g8rguy: Boy, you are really exercised over this, aren’t you?!? I didn’t claim that the top 400 are representative of the top 1% or anything like that. What I claimed they are representative of is the very super-mega rich. They are in fact a perfect representation of what they are…the top 400 highest-earners (at least in reported income). And, you may think this is a trivial sample size but:
(1) 400 people is good enough to get pretty reasonable statistics. You can’t claim this data is just some sort of statistical fluctuation.
(2) Although these 400 people represent a miniscule percentage of the total population of income tax returns ( <0.001%), they do not represent a miniscule percentage of the income. In fact, one statistic I didn’t note is that these 400 people earned liked 1.1% of the total income earned in 2000…and this number was up from 0.5% in 1992.
The point is that the super-duper rich, the mega-ultra wealthy are paying federal income tax at a rate that is only a little bit higher than you or I on their reported income (in fact, it may not be higher depending on where our income falls). And, once you consider the other federal taxes (let alone, state taxes), it is almost certain that they are paying a lower percentage of their income in taxes.
Just to further elaborate, I never claimed that these facts about the top 400 taxpayers are the first and last piece of interesting data on income tax progressivity. In fact, if you were around here more, you’d see that we have talked ad nauseum about the top 1%, the different quintiles and so on.
This is just one more piece of data, but in my mind it is a particularly fascinating one because it looks at folks who are without-a-doubt doing absolutely fabulously and asks what they are paying in taxes compared to the average Joe. I.e., it asks about what the progressivity of the tax system is like at the tippy-top. And, to my mind, the answer is rather disturbing. Maybe, to you, it doesn’t make a bit of difference. But, hey, that’s what democracy is all about … You present the facts and people decide what they think about them.
Dude, you have got to ficure out a way to get some less biased information. Seriously. You already have lots of information about how bad capitalism is. Try looking for some information about how good it is.
I’m not going to go into every single claime in this new book you purchased. But I’ll address the first 2 you posted.
I have no idea whatsoever what he means by “average person”. But this cite indicates that the top 10% paid 29.7%, the top 5% paid 31.1, and the top 1% paid 33.2% in total effective federal taxes. The numbers for income taxes are lower. At 19.7%, 21.6%, and 24.2% respectively. If you can come up with his method for calculating the “average person” I would appreciate it.
Again, I don’t understand what he means by average. However, the cite I listed above indicates that the total effective tax rate for the top 1% went from 30.6 to 33.2 an increase of 7.8%. Just to be fair, the income tax numbers went from 21.2% to 24.2%, an increase of 14.1%.
From a later post:
And how much of the total taxes collected did they pay? I suspect it is quite a bit higher than 1.1%. Don’t you?
I understand that these numbers represent the top 1% rather than the top 400. But as you can see the numbers given by David Cay Johnston are clearly against the trend. I’d like to hear his evidence for the numbers presented in his book. Extraordinary claims and all that…
And, jshore as long as we are adding alarming allegations to the end of these posts without evidence, I should point out that these numbers become even more interesting if you look at the percentage of the taxes collected paid by each income group. That is, the richest of us pay a much higher percentage of the taxes collected than they earn as a percentage of the economy. I assume that this trend is mostly complimented by the states. IT would have to be reversed in a massive way (not simply slightly more regressive) to counter act this fact.
From your earlier post and in no particular order:
No. From the report I cited “Most households pay more payroll taxes than income taxes; in 2000, nearly 71 percent of households did so (see Table 2). (Table C-1 provides data for the full 1979-2000 period.) That statistic counts both the employee and employer shares of payroll taxes–because, as most economists conclude, workers bear the full cost of such taxes.”.
Right. But you have to assume that the State tax structures are extremely regressive to get to “fairly flat”. Unless the States collect more money and do so in a much more regressive way, then they cannot counter act the progressivity of the federal taxes. I am blabbering without a specific site in this regards as we both have failed to come up with a good site that discusses State taxes and how they break down. This is most likely due to the massive increase in complication when you try and add States into the mix. But I am fairly confident that your assertion is wrong. State tax collecting would have to be much worse than federal tax collecting to make up for the progressivity of the feds.
Some of the numbers given by your cite "N. Johnson and I. J. Lav, “Are State Taxes Becoming More Regressive?” (Center on Budget and Policy Priorities, 1997). seem to indicate that the state numbers are paultry compared to the federal numbers. That is, they are talking about income tax cuts of less than 10 billion over 4 years and sales tax increases of about 12 billion over 4 years amongst all 50 states. I hardly think this can change the progressivity of the federal income tax. I seriously doubt wether it could even dent it.
