Tax Burden Continues to Shift from the Wealthy to the Working Class

This Ralph Nader article examines our present tax system and the state of our distribution of wealth and argues that America has a problem and our economic growth, our middle classes, and our working classes all suffer as a result of these conditions.



Using facts and statistics to support your opinions answer the following questions:

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?

Eeyore raises some important issues with taxation schedules and income distributions ... and Ralph Nader. But there may be problems debating these issues, both in the question-formulation, and the answering.

We all know that tax codes are massively bloated (whether they please or annoy us). Throwing Ralph into it doesn't make it any more approachable. I'm going to try a slightly different tack with Eeyore's questions, by trying to show ... complications in them.


Is "percentage" actually the whole story? Is it even the 'correct' story?

No. Rich people pay a lot of taxes. The idea that they should pay a percentage is just that ... an idea. Indeed, right now the idea of a flat tax is in the air.
Flat tax, sales tax unlikely ...

True, the flat tax does not look like a strong comer, but it serves the point. There is an implied assumption that the "percentage" can be taken as the measure by which we can rate the true performance of the rich. Actually, several other different ways of taxing are possible & common, and would completely alter the conclusion reached on the basis of percents.


Tax burdens do shift, quite often without anybody actively causing or creating the shift. If someone is conniving the tax distribution, that's an 'issue': if the shift is a natural, i.e. non-manipulated process, then it is just a 'phenomenon'. To be able to point at some set of changing numbers doesn't necessarily implicate the administration.


If real harm is judged to be coming to society, then there is a duty on the part of government to redress the harm. It does not, though, mean their action must address the original problem: their responsiblity can be met by preventing harm, without instituting reform. I think this 'device' is actually quite common.

To illustrate, if exploitative employers are working employees' fingers to the bone and many people are becoming crippled, dying of gangrene, then harm is being done. Government does not have to go after the avaricious employers: they can instead simply see to better bandages, ointments, medical monitoring, etc. The exploitation continues.

I am actually strongly biased to Eeyore's point of view & intended message. I think part of the reason why these concerns are able to remain issues, instead of being solved, lies in the complications that arise, trying to get a firm grip on them.

This is hard is show in chart form on AD. However, the charts can be viewed at: National Tax Payers Union


2002
Top 1% - Percentage of America based on AGI
$285,424 - Earnings thresholds, based on AGI
33.71 - Percentage of Personal Income Tax Revenue

Top 5% - Percentage of America based on AGI
$126,525 - Earnings thresholds, based on AGI
53.80 - Percentage of Personal Income Tax Revenue


Top 10% - Percentage of America based on AGI
$92,663 - Earnings thresholds, based on AGI
65.73 - Percentage of Personal Income Tax Revenue

Top 25% - Percentage of America based on AGI
$56,401 - Earnings thresholds, based on AGI
83.90 - Percentage of Personal Income Tax Revenue

Top 50% - Percentage of America based on AGI
$28,654 - Earnings thresholds, based on AGI
96.50 - Percentage of Personal Income Tax Revenue

Bottom 50% - Percentage of America based on AGI
<$28,654 - Earnings thresholds, based on AGI
3.50 - Percentage of Personal Income Tax Revenue

(Note AGI = Adjusted Gross Income, Source is IRS)

Now if you go to the link above you will see that from 2000 to 2001 the tax burden did shift very slightly from the rich to the lower categories and shifted slightly back towards the rich in 2002. When you look at the 1999 numbers you see that the burden was even higher on the lower categories at that time.

What this chart shows is that the upper 50% of wage earners in America pay 96.5% of the taxes, with the upper 1% paying 33.71% of the taxes on it's own. That 33.71% paid by the upper 1% is over 10 times the amount paid by the lower 50%.

Something else to consider is the growing number of Zero-Tax Americans.



A complete chart and analysis of Zero Tax Filers is Available: here

Here's an interesting blurb from that same article:




Using facts and statistics to support your opinions answer the following questions:

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

No. The top one percent of the wage earners pays 33.71% of all the Income tax revenues collected by the IRS. 1% of wage earners pay slightly over 1/3rd of all taxes. Now using the chart, if we do a little math, the TOP 50% of wage earners pay 96.50% of the taxes, subtract the 33.71% paid by the TOP 1% and we get a new total of: 62.79%. So, the top 49% of wage earners pay 62.79% of the taxes. This group makes up the vast majority of America and yet they only pay twice what the top 1% of wage earners pay in total personal tax revenues collected. As for the burden being on the poor, the lower 50% of America pays 3.50% of the taxes, and I can tell you from personal experience that that number is only on the very top of that group because as you go lower in income (Late year's limit was 28,000.00 I believe), families qualify for the Earned Income Tax credit and actually get more back then they had withheld. In my case, last year I had a refund of well over $2000.00 when I had only paid in about $600.00 or so in withholding (can't remember exact numbers and I am too lazy to dig them up in the file cabinet ).

So the answer to this question is No.

Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?

Look at the charts on the link I provided. since 1999, it has shifted back and forth but it more often shifts in favor of the lower incomes.

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?


