pay their fair share’, but reflective of their nature.
In any case again, the claim that federal debt is a transfer of money from poor to rich misses a really basic point: the govt is now financing the debt at a negative real interest rate. It is collecting real value from investors in return for perceived safety. This is in even more severe in other rich countries with more negative real rates on govt bonds.
But even with a positive real interest rate on govt debt there’s a long way from ‘poor don’t pay’ to ‘poor pay most’ of taxes. The latter is clearly not true. If (and in the past when) govt debt paid a positive real return, it was in fact tending to pay it to people who’d be mainly, not solely, nor necessarily ‘unfairly’ (which is a political judgement), the ones paying the taxes to eventually redeem net debt. But again, for now that debate is moot. Investors are paying the govt on a real basis.
It depends on the question you’re asking.
“People below the median income pay a LOT in taxes …”
Median income is over $51,000. The federal income tax rate on that is $5,183.75 plus 25% of the amount over $37,650 – or around $8,500. (Both data from irs.gov)
That, multiplied across everyone at or below the median income level, is, in fact, a LOT in taxes.
(Crikey, how I’d like to make $51,000 a year! )
You’re forgetting the exemption amount. If you make $51,000, you will pay no more than $6,100 for a single person with no deductions.
It is not. You’re using a vague term – “a lot” – with no context. Is $100 a lot of money? For a beer, yes. For revenue for the Walmart Corporation? No. As I showed you before, the bottom 50% of income earners pay 3% of income taxes.
I’m glad I amuse you.
Are you denying anything I wrote?