However, I want to acknowledge (for anyone else reading this, jshore knows it already) that I am somewhat out of my element talking about such things. I am not an expert by any means. And I should also reiterate that I do not have good numbers on the state by state tax breakdown. Your cite, jshore comes pretty close. However, it preferes to look at things like the number of progressive tax cutes and regressive tax increases rather than the total amounts collected or the income rates effected.
A quick google on “who paid the taxes” resulted in this cite. It is a pretty balanced discussion of the issue of progresivity in the US tax system. It is old (as is the book), but it gives a good set of definitions about what progressive means, how it is measured and so forth. It does include a graph from the book which I found interesting. Scroll down in the link to see it. It is the only graph on there. The graph indicates 2 lines one indicating that the tax rate is progressive and the other indicating that it is regressive. Interestingly the regressive line assumes that half of corporate taxes are paid by customers. While the progressive line assumes that all corporate taxes are paid by shareholders.
It seems even basic assumptions about who pays taxes are not only open to question, but can reverse the conclusions. A very complex subject indeed.
If Desmo and his ilk force me to defend my position, then I’ll defend it. Has that been disallowed or something? Is there something odd about defending the proposition that looking at an unrepresentative sample and using it to draw significant conclusions is unhelpful?
You’ll notice that I didn’t attribute this to you, because you didn’t do so, but merely said you found it interesting. I agree: it’s interesting. But it doesn’t tell us why the mega-ultra wealthy pay so little, and it doesn’t tell us what the rich as a whole do, and as such it’s less than indicative. A few bald figures about the tippy-tippety-top do not a story make. The focus, I suggest, is too narrow.
You, apparently, disagree. More power to you. As you say, that’s what democracy is all about.
Interesting. My impression from previous forays into this area is that Slemrod is considered one of the gurus on taxation issues. And, yes, it is complex. As for the graph, it is important to note that the y-axis does not go all the way down to 0. So, yes, while various assumptions can change the conclusions, not looking carefully at the axis would lead one to believe the conclusions are changing more drastically than they are. Neither curve is what I would consider strongly progressive or regressive (although the regressive one does have some interesting sharper jumps near the top and bottom ends of the scale).
With all due respect what you have outlined are, at best, suspect reasons for voting for Bush:
If you pay any attention to labor statistics you will notice that very little job creation is taking place which makes one wonder how is unemployment going down? The answer is that labor force participation has declined by a full point taking 1.7M people off the unemployment rolls. And while it is possible they all hit the lottery and therefore didn’t need to work the more likely reason is that due to lack of job prospects the majority here simply dropped out and are a part of the disgruntled workforce.
So an declining unemployment rate placed in its proper context shows this portion of Bush’s economic program to be very much a failure.
Gore proposed a 500B tax cut targeted at middle and low income America. The democrats counter to Bush’s original 2001 proposal was 900B targeted at middle and low income America. Of the three–Gore, the Democrats, and Bush– Bush’s was the smallest for middle and low-income America plus the Child Tax Credit additions under the Bush tax cut are set to expire in 2005 and the Alternate Minimum Tax will start impacting Middle America in 2005. As such, Bush gave “average Joe” the short end of the stick and is going to need the AMT to meet his “cut the deficit in half” projections.
So, the Bush tax cut is certainly no reason to vote for Bush.
The quest of OLB is a coin flip. It is reasonable to assume that whom ever were president we would have invaded Afghanistan and pursued OLB. The unanswered question is if we weren’t also pursuing Saddam at the same time whether we would have been more determined to enter Pakistan in force and actually try to capture OLB. I think it reasonable to assume that splitting our military didn’t help in pursuit of OLB–the known murderer of over 3,000 Americans.
Given that, I would think average Joe would be kind a pissed at Bush’s leadership here.
The quest for Saddam Hussein is another coin flip. First, with the UN inspectors back in place and our military in place north and south there really wasn’t much Saddam was in position to do. And yes, I think everyone is happy he is gone but that in itself is certainly no reason to invade a sovereign nation.
I would think any average Joe not using his emotions for his brains would question Bush’s leadership here too.
The deficit and economic growth: we raised taxes on the top 10% in 93 and the economy continued to grow so I think it reasonable to assume that rolling back the tax cut on the top 10% will not have ill effects on the economy this time. Further, by rolling back part of the cut there is now some room to fix the AMT and make the CTC adjustments permanent which will without no doubt be of benefit to middle America and the economy and I think the average Joe smart enough to realize that.
So the deficit is a concern as is retaining the portions of the tax cut the have the greatest impact on the majority of Americans and vote for Bush by the average Joe is the best way to loose control of the first and totally loose the second.