I don't see that there is anything to adjust. Well actually I do, I think the upper incomes are way over-taxed. I think a flat tax would serve the country better so long as a limit of say $30,000.00 a year was applied. Meaning if a family made less then that, they didn't pay the tax. There should also be consideration for retirees. However, an even better plan would be a national sales tax, so long as there was a system in place to deal with the regressive nature of it by exempting the lower incomes (say $30,000 a year again) and Retirees. However, currently without the upper 1% we would have collected 1/3 less in total personal income tax revenues. It seems to me, if 1% pays 33+% of the taxes then they are definitely paying "their share".

Now corporate taxation is another issue. Since the vast majority of us get our paychecks from Corporations (with the exception of many in the top 1%), it is beneficial to us and society as a whole if the Corporations are more financially solvent and have more assets. So, IMHO Society would be best served if we dramatically reduced corporate taxes. It would help domestically, both by making companies financially stronger and by making foreign countries less attractive.

source

One thing that continues to damage this country is the idea that the Wealthy and the Corporations don't pay "their fair share". The more we attempt to take from them, the more they invest overseas. We have to open our eyes to the realities of problems our tax laws cause us.

Source


Thankfully, even congress can see it when the writing on the wall is that bad and:

Source

But the damage had already been done. How many of those working class American boat builders cheered congress for making the rich pay "their fair share"? Do you think they cheered from the unemployment line or waited until they got home?

I don’t find where the National Tax Payer’s Union page Overlandsailor presented answers any of the questions Eeyore posed at the beginning of this thread. To do that, I would need much more information. For instance, I would first need to know just how much income can be claimed as non-taxable in the AGI model. Next, I would have to find out if it’s possible to increase wealth, but not consider that increase as income according to tax codes. Can the poor and middle class use these “adjustments” as effectively as wealthier citizens?

I think income disparity might play a part in the percentages offered up by the National Tax Payer’s Union, too. Unfortunately, I’m too limited in time and access to answer this question. I only have my internet search engine, and actual data about US income disparity is rare and dated. The best picture I could get is that the wealthiest two-fifths of Americans took home about 70% of the income pie in the late ‘80’s, early ‘90’s. If we combine this with the amount of income, or increased wealth people do not pay taxes on, would the actual percentages of tax paid more closely reflect the amount of actual income earned?

Could this increasing number reflect the number of people earning less wages in a job market of shrinking manufacturing jobs and more service type jobs? Unfortunately, lower wages among the working class means that they pay fewer taxes and seek out more government services. This should, I think, increase the tax burden on both the middle and upper classes.

First of all, I was under the impression that the majority of Americans were employed by small business, but I may be wrong. Also, considering the argument that corporate taxes make products more expensive because the consumer absorbs the cost, how should this affect the solvency of a corporation? Plus, do we have an example of tax breaks that have directly resulted in higher worker wages or lowered costs at the check out line?

Honestly Overlandsailor, I agree that the tax codes need work, but I don’t see how cutting corporate taxes is going to make these same corporations keep their operations in the US. Removing taxes that are added into the cost of a product in the first place isn’t about to change minds. After all, we already offer tax loopholes for companies to move offshore;

http://techpolicy.typepad.com/tpp/2004/03/...reaks_for_.html

Then, we can add in the fact that many corporations are already paying fewer US taxes, or not paying at all because of loopholes according to this article;

http://www.ctj.org/corpfed04pr.pdf

Taxes certainly may have played a role in that, but weren’t luxury boat sales strong in previous years resulting in a satisfied market, and wasn’t that year, 1991, in the midst of a recession?

There are so many factors that affect the economy that I can hardly grasp all of the causes and effects of change. I'm just a blue collar, working stiff with little education, and I don’t profess to know the answers, but I do want to learn. Hopefully, answers to my questions will lead me to a better understanding of this issue.

I think it is disingenuous, not to mention bad maths, to compared percentile income distributions to percentage of federal income taxes paid.

In overlandsailor's figures, the top 1% of earners pay 33.71% of the taxes. But what is their share of the income? It might not be 33.71%, but anyone who thinks it is as low as 1% is deluding themselves.

In other words, a fairer comparison, and a stronger case, could be made by comparing percentile of earnings with percentile of tax contribution, or share of total income with share of total taxes paid by percentile. But I have never seen such figures compiled - largely because the comparison is usually done by people who are, or who aspire to be, in the top few percentiles by income, and who don't think progressive taxation is fair to them.

For example, nobody who makes this argument is foolish enough to suggest that the middle and lower classes do not pay enough income tax (which is the underlying implication of suggesting that the upper classes, by income, pay more than their fair share).

The only example I could find that compares like with like is here. The figures are a little old, but they suggest that the top 1% of earners pay 33.89% of all income tax while earning 17.53 percent of all the income - i.e. they pay twice as much as is strictly "fair" if "fair" means everyone pays the same.

The author then goes on to analyse how estate taxes and capital gains taxes (which affect the rich more than middle- or low-income families) have different effects, leading to an overall federal taxation positon where

Still not "fair", but demonstrably fairer than is indicated by saying that the top 1 percent of earners pays 30-odd percent of the taxes.

Fool here! Where do I sign?

