Fair Share of Taxes?

Off Topic Politics and World Issues
1

You’ll often hear those who lean Left claiming that the “rich” don’t pay their “fair share” of taxes. I suppose it’s all in how you define “fair share”:

http://www.taxfoundation.org/files/ff104.pdf

EXCERPT:

New data released by the IRS today offers interesting insights into the distributional spread of the federal income tax burden, new analysis by the Tax Foundation shows. The new data shows that the top-earning 25% of taxpayers (AGI over $62,068) earned 67.5% of the nation’s income, but they paid more than four out of every five dollars collected by the federal income tax (86%). The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation’s income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns.

Now, to be fair, simply looking at federal income taxes doesn’t give the whole picture. We’d need to look at payroll taxes, earned income tax credits, state and local income, property, and sales taxes and all the rest to get a real handle on who is paying his/her “fair share” and who isn’t.

Still, that’s a pretty skewed distribution of amounts paid. I think that all citizens should shoulder some of the tax burden for public goods. To put it another way, it’s a bad idea for the cart to have more people riding in it than pulling it.

It looks like we’ve achieved Voltaire’s standard for government:

[i]“In general, the art of government consists in taking as much money as possible from one party of citizens to give to the other.”

Voltaire (1764)[/i]

However, if we make the burden of taxation overly disproportionate on the top tier of earners, we’ll need to keep this quote more in mind:

[i]“No republic has long outlived the discovery by a majority of its people that they could vote themselves largesse from the public treasury.”

Alexander Tytler[/i]

Flat tax anyone?

2

Some important information is missing. Well, it’s not really missing, I’m sure it has been carefully deleted.

What tax% does the top 1% pay. Hey, all these numbers and you couldn’t squeeze that one in.

Still, we can deduct one thing. The top 1% earns 21% of the income. So they earn 21 times as much, not as much as low income. No, they earn 21 times as much as average income. 21 times as much.

Suppose the average person makes 100$ a day, they they would make 2.100$ a day. That’s ok. I can live with that. They probably have to work hard. But I doubt they would be working 21 times as hard as me. I know they aren’t 21 times smarter than me. But, it’s ok. I can live with that.

Still

I support a flat tax.

I’m sure none off the filthy rich, with their tax havens and deductions left, right and center pay the same taxpercentage the average Joe is paying.

Not really. Not when you cut the crap and take into account all the reductions and cuts their smart tax counselors have managed for them.

And don’t kid yourself into thinking these people reap in the rewards for the risk they took. They don’t run any risk. They’re job is not going to be outsourced. They’re not going to be reorganized out of a job.

Only when they’re utterly and completely, undeniably, for all the world to see incompetent, and only then, they’ll get a huge golden handshake.

Lord, have pity on the rich.

3

I’m not so sure about the flat tax. At least not on income. Personally, I don’t agree with the Income Tax at all. I wouldn’t argue, as some do, that it’s unconstitutional, but I don’t believe that “legal” equals “right” either.

I’ve been more and more drawn to the idea of the FAIR tax, or a consumption tax. The consumption tax in particular is pretty appealing, since it could reward people for the money they save, which might do a lot to help with poverty rates.

Of course, if you get too crazy with the rates on a consumption tax, it would sharply discourage purchasing overall, which would hurt the economy, so it would have to be a pretty delicate balance.

It would end up with the rich still paying more in taxes, but they would be paying on the things they buy rather than on the money they earn.

4

I am in favor of no income tax and just sales taxes. The government can then be free to set rates for certain goods and services.

Consumption taxes seem a bit more fair to me because consumption does not discriminate. Everyone needs to feed and clothe themselves to a greater or lesser degree.

This would also have the benefit of reducing the size of government assuming it does not have the power to print money.

5

[quote]Wreckless wrote:
Some important information is missing. Well, it’s not really missing, I’m sure it has been carefully deleted.