Well, he argues that one reason why the mega-wealthy pay so little is the cuts in the capital gains tax (and more recent, dividends tax). In fact, I believe he shows that there effective tax rate rose somewhat in the first part of 1992-2000 period and then dropped back down quite dramatically after the capital gains tax rate went down to 20%. [Much of the book also talks about various ways the very rich shelter money from taxation…but many of these actually mean they don’t even report the income and so it doesn’t even figure into their effective tax rate.]
Of course, I don’t know how you define “rich as a whole”, i.e., where your cutoff is. His book as a whole seems to be most focussed on those in the top 1% or even fraction of 1%. It’s a whole book on the subject and I’ve just summarized about 1 or 2 pages of it in my post above. I heartily recommend you read the whole thing (i’m into chapter 4 now myself) and then you can come back and tell us what you think.
You may think that focussing even on the top 1% is considering only a tiny portion of the population but I’ll remind you that these folks are pulling down about 20% of the reported income. (I think their fraction of the total wealth may even be higher…but I’m not sure.) And, the whole point of the book is that nearly all the rest of us are being ripped off by the tax avoidance of a very wealthy few.
Yes, one would assume that the capital gains tax cut had a lot to do with it. Next question: if that’s indeed the cause, has the capital gains rate cut been a bad thing? If not, what are we worrying about?
Of course, defining rich as a whole is certainly nebulous. I think the top 1% is a good number to look at, but I wouldn’t insist on it, and if you wanted to use 0.5% or 2% or some such, I’d be just as happy. But the top 0.001% seems rather… myopic.
And actually, I had better thank you for bringing the book up to begin with, because as soon as I finish my dissertation I’ll try to remember to take a look at it!
Please. This seems like a nit pick, but this is the type of language we have to eliminate. The mega wealthy do not pay “so little”.
And this is another.
In 2000 the top 1% of households, earned about 17.8% of the income. They paid 25.6% of the total federal tax. Now, I’m all for discussing whether this number is too much or too little. I’m all for everyone having opinions about whether taxes on this group or that group need to go up or down. But as you so wisely said in another thread, we have to start with a more reasonable acknowledgement of the current situation. A quarter of the total federal taxes is hardly “so little”. And while they do earn more of the total income than others, they are hardly “ripping us off” by paying a greater portion of the taxes than they earn of the income.
Well, as you can see from my post, I stole that language from g8rguy, so take it up with him.
Well, in this case, I thought I was borrowing language from Johnston, although now that I look back at the title, I realize I substituted “rip off” for “cheat”. But if you read Johnston’s book, his points are that
(1) They are using various scams to avoid paying taxes that they really ought to be paying. Many (although certainly not all) of these scams are not illegal, hence the book title, but they are loopholes to get around the law, or in some cases, changes in the law that are made often in a quite secretive manner to benefit a select wealthy few.
(2) Also note that many of these operate at the level where they reduce the income one even has to report. So, it is not really clear if the income of the very wealthy isn’t being understated by a significant amount. As the reference you found says, quoting the book itself (in a claim that I’ll admit I didn’t get to look into his documentation for…He referenced some NY Times article):
(3) I am not sure exactly where Johnston would draw the line, but I think he is particularly interested in some fraction of the top 1%…The ones who really have the good tax lawyers working for them. As that reference that you found says:
I just skimmed it…And, as I’ve noted, I am not that far into Johnston’s book yet, but the short answer is that this summary seems to be pretty accurate.
Good point. To be honest, I forgot that that thread started out with the OP referring to Johnston’s book. We seem to have quickly deviated into other related issues.
Well, note he was talking only about federal income tax there. As for “average person”, that is my poor choice of terms probably (I’m picking up bad habits from Bush)…He talked about the average rate by which I am pretty sure he meant the total amount of federal income tax paid divided by the total amount of income.
Note that it is important to compare numbers from the same source, as he notes different sources generally have somewhat different numbers although the conclusions are usually pretty much the same if you use the same method of measuring consistently.
Well, no…It would be a somewhat higher but not that much because their tax rate wasn’t that much higher than the average (and would have been even less so if the Bush tax cuts had been in place). And, this is before we consider all the other more regressive taxes.
Well, his numbers come directly from the IRS release of the tax returns of the top 400 taxpayers. I think he would agree that the top 400 are better tax-avoiders than your top-1%er is.
Oh, okay, thanks for digging that up…My guess was wrong. Glad to see they figure it this way.
Of course there are tax cheats. And certianly there will be more rich tax cheats than poor tax cheats at least as a percentage of the group. Part of the lessons from the eighties was that if we lower the rates, we can reduce the loopholes and get similar amounts of revenue (I’m not saying that is the only or even most important lesson, don’t bite me). But I’d be really interested in the other side of this coin. How much money do these 400 richest people pay? How much of the total taxes came from them?