Kidding aside, I think a very valid argument can be made for this. The argument starts off with the assumption that people should only get out of government goods and services equal to the value that they put in. Otherwise, you are by definition receiving goods and services that someone else paid for--how is that 'fair'? Then, when you look at the tax breakdowns provided by Overland Sailor, you can clearly see that, by this measure, the top 50% of wage earners pay for 96.5% of all government goods and services, yet the bottom 50% of wage earners, who only pay for 3.5% of the goods and services, receive the majority of them. This is inherently 'unfair'. Am I arguing that the tax code should be modified to reflect this? No. Obviously, that wouldn't work. But it is frequently worthwhile to flip a question on its head and view things from the opposite perspective. I do think it quite worthwhile to view things from this perspective before making any comments about those in the higer tax brackets not paying 'their fair share'--when you look at what they put in, vs. what they get out , it is obvious that such statements have no merit, and also that the government is clearly involved in income redistribution. You can argue whether or not that is a good thing, but it is inarguable that that is in fact what is occurring. I think it is further worthwhile to remember that when programs seek to provide additional goods and services financed by taxes on the 'rich'--or, for that matter, financed by any group other than the one receiving the goods and services, they are doing nothing more than giving something to one group and having another group pay for it. Again, the argument over whether that is a good thing or not is completely separate from the statement that that is in fact what is occurring. I am not seeking to debate the merits of the system, but rather to illuminate the process for what it is, since I think this basic concept gets lost in debates such as these (oh, yes, and to play a little devil's advocate, just for fun ). So, before ranting about the rich not paying enough in taxes, please remember that they pay far more in taxes than they receive back in services. Now, I know there are going to be plenty of responses of the nature 'Oh, but look at all the government kickbacks they receive!'. While I don't discount that this is the case, it doesn't detract from the proposition that the top wage earners pay the majority of taxes, while the bottom wage earners receive the majority of services.

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?

Almost every single government program is based on this concept, so, if the answer isn't 'yes'--we, and every other country on earth, have some serious rethinking of the role of government to do. In effect, government is set up to harness the income generating power of the top wage earners to provide goods and services for lower wage earners. So, the government is completely structured to redistribute income. If the answer to this question is 'No', then the entire system would need to change. However, it would be quite nice if people would recognize it for what it is.

I'll have to dig up some additional statistics to answer Eeyore's other questions, so, after my tarring and feathering, I'll try and address those later.

Perceptive and persuasive points, Hobbes but even this is not the whole story. Critically, you're missing out a sense of time

A top wage earner, chances are, wasn't always a top wage earner. Most people start at (or near, or near-ish) the bottom and work their way up, so at least some of the apparent unfairness of their shouldering of the bulk of the tax "burden" is in fact perfectly fair pay-back for when they were more a receiver than a giver.

Every single person who has ever attended a state-funded school or driven on a state-funded road falls into this category, not just those who may have received welfare at some point.

Similarly any top wage earners who may at some notional future point need to rely on, or merely use, state-funded services, even unintentionally, might balance out the apparent "unfairness" of their current situation by doing so.

Personally I think taxes should be viewed with this latter point strongly in mind - they aren't just a simple and immediate transaction with the state for the services I currently use - they are also an insurance against services I might need to use at some future point.

For example, I don't at this precise moment feel the need to be defended by the Navy against a seaborne attack. But neither do I think the Navy is a waste of my taxes that justifies the Navy being axed so my taxes can be lowered, because I accept as real the possibility of such an event, however improbable it may seem.

In the light of all this, your argument only really indicates those that have never used, and are never likely to, any part of the public sphere should have lowered taxes. For example, Paris Hilton, or Dylan Zeta-Jones-Douglas.

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?
No. As has been shown, they pay a somewhat higher percentage. At least, they do on the declared income that isn't funnelled to secretive tax havens abroad, which many (but not all) do. [remarks]If people can cite large-but-by-definition-uncountable numbers of illegal immigrants are evidence of a terrible and massive problem, then surely I can claim large-but-by-definition-"legal" tax-avoidance schemes as a problem too?[/remarks]

Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?
It appears so, just as it appears that the burden shifted towards the higher earners under the Clinton administrations. I can make no comment except to facetiously observe that the US economy did very well under the "high-tax" Clinton regime, and has staggered somewhat in its recovery under the "low tax" Bush regime.

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?
It creates serious social problems, but appears to be largely tangential to the success or otherwise of the economy.

Julian, you're absolutely correct. It is bad math, and it is disingenuous, and it's done strictly to justify the position of those "rich" who want to lower their tax bills.

This article, from The Moderate Independent, debunks the statistics used by by Rush Limbaugh, to prove that "the rich" pay a disproportionally large share of this country's tax bill. The numbers that Limbaugh uses are from the 2000 and 2001 tax years, so they are a few years behind OverlandSailor's, but the basic argument from OS and Limbaugh are nearly identical. It's a bit of a long read, but it's well written, and easy to understand.

Also, the closest I've come to what I think you were asking about - a percentage by percentage comparison of income to taxes in the highest incomes - I found at the Office for Social Justice webpage, a Catholic economic service organization based in Minneapolis.



In natural shifts, that may be the case, OS, but what about the latest rounds of tax cuts. Let's see, we're eliminating the inheritance tax, and have already greatly reduced the rates paid on dividends (a 25% cut) and capital gains (a whopping 62% reduction).