What tax% does the top 1% pay. Hey, all these numbers and you couldn’t squeeze that one in.

Still, we can deduct one thing. The top 1% earns 21% of the income. So they earn 21 times as much, not as much as low income. No, they earn 21 times as much as average income. 21 times as much.

Suppose the average person makes 100$ a day, they they would make 2.100$ a day. That’s ok. I can live with that. They probably have to work hard. But I doubt they would be working 21 times as hard as me. I know they aren’t 21 times smarter than me. But, it’s ok. I can live with that.

Still

I support a flat tax.

I’m sure none off the filthy rich, with their tax havens and deductions left, right and center pay the same taxpercentage the average Joe is paying.

Not really. Not when you cut the crap and take into account all the reductions and cuts their smart tax counselors have managed for them.

And don’t kid yourself into thinking these people reap in the rewards for the risk they took. They don’t run any risk. They’re job is not going to be outsourced. They’re not going to be reorganized out of a job.

Only when they’re utterly and completely, undeniably, for all the world to see incompetent, and only then, they’ll get a huge golden handshake.

Lord, have pity on the rich.[/quote]

There is an entirely simple reason for this:

Once it is established that the government can legally steal, the rich can play that game too.

Just far, far better than the average guy.

I don`t blame them.

6

[quote]Wreckless wrote:
Some important information is missing. Well, it’s not really missing, I’m sure it has been carefully deleted.

What tax% does the top 1% pay. Hey, all these numbers and you couldn’t squeeze that one in.

Still, we can deduct one thing. The top 1% earns 21% of the income. So they earn 21 times as much, not as much as low income. No, they earn 21 times as much as average income. 21 times as much.

Suppose the average person makes 100$ a day, they they would make 2.100$ a day. That’s ok. I can live with that. They probably have to work hard. But I doubt they would be working 21 times as hard as me. I know they aren’t 21 times smarter than me. But, it’s ok. I can live with that.
[/quote]

Check your math. Say, that we have 100 people and $100. 1 person would make $21 and the other 99 people share the remaining $79. Therefore, each person would make $0.80 and the 1 person would make $21. 21/.8 = 26.3. Therefore, they make 26.3 times as much. That is even worse.

7

[quote]Chewie wrote:
Check your math. Say, that we have 100 people and $100. 1 person would make $21 and the other 99 people share the remaining $79. Therefore, each person would make $0.80 and the 1 person would make $21. 21/.8 = 26.3. Therefore, they make 26.3 times as much. That is even worse.

[/quote]

Actually they make .263*(The number of people in the population) times as much.

Aside from that, I think it is obvious that the current tax system needs overhauled.

Right now, I support a flat tax on ALL income. x% on wages, x% on capital gains, forget about unearned income and earned income, it should all be the same. This should get rid of all the loopholes that business owners, hedge fund managers, and mutual fund managers use to lower thier effective tax rate. I would then bring back Bush’s Lifetime Savings Account idea (in addition to ira’s and 401k’s), so that we can still save some money completely tax free. If I remember right, an LSA let you put up to 7500 after tax dollars into any approved account (the same types of investments allowed in IRA’s) and it would grow tax free. You can also withdraw the money at any time without paying taxes or penalties.

I really like the idea of a consumption tax and no income taxes, but I am on the fence with the FairTax act. For instance, I for one would stock up on anything and everything I could before the tax was enabled, leading to low tax revenues in the beginning (assuming many others did this too). I would also buy everything except my necessities used, so that when you throw in my “prebate”, I am paying $0 in taxes, unless I spend enough on things like utilities, gas, insurance, food, mortgage interest profit margin, to take my spending over poverty levels.

Other fundamental issues I can think of are people on the US/Canada border shopping in Canada (How do you regulate this?)

Mailing a prebate check to the homeless and others without a physical address?

Running a legitamite business that is not profitable?