Well, to do this they would have to hide the income from other sources as well. That is, if I am not mistaken, the CBO site I linked to did not simply look at tax returns and note total claimed income. IT used other methods of determining household income.
So,
Yes, but extraordinary claims… He might need to provide more definitive proof that such a thing is occuring before we go out and hire more gestapo personel to hunt down those evil richies.
[QUOTE]
He referenced some NY Times article
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They weren’t his own articles were they?
That’s all right. I remember. I recieved a significatn drumming from you on many very badly argued points (by me). So I remember the thread quite well. I learned a lot. It is what finally lead me to spend time with that CBO site and run numbers through my own spread sheet.
Actually, the problem is entirely yours. You are still whining about the data not being “representative”. I repeat: no one said it was, or was supposed to be a representative sample of some larger class of people that you are unwilling or unable to define.
Neither am I, and in fact I haven’t said a single word on the topic in this thread.
Perhaps if you’d included a statement like this in your initial post, instead of an attempted sarcastic dismissal of the data, I wouldn’t have taken such exception.
As I said, I haven’t stated a position one way or the other. You are assuming that I have a position, and you have made an assumption about what it would be if I had one.
If I’d said anything even remotely resembling that, you might have some kind of point, I guess.
Not sure what to make of that. You refered to my “ilk” earlier, and I think you intentended it to mean something like “liberal commie pinkos”. My “ilk” is actually “people who have qualifications in econometrics and who understand the subject better than you do”.
Desmo, you know… I was prepared to be immensely irritated with you, but on rereading, I owe you an apology instead. Something about the way you phrased your objections really irked me, but that’s not an excuse. Sorry.
Bush is as liberal as kerry, but the republican congress is not stopping anything liberal that bush does.
If kerry were elected, you would see the republicans trying to stop all liberal legislation. I doubt that the republicans would have supported the war in iraq, the huge deficits, the trade deficit, the homeland security bill, prescrition medicines, etc if a demcrat president tried to get them thru.
Electing a democrat president would cause the republicans in congress to once again come up with a “conservative contract with america”.
I say quite a bit, and you say somewhat. Some day you and I have to have a conversation to come to some agreement on how to draw the line between the two value judgements.
In 2000, the top 1% paid 25% of the tax and earned 17% of the income. If we take your assumption about the top 400 (1.1% of the income) and the numbers for the revenue for that year (was it 2003? or 2002?) I’m using 2003, because I have some numbers from there. The extimated tax base for 2003 is 5 trillion dollars. 1% of that is about 50 billion dollars. 22.2% of that (from your earlier post quoting fromt he book) is about 11 billion. Given that the 2003 budget is projected (on the CBO cite) at 1.7 trillion, we have the top 400 tax payers paying about 6% of the total collected tax.
I’m sorry if I confused 2003 with some other year, or if I mixed up any of the other numbers. I just wanted to get straight the difference between slightly higher and quite a bit higher is. I think 6 times is quite a bit higher. jshore seems to think that 6 times is only “somewhat” higher. <just ribbing a little j.>
No problem. Thanks for asking the question. As soon as you did, I found I was not sure, and began worrying about that cite I have been relying on.
Ah, pervert, you have messed up here. I am not going to trace your error exactly, but there is no way you can have the top 400 paying at a 22.2% rate and the average person paying at at 15.3% rate and get that the top 400 taxpayers are paying 6% of the total collected tax. That just doesn’t add up. What you want to do is multiply their income share of 1.1% by the ratio (22.2%/15.3%) which will get you about 1.6% of the taxes. And, that was before the Bush tax cuts which are estimated to drop their rate to 17.5% which means they will pay about 1.26% of the taxes. Personally, I think a factor of 1.14 is very accurately (if not generously) described as “somewhat higher but not that much”!
[If you want to be sure I did the math correctly, it is easy to check. Assume, for the sake of argument, that the total amount of income earned in the country was $10 trillion. (The amount you assume doesn’t matter since it will appear in the numerator and the denominator and thus cancel out.) Then the top 400 get $110 billion (=$10 trillion X 1.1%) and would have (if Bush tax cuts had been in effect) paid taxes of $19.25 billion (=$110 billion X 17.5%). The taxpayers as a whole would have paid $1.53 trillion (=$10 trillion X 15.3%). If you divide $19.25 billion into $1.53 trillion, you get 1.26%.]
I learned a lot. It is what finally lead me to spend time with that CBO site and run numbers through my own spread sheet.