Only little more than half of American households own stock either directly or through mutual funds. However, over 86 percent of the value of all stocks and mutual funds, including pensions, was held by the top 10% of households. But, the top 1% of Americans owned 47.7% of all stock, while the bottom 80 percent owned 4.1 percent. Nearly 35% of all stock market gains went to the top 1% of shareholders. 64% of American households have stock holdings worth $5,000 or less, or own no stock at all.

So, as far as capital gains and dividends go, I would say that we've definitely shifted tax relief towards the wealthy.

Using facts and statistics to support your opinions answer the following questions:

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

The simple answer to this is a flat out NO. As a matter of fact, The chart below shows that the "extremely wealthy" are taxed at a rate that is eight hundred and forty-nine percent higher than the bottom 50% of wage earners. That's just the tax rate, not the actual income tax payed.

Source: http://www.taxfoundation.org/prtopincometable.html

Data:

• Top 1 %
  • Income: >$285,424
  • Percent of tax payed: 33.71%
  • Percent of Income: 27.25%
• Top 5 %
  • Income: >$126,525
  • Percent of tax payed: 53.80%
  • Percent of Income: 22.95%
• Top 10 %
  • Income: >$92,663
  • Percent of tax payed: 65.73%
  • Percent of Income: 20.51%
• Top 25 %
  • Income: >$56,401
  • Percent of tax payed: 83.90%
  • Percent of Income: 16.99%
• Top 50 %
  • Income: >$28.654
  • Percent of tax payed: 96.50%
  • Percent of Income: 14.66%
• Bottom 50 %
  • Income: <$28,654
  • Percent of tax payed: 3.50%
  • Percent of Income: 3.21%

Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?
Hopefully. Really, though, this question is fairly slanted (although not as slanted as the next).

We all know that budgets are passed by the Congress. We also all know that the IRS falls under Title 26 of the US code.

Certainly I do not need to explain that the Congress passes the laws that constitute the US Code. Certainly I do not need to explain that the president, the "Executive" (or the "administration" to which it is referred in this case), is charged with executing the laws.

Regardless of the direction the US Code regarding federal income tax has taken, the credit/blame lies squarely on the Legislative branch, that being the Congress-- not the "Administration."

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?

Wait, wait, wait. Let me rephrase this question:

Does the naturally uneven distribution of income caused by varying skill levels, work ethics, and localized economic conditions cause so many problems that we need the federal government to redistribute income in another fashion, presumably via the already unfair but apparently not unfair enough tax code?



The only government involvement in the distribution of income that the Constitution or I personally support is the absence of government involvement in the distribution of income. I see absolutely no clauses in there that state that the Congress can level the playing field via the tax code, or that they even have the right to try to level the playing field via the tax code.

I think we all need a good lesson in a limited, restrained federal government.

Mike

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

I remember this coming up in opinion journal when Teresa Heinz-Kerry released her 2003 taxes. This is NOT a rip on TH Kerry, as I believe the same would be true for many millionaires, it's just good for illustration.

For someone worth more than $1 Billion, earning about $5 million per year, her rate is lower than the average rate, at only 12.4%. Not 27, 33, or even 25%, but 12.4%. Because she lives off of investments and trusts, she pays a sheltered rate. Not to mention that her payroll taxes, and Social Security taxes are no more than a token, a joke really vs. those that work for a living.


Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?

People who work for a living, be it white or blue collar, don't have tax dodges, tax shelters, tax lawyers, whatever. We pay taxes on what we earn. We hope that we earn enough to invest a little and not get burned paying taxes those investments. After all, we already paid tax when we earned that money in the first place. Then, we risk the money in a business or investment, and it gets taxed again? Why? Our investment dollars allow companies to create jobs by hiring people and purchasing capital equipment.

Tax reform needs to be radical, either a flat or consumption tax. Our current system is only good for the lawyers. Taxing "wealth" doesn't do anything but encourage the hiding and moving of wealth and class envy. Progressively taxing income discourages incentive to earn more income. A fair, flat tax is the only way to go.

My heart is all a flutter that this got picked up. Thank GOODNESS the election in over.

I have a lot of links and more passion than logic for starting this. But I have done too much research and have too little structure in mind.

Starting point.

When all taxes federal, state, local, beer, gas, SSI, and Medicare etc. are figured in, I am becoming convinced that our tax policy actually contributes to the growing inequality of wealth in our society.

The most depressing thing about this in my mind is that we have come to believe that our tax policies are inherently biased against the wealthy and are in fact part of a form of class warfare against the wealthy that needs to be addressed to create a fairer society.

While we hold these beliefs it seems that things get even tougher, per tax policy on the poorest Americans.

Here come the links!





Those two are from this article.
For Richer
Bear with me that is the only subscription link.


Please look for the interesting graphics.
U.S. Income Distribution & Class Structure



AMERICA: WHO STOLE THE DREAM?

And when Social Security taxes are figured in the poor pay a regressive tax on their first dollar of income.


Working poor suffer under Bush tax cuts


And . . . . from the CATO institute, Social Security seems to punish the working class that it supposedly benefits.

Privatizing Social Security: A Big Boost for the Poor

And a reference to one of my favorite books, Perfectly Legal by David Cay Johnston.