8

[quote]tedro wrote:
I would then bring back Bush’s Lifetime Savings Account idea (in addition to ira’s and 401k’s), so that we can still save some money completely tax free. If I remember right, an LSA let you put up to 7500 after tax dollars into any approved account (the same types of investments allowed in IRA’s) and it would grow tax free. You can also withdraw the money at any time without paying taxes or penalties.
[/quote]

Clearly you are a fool. If I have learned anything from the Democrats’ arguments against Bush’s savings plan, it is that people cannot be trusted with their own money. Plus, if people are allowed to save their money tax-free, some insurers might lose money, so of course that would NEVER WORK. Also, the plan is associated with Bush, therefore is is doomed to failure.

Source:
http://www.boston.com/business/articles/2005/01/20/life_insurers_fighting_major_bush_initiative/

9

[quote]MrRezister wrote:
But the White House plan, which is coveted by the mutual fund industry as a potential bonanza, so far has faltered largely because of the opposition of the American Council of Life Insurers, which fears the idea could cost it billions of dollars of business.
Source:
http://www.boston.com/business/articles/2005/01/20/life_insurers_fighting_major_bush_initiative/[/quote]

Whole life insurance is typically a bad investment these days anyways. Term life for the period you have dependants and a long-term savings account plus contributions to a 401k and/or ira will yield more money for most people, unless of course you die young.

10

[quote]LIFTICVSMAXIMVS wrote:
I am in favor of no income tax and just sales taxes. The government can then be free to set rates for certain goods and services.

Consumption taxes seem a bit more fair to me because consumption does not discriminate. Everyone needs to feed and clothe themselves to a greater or lesser degree.

This would also have the benefit of reducing the size of government assuming it does not have the power to print money.[/quote]

I have no issue diplacing IRS workers. I am in favor of the sales tax. It is elegent in it’s simplicity. Atually, there is a movement for such a thing, it’s called “Fair Tax”

11

[quote]Wreckless wrote:
Some important information is missing. Well, it’s not really missing, I’m sure it has been carefully deleted.

What tax% does the top 1% pay. Hey, all these numbers and you couldn’t squeeze that one in.

Still, we can deduct one thing. The top 1% earns 21% of the income. So they earn 21 times as much, not as much as low income. No, they earn 21 times as much as average income. 21 times as much.

Suppose the average person makes 100$ a day, they they would make 2.100$ a day. That’s ok. I can live with that. They probably have to work hard. But I doubt they would be working 21 times as hard as me. I know they aren’t 21 times smarter than me. But, it’s ok. I can live with that.

Still

I support a flat tax.

I’m sure none off the filthy rich, with their tax havens and deductions left, right and center pay the same taxpercentage the average Joe is paying.

Not really. Not when you cut the crap and take into account all the reductions and cuts their smart tax counselors have managed for them.

And don’t kid yourself into thinking these people reap in the rewards for the risk they took. They don’t run any risk. They’re job is not going to be outsourced. They’re not going to be reorganized out of a job.

Only when they’re utterly and completely, undeniably, for all the world to see incompetent, and only then, they’ll get a huge golden handshake.

Lord, have pity on the rich.[/quote]

IF you put excesve tax burden on the rich, they leave. The Beatles did it in the sixties, the Venezuelans of means are leaving in masse, it happens everywhere. The problem is that these are the same people who own businesses, sell services and provide jobs. If you have a job, you are likely working for rich people, or the government.

12

Not that I’m complaining (and not that it affects me at all), but this is somewhat unsurprising - from today’s WSJ editorials:

[i]Reid’s Tax Hedge
October 10, 2007; Page A20

Three months after Democrats made headlines with a plan to double the taxes on hedge funds and private equity, Senate Majority Leader Harry Reid seems to have had a change of heart. On Monday, the Nevada Senator indicated he won’t follow through on the tax-the-rich plan, demurring that the Senate is awfully busy.