TAXING THE POOR

To be confusing



Redistribution of Income

And a comment on reverse class warfare



TAX REFORM AND CLASS WARFARE

And of course then there are the tax loop holes available to the wealthy that are being looked into with a less than investigative eye by the IRS.



I.R.S. Loophole Allows Wealthy to Avoid Taxes

These are some of the results of my research today. Three hours is enough. I'll chime in an a more focused manner later. Please humor me and look at some of the links.

What does this show? That the rich get richer faster than the poor get richer. Big surprise there. These numbers are overinflated BTW because the rich can also lose large amounts of money much faster than the poor can.

http://www.cato.org/dailys/04-18-04.html





Subsidies meaning tax breaks (we will take less of your money) and social programs meaning handouts (have this other guys money). It's funny that someone would relate the two as if they are equal in stature (nevermind it's MM doesn't surprise me).



Another misleading article by citing number's on a specific date that overinflates (or rather underinflates) the real average. As shown in your first article, the average income has increased since 1980. Still this doesn't have anything to do with what percentage of taxes they pay in reference to their income, most of the articles you linked to are about an increase in wealth distribution that also do not take into account an increase in wealth overall.

Use this link for reference.

http://www.census.gov/hhes/income/histinc/h11.html

This only proves that the rich are often able to garner more wealth than their counterparts long ago which translates into more wealth for the average person and has. This has nothing to do with the amount of taxes they pay. People who make under $20,000 hardly pay a dime to the federal government.



What it doesn't tell you is that the employer actually pays for your SS on the money you make.

http://www.kiplinger.com/books/taxupdates.html



In other words an employer pays 6.2% of your own social security and THEN pays another 2% of there own (if they make over $288,000). Given that only pertains to employers, but if you make over $288,800 I doubt you are going to depend on SS for your retirement fund. SS wasn't meant to pay for a retirement in it's entirety the first place.



As opposed to private investment? Of course SS is not going to give the returns of private investment. So I take it you support the administrations plan of privatizing SS?



This is flat out misleading from the get go. While it is true that the min. wage has fallen since the 70's it's a complete lie to say that the average (median) income has fallen. You CANNOT use min. wage as a starting point. I'm glad the government has not risen the min. wage because it's been left behind and forgotten, even McDonalds starts out at $7.00/hr. Minimum wage should be abolished because it drives down real wages and increases inflation. The only people that benefit from min. wage are illegal immigrants and the companies that higher them.



Did you even understand what you posted? This state's that the government required private firms to increase nonwage compensation and to pay higher payroll taxes. Meaning that companies burden a higher percentage of the cost of employee benefits and the taxes they pay and implies this has leaded to lower wages for the employee. Which is probably true. In other words the employer has to pay a higher percentage for health insurance (as an example) than in the past which translates into less money for the employer as well as for the employee.

A company can only expand when it's bottom line expands. If you take away from that bottom line by requiring the employer to pay for a higher percentage in nonwage compensation and of their payroll tax that immediately take's away from their bottom line.



This is basically saying the more money a business has the more they will give to the employee. In other words if there was no payroll tax incomes would be higher. That's a given and also why I'm with carlitoswhey that a flat or consumption tax should be passed. This is primarily supported by Republicans in congress.

NOTE : For some reason when I put this in the standard quote format it takes away the quoted format from the rest of my post.

QUOTE
Through a technique invented by a lawyer in New York and a chemical engineer in California, each dollar spent on this insurance can typically eliminate $9 in taxes. Spend $10 million on this insurance, avoid $90 million or more in income, gift, generation-skipping and estate taxes.
QUOTE

This was already demostrated by carlitoswhey. The only real way around this for the government without minimizing "good deeds" is a flat or consumption tax.

OK so after all of that what does this have to do with the rich paying less taxes than the poor? As already demonstrated by Mike with actual numbers and percentage of income the rich pay a higher percentage of taxes than the lower income brackets. Given the rich normally find ways around this through tax shelters, investment incentives, and tax write-off's (such as donating to the salvation army).

My point with social security is that it places an undue burden on the people it is supposed to help, especially after the 1983 system that was supposed to create a surplus in the system and was used to fund the government with a regressive system. Where are those 25 years of surpluses now that were supposed to justify the increases to the regressive taxation system in the payroll taxes.

While the employer does pay the the payroll taxes for his employee and the wages and the payroll taxes that are deducted from a wage-earner's paycheck, when said employer considers a hire he considers the net costs of hiring an employee.

The short of it is that all of the taxes and the wages combined are the true compensation allotted to an employee. And the employer considers all of those costs when considering the wages to be paid. So the employer share of the payroll taxes are actually hidden taxes that take away from an employees ability to ask for wage increases but do not visibly appear as part of his cost of taxation on his paychecks.

These taxes come out of the poorest American's paycheck on the very first dollar. And to the extent that the 1983 revisions were intended to create a SSI surplus, it was at the expense of workers who got a reverse tax shelter. Instead of having an offer to defer todays tax bill until years in the future, the SSI surplus system asked workers to pay tax dollars today for benefits to be (Hopefully) received well in the future. The tax shelter recipient pays today's tax bill well in the future and continues to hold on to those present earnings with the possibility of generating additional compoundable income.

So I argue the payroll taxes which 80% of Americans pay more of than income taxes, help create a greater disparity in wealth in the United States. It would be much healthier if these taxes were removed from the payroll because then American employers would be able to hire more people. Roll them into a progressive income tax or a relatively flat tax. I won't complain.

QUOTE

QUOTE

Still, we can never know what would have happened if government transfers had not increased. It is possible that the distribution of income would have become more unequal. The slowdown in the growth of wages since 1973, the increase in the number of female-headed households, and the aging of the population have been cited as reasons why the income distribution would have become more unequal without increased government transfers. Yet some of these very changes may have been accentuated by increases in government transfers. A partial explanation for the slowdown in the growth of wages is that governments have required private firms to increase nonwage compensation and to pay higher payroll taxes.

Did you even understand what you posted?

Ummmmm, yes?! Government tax policy has made it more difficult for employers to hire workers in America. Do I pass the test?

QUOTE

OK so after all of that what does this have to do with the rich paying less taxes than the poor?  As already demonstrated by Mike with actual numbers and percentage of income the rich pay a higher percentage of taxes than the lower income brackets.  Given the rich normally find ways around this through tax shelters, investment incentives, and tax write-off's (such as donating to the salvation army).

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

Mike demonstrated a point with statistics based solely on income tax. When all forms of taxation are figured in I don't believe the answer is so clear cut that the wealthiest 1 or .5% of Americans pay a higher number of pennies per dollar in taxes tan the very poor or the middle class. Don't forget that capital based income taxes have been reduced to, I believe, 15%. Estate taxes which only applied to large inheritances of unearned income seem to be on the way out as well. Add that to the sophisticated tax shelters available in an increasingly complicated tax code and it leaves me believing that the very wealthy are able to dramatically underreport their incomes and in doing so pay a very low percentage of their income to the federal government in a way that is not available to an upper middle class professional.

Regardless of the answer to question #1, is the tax burden presently being shifted from the super wealthy to the middle and working classes under the tax policies of the present administration?

I believe the tax burden is being shifted. Both by making changes that put a greater weight of the taxes on the middle and lower classes and by running up a large debt to fund tax benefits for the very wealthy and have them paid back by future tax collections.

Does our distribution of income cause such problems for our society and economy that government policies should adjust to try to reduce it?

I think both running up a large debt (which makes foreign investors nervous to the point of looking for other economies to invest in and other currencies to balance out their financial interests) and have a system in which the distribution of wealth is turning away from the healthy more balances levels of the 50s and 60s and turning back to the unhealthy levels of the 1920s will further undermine what our economy depends on, consumption. The consumer drives our economy. This was true in 1929 and it is more true today. But we are increasingly turning to a capital friendly taxation system.

Others may think that the differences in income and capital accumulation tend more to reflect work ethic of the recipients, I believe the game is increasingly rigged to reward the haves and is making it harder and harder for the trying-to-get-it-toos to have a chance to get in on the game.

While I respect people who believe in a conservative interpretation of the government's powers based on the constitution, I think we have long ago given into the idea of federal bureaucracies tinkering with the economy to help shape our economy and society and keep it healthy. These reforms were put in in the progressive era and the new deal. The height of new deal policies and government activity in the economy helped create that outrageous postwar (WWII) boom in the US from 1945-1965.

With the present reality I believe that government policy should encourage a strong and thriving middle class. That middle class, to me as a student of history, is the necessary ingredient for a stable democracy.

No arguement from me. It's only that I do not understand how this applies to the rich paying less of the tax burden than the poor.



So you are a proponent of tax breaks for employers?



In other words the rich can find a way to route their capital from taxes. No arguement from me.



"The poor" HARDLY PAY federal income taxes even percentage wise. Since you linked to many articles about the income gap between brackets the only thing that the current administration has done is to increase the the middle class paycheck and their tax returns, not the "mega-rich".

http://www.nationalreview.com/nrof_luskin/...00408191200.asp

http://www.nationalreview.com/images/chart_luskin8-19A.gif

http://www.nationalreview.com/images/chart_luskin8-19B.gif



Really? The charts that I linked to above tell a different story.

The US economy hit a recession shortly after the current admin. took office. It also came out of a recession shorty after the current admin. took office shortly after the tax cuts were implemented.

http://www.nber.org/cycles/july2003.html



Eeyore I do not disagree with you that the tax code need's to be reformed. However I do not see how over the last four years the tax burden has been shifted from the rich to the poor on a federal level.

(and BTW the same stats in the article linked by the national review above are provided by Paul Krugman, the same guy that provided your misleading information of how the rich wealth grew 1000 times compared to the average worker it's only that he spun them differently in the NY Times)

The poor have gotten richer (most of the supposed "poor" have a microwave, color tv, computer, and spend plenty of money on beer and drugs at the same time), the rich have gotten even richer. In the end the rich pay a larger percentage than the middle class (the poor hardly pay anything) but they are able to get around it, it has not expanded in the last four years. The only solution is a consumption or a flat tax.

Umm, Mike, can you explain this to me? Maybe I'm just a little slow today, but I don't see where you got your 849% figure from, in anything that's on the website you linked to.