This is a little awkward for a party that has made income inequality a campaign staple. But the turnabout isn’t so mysterious in an election season when Wall Street moneymen have made more than $6 million in political donations, with most going to Democrats, especially a certain Senator from New York. Hillary Clinton’s main Presidential competitors, Barack Obama and John Edwards, were particularly dismayed yesterday at the bill’s demise, as it happens. Though she’d endorsed the idea in the past, Mrs. Clinton was mum.

Not to say we’re sorry to see the issue die, even if it is destined to return. The tax hike, which would raise the rates on “carried interest” to 35% from 15%, is hardly what fragile credit markets need. New York Democrat Charles Schumer also exercised a bit of political jujitsu to finish it off. Mr. Schumer proposed his own bill this week that would have raised the tax rate not just on private equity but also on other “partnerships” that pay the 15% rate, such as real estate and oil and gas.

Broadening the base of tax targets would have made it a heavier lift for Senator Reid, with his majority of only 51 in the Senate and an election not so far away. The question is what happens if there are 57, or perhaps even 60, Senate Democrats in 2009. Somehow we doubt those Wall Street campaign checks will stop Mr. Reid then.[/i]

13

Some further interesting info. Taxes on the bottom seventy-five percent have gotten a lot smaller, while taxes on the top one percent are the same as they were in 1990

graph taken from here:
http://gregmankiw.blogspot.com/2007/10/average-income-tax-rates.html

14

Also, top earners can afford their own insurance, private schools, food, medical treatment etc and do so.

Non top earners use the taxes for medicare/aid, public hospitals, public schools, etc.

Why should the wealthy be expected to pay money in to a system they don’t use to the same extent as others? It’s bullshit.

15

I would like to see the rate for the top 0.1%, I bet its lower than the top 1%.

Also keep in mind that the chart does not include social security tax, which would lessen the gap between those with incomes over $97,500 and those with lower incomes.

16

I found this while trying to answer my own question. http://www.taxfoundation.org/files/wp1.pdf

[i]
While the U.S. tax system is progressive, the distribution of government spending makes
the overall fiscal system more progressive than is apparent from tax distributions alone.
Using a microdata model we estimate the distribution of federal, state and local taxes and
spending between 1991 and 2004. We find households in the lowest quintile of income
received roughly $8.21 in federal, state and local government spending for every dollar of
taxes paid in 2004, while households in the middle quintile received $1.30, and
households in the top quintile received $0.41. Overall, tax payments exceeded
government spending received for the top two quintiles of income, resulting in a net
fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes
and spending appear to have large distributional effects on households, and these effects
have grown since 1991. The results suggest tax distributions alone are an inadequate
measure of progressivity, and policymakers should examine both tax and spending
distributions when judging the overall fairness of policy toward income groups.
[/i]

If that doesn’t make you want a flat tax or consumption tax I don’t know what will. Social welfare programs will make a flat tax progressive anyways.

17

Well the first thing we need to do is quit all this class warfare. There is a gap between people paid a lot and those who are not paid as much. Well duh.

There actually is a difference between the wealthy and the poor. And what is funny is that the differences are put out for everyone to see, but instead of following the advice, many are just complaining about how much they have.

This is called being jealous.

Why should the brain surgeon make more then the guy sweeping the floor? Probably because the brain surgeon spent years developing a skill that is marketable. Then again there are people who started cleaning floors, and now make a lot more then that brain surgeon.

Locally we had a guy that started in a car wash, and eventually bought the car wash and a car dealership also. There are people who started working at McDonald’s, and ended up owning one or more.

The difference? Focus and delayed gratification. About 90% of the wealthy are first generation rich, meaning they earned it themselves. They did not inherit it, or get it as a gift.

The rich also work 60 - 80 hours a week, while the average person works less then 40.

I know a person who has 2 car payments equaling over a grand a month in payments. If that was put into a mutual fund instead, that would be worth a million in just over 20 years.