Even if that's true, so what? Look at the income disparities, as well. Let's assume that on average, someone in the top 1% of income earners is paying 849 times the tax of of someone in the bottom 50% of income earners. How many more times, on average is their income, compared to to the bottom 50%? Thousands? In some cases, millions?

Yes, indeed, let's all cry for the multi-millionaires, who, in the last 40 years, has seen their marginal tax rate reduced from 90% to 27.75%. I'm sure they are really hurting.

But, when all is said and done, it's not about that at all, is it? Isn't it in everyone's interest that every child gets a decent education, that everyone can travel on (mostly) decent roads? Isn't it in everyone's interest that the least able among us are taken care of, and not thown out into the streets? If you don't think so, or if you think that the actual dollar amount from each person be identical, then it isn't gonna work, and this country is over and done with.



This is totally disingenuous. Of course Congress writes the laws, but your wording here suggests that the administration has nothing whatsoever to do with how these laws are written, and has absolutely no influence on Congress to get these laws passed.
If, as you say, the administration's job is "only" to execute the laws passed by congress, then perhaps the administration ought to shut up, and stop cheerleading for one side or the other. Let the Congress do their own persuading to the people back home, and let the President "merely" administer the laws.



Well, there is the "general welfare" clause. We can certainly argue whether this clause actually enables Congress to do a lot of what they do. Unfortunately, I think we've long ago turned the corner on this, and it would be awfully difficult to put the genie back into the bottle at this late date.

No, Vampiel, what your quote tells us, is that the employer pays for half of the employees SS and medicare. Look at the quote again. "Tax rates remain the same, with 6.2% on employers and employees, for FICA, and 1.45 on each for Medicare, for a total of 7.65% on amounts up to $87,900." In other words, the actual tax rate for FICA and Medicare is actually 15.3%, with the employer and employee each sharing half. That's why self-employed people pay the 15.3% rate - they're paying the full boat, all on their own.

And your right, if you make substantially over $200,000 you should have many more resources for planning your retirement than someone making $30,000. On the other hand, when you reach retirement age, the government is going to send you your SS check, regardless of past or current income, right up til the day you shuffle off this mortal coil.

There is one thing I found interesting in looking at all the sites listed in this thread however. The median income in this country is about $28,000 per year. So the bottom 50% of every wage earner in America makes only $28,000 per year, or less. Now look at the charts again. 50% of all the wage earners make about 95% of all the income. Heck, the top 1% make more than the entire bottom 50%.

Now, I'm not at all sure why this is the case, but we aren't talking about lazy bums here, who won't get a job. We are talking about people who, for the most part, are working hard, trying to get ahead. How do we know this? Because the information comes from those that filed tax returns. Some of these will surely be from interest or dividend income, but most will likely be from regular, old fashioned, punch the time-clock workers.

If this is truly the "land of opportunity" it looks like we are leaving a whole lot of people behind.

Apparently you missed the basic point of the statistics. In which the wealthy pay a larger percentage of their income than the middle and lower class.



In other words, take from the rich and give to the poor. Unfortunately this never translates into "general welfare" as a nation.



That's what I stated. If the employers makes $288,800 then they are paying 6.2% of your SS AND 2% of their own SS. In other words the rich CEO's are paying for half of everyone elses SS on top of their own.



From 2000 to 2002 the average income of the middle class rose and the wealthy decreased.

http://www.nationalreview.com/images/chart_luskin8-19A.gif



Perhaps but it's certianly not a trend that has increased from 2000 to 2002.

http://www.nationalreview.com/images/chart_luskin8-19B.gif

No, I didn't miss his "point" at all. It's the same one that was made originally by OverlandSailor, and previously by people like Rush Limbaugh.

I thought the article I linked to in my first post did a rather good job of showing that this isn't necessarily the case, because you're comparing apples to oranges, which the article corrects:




Where, anywhere in my what you quoted from my post, did I say that? Mike asked where in the Constitution did it say that Congress could could redristribute income. My only reply was that an argument could be made that Congress uses the "general welfare" clause to accomplish this. I made no comment at all on whether or not this argument was correct, or that it should be used in the manner it is, only that since it had been used this way for so long, that it's nigh-on impossible to reverse at this point.


My fault, I misread what you wrote, and took it to mean that the employer was paying all of your SS.


My point in this, was that according to Mike's and OS's and Rush's basic premise, the top 50% of income earners pay 96.5% of all the taxes in this country. But, again, so what? The top 50% make about 95% of all the income!

Let's see now, all those combined that make 95% of the income pay 96.5% of the taxes, and all those combined who make only 5% of the income pay only 3.5% of the taxes. Doesn't look nearly as bad when you look at it like that, as opposed to the way they look at it, now does it?


Still kind of disingenuous on your part, Vampiel. Yes, in the last two or three years, there have been some small gains in income in the lower half of the income scale, and some modest (and maybe not so modest, for those making $10Mil or more) declines in the top income level. But what about the advances or declines over the last 20 years or so?

Increases in executive pay outpaced growth in average workers’ pay in the 1980s and 1990s at an eye-popping rate. Business Week has estimated that the average CEO of a major U.S. corporation made 42 times the average hourly worker’s pay in 1980, 85 times in 1990 and 411 times in 2001. Over the last ten years, CEO pay soared 340 percent. Meanwhile, during that time period, the average hourly workers pay, because of rising costs and inflation, remained rather stagnant, or even declined.

Really now, are you going to begrudge someone making $25,000 a paltry 1.3% increase, after a decade of no real increase at all? And are you really going to cry over the CEO who only made $18 million last year instead of $22 million?

C'mon, you and I both know that overall, the CEO's have been doing much much much better in pay increases than any hourly worker could hope to acheive, in the last twenty years.

These statistics are drawing an incorrect conclusion. Just because one groups income rose more than another groups does not indicate in any way that any wealth was transferred from one group to the other. This is the fallacy in logic that directly leads to class warfare. If you are making $50,000, and someone else is making $200,000, and then some period of time later you are making $60,000, and that other person is making $500,000 --- what exactly have you transferred to him? Nothing. Rather, you have both benefited, with one simply benefiting more than the other. The pie increased, and different people got different amounts of the increase. This by no means indicates that anyone gave any of their pie to anyone else.




And they will receive even less benefit. The SS Tax is capped at that amount precisely because there is supposed to be a 'you get back what you pay in' aspect to SS. This is why you cannot have this discussion without examing the flip side of the coin...what different income groups get in goods and services vs. what they pay in. As the statistics I presented earlier clearly show...the bottom percentage of income earners receive far, far more in goods and services than what they pay into the system.




How can the working class be punished when they receive far more in benefits than they pay into the system? ??? ????????

It's not that I'm arguing for a 'pay as you go' system...the problem is that there is a lack of recognition of the basic fact that upper income people clearly contribute most of the income, while lower income people receive most of the services.



This is a classic example of changing the measure to get the desired result. What type of tax do we levy in this country? An income tax. Tell me then, what relevance does wealth have to the tax rate? None whatsoever. If we're going to have this discussion, lets stick to comparing apples to apples, and oranges to oranges.

QUOTE(Vampiel @ Dec 7 2004, 01:58 AM)

So you are a proponent of tax breaks for employers?

The only solution is a consumption or a flat tax.

In my earlier batch of sources that I posted there was an analogy about taxation and destruction. The point is that taxation diminishes consumption of what is taxed. There was an example of an old tax on windows in France and the result was that many people went without windows and you can still see windowless structures from that period today.

I think that taxes should be removed from employment, i.e. payroll taxes (and for that matter the obligation of paying medical insurance) so that it becomes easier to commit to hiring an employee in this country. I see this as a way to improve the lives of people who depend on earned income for a living.

So am am for removing payroll taxes and rolling them into the income tax structure.

I am against a consumption tax because I think that is an extremely dangerous route and yet another act of preferential treatment for capital. I think we have a very healthy level of capital in this country and I think we need to encourage consumption. Therefore I strongly disagree with a consumption tax.

I also think Social Security provides a very valuable service for our entire society. Elderly people used to have one of the highest poverty rates of our society and largely due to social security and medicare (along with a sustained period of prosperity for wealth accumulation for our present elderly) I believe this is now one of the most affluent groups in society. (As it should be)

But we are not natural savers and without this retirement income supplement our whole society will suffer and this will be a new group that will not be able to continue a healthy rate of consumption. It is largely a pay as we go system. The 1983 adjustments were supposed to pretax baby boomers to build up a surplus but we used that money to pay for our costs of government.

These taxes are regressive and in the employer side hidden taxes against the workers. They start at dollar one of income and therefor the working poor who are often said to pay no taxes actually pay a significant percentage of their income in taxes and the Bush cuts have offered them no relief because they do not pay income taxes.

If you want to harm something tax it. We are going to die and we are going to pay taxes, but we can control how we tax. I think the two most important aspects of our economy are the quality of jobs produced and the level of consumption Americans can sustain.

Edited to add I give up, I am losing my battle with the quote features.

*edited to fix quote

Sure, I can explain.

The question as posed by the topic starter was:

Do the extremely wealthy (let's use top 1% of Americans in terms of income) pay a smaller percentage of their overall income than middle class to poor Americans?

My statistics showed that the top 1% pay 27.25% of their income to taxes. They also showed that the bottom 50% pay 3.21% of their income to taxes.

27.5 % is 849% of 3.21:

3.21 * 849% (8.49) = 27.5

Simple math, not really disputable.

I answered the specific question with specific numbers in a factual manner. If you want a different answer, ask a different question.



Disingenuous?

If we are going to place blame, let's place it to the right place. Congress makes the laws, and the president signs them.

If congress is comfortable relinquishing some of their power to the president, that is their decision. Still, it does not change the fact that legislative responsibility lies squarely on the backs of the congress.


It would be awful difficult? OK, well, only easy actions are worth taking. The difficult ones must not be that important. /sarcasm

Just because the current executive, legislative, and judicial branches have trampled the constitution into some sort of unrecognizable mess does not make is OK to continue to abuse the power that the citizens of the US have granted.

Mike

I don't think it is quite that simple because Americans pay more types of taxes than just the income tax and because of the fact that much income can be hidden in tax dodges and shelters that are much more accessible to the super wealthy.

Poorly worded perhaps to make it seem that the question was about income taces. Also missing the word tax or taxes in the question. But that doesn't mean there is only one si