Most people are not wealthy because they do not want to do what the wealthy have done. They do not want to delay gratification, they want it now, and that credit card will get it now. No wait. They will just be paying for it 10 years after �??it�?? no longer exists. Some people are still paying for a meal they had last millennium.

Just watch this guys new show tonight:

http://www.foxbusiness.com/our-team/personalities/dave-ramsey.html

18

[quote]BostonBarrister wrote:
Some further interesting info. Taxes on the bottom seventy-five percent have gotten a lot smaller, while taxes on the top one percent are the same as they were in 1990

graph taken from here:
http://gregmankiw.blogspot.com/2007/10/average-income-tax-rates.html

[/quote]

In the mean time however the top 1% is making a lot more money than in 1990. So they pay the same taxes, but on a larger income.

The income of the lower 50% hasn’t risen that much, perhaps not at all.

19

[quote]pat36 wrote:
Wreckless wrote:
Some important information is missing. Well, it’s not really missing, I’m sure it has been carefully deleted.

What tax% does the top 1% pay. Hey, all these numbers and you couldn’t squeeze that one in.

Still, we can deduct one thing. The top 1% earns 21% of the income. So they earn 21 times as much, not as much as low income. No, they earn 21 times as much as average income. 21 times as much.

Suppose the average person makes 100$ a day, they they would make 2.100$ a day. That’s ok. I can live with that. They probably have to work hard. But I doubt they would be working 21 times as hard as me. I know they aren’t 21 times smarter than me. But, it’s ok. I can live with that.

Still

I support a flat tax.

I’m sure none off the filthy rich, with their tax havens and deductions left, right and center pay the same taxpercentage the average Joe is paying.

Not really. Not when you cut the crap and take into account all the reductions and cuts their smart tax counselors have managed for them.

And don’t kid yourself into thinking these people reap in the rewards for the risk they took. They don’t run any risk. They’re job is not going to be outsourced. They’re not going to be reorganized out of a job.

Only when they’re utterly and completely, undeniably, for all the world to see incompetent, and only then, they’ll get a huge golden handshake.

Lord, have pity on the rich.

IF you put excesve tax burden on the rich, they leave. The Beatles did it in the sixties, the Venezuelans of means are leaving in masse, it happens everywhere. The problem is that these are the same people who own businesses, sell services and provide jobs. If you have a job, you are likely working for rich people, or the government.[/quote]

I work for somebody. And he’s rich compared to me. And don’t pity him though.

Excessive tax burdon? The top 1% pays nearly 40% of the tax but has over 21% of the income. So their tax burdon is twice that of the average Joe? Is that excessive?

And if the rich are leaving everywhere, where are they going to?

20

[quote]tedro wrote:
I found this while trying to answer my own question. http://www.taxfoundation.org/files/wp1.pdf

[i]
While the U.S. tax system is progressive, the distribution of government spending makes
the overall fiscal system more progressive than is apparent from tax distributions alone.
Using a microdata model we estimate the distribution of federal, state and local taxes and
spending between 1991 and 2004. We find households in the lowest quintile of income
received roughly $8.21 in federal, state and local government spending for every dollar of
taxes paid in 2004, while households in the middle quintile received $1.30, and
households in the top quintile received $0.41. Overall, tax payments exceeded
government spending received for the top two quintiles of income, resulting in a net
fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes
and spending appear to have large distributional effects on households, and these effects
have grown since 1991. The results suggest tax distributions alone are an inadequate
measure of progressivity, and policymakers should examine both tax and spending
distributions when judging the overall fairness of policy toward income groups.
[/i]

If that doesn’t make you want a flat tax or consumption tax I don’t know what will. Social welfare programs will make a flat tax progressive anyways.[/quote]

I doubt they took into account the raise in stock the war industry experienced after Bush invaded Iraq.
How much money did that put in the pocket of the average Joe? And how much in the pocket of the top 1%?