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The "rich paying their fair share of the taxes"...(61 posts)

The "rich paying their fair share of the taxes"...Dwayne Barry
Jan 16, 2004 8:57 AM
Some people here seem to have a grasp of taxes/economics. You often see it stated that the rich don't pay their share of the taxes or something to that effect, yet everyone knows that as your income increases you pay a greater percentage of that in income taxes. Recognizing that there are many tax loop-holes, is it actually true that as a percentage of their income the "rich" actually end up paying less than middle-class or poor people in taxes?
probably notColnagoFE
Jan 16, 2004 9:04 AM
I don't have the answer, but I'm still guessing that the rich pay a higher percentage of taxes even after all the write-offs and loopholes. That said...I'd rather have 40% of a million dollars than 80% of $50k.
It all depends on definitions,TJeanloz
Jan 16, 2004 9:09 AM
What is a "fair" share. A lot of people would say that the rich should pay in tax everything more than they "need". It also depends on who you define as "rich".

There are actually many fewer tax loop holes than you think. Most of the "loop holes" favor the middle class. After all, child tax credits, deductable interest, education credits, et. al. are all "loop holes". With the AMT, there are actually fewer loop holes available to the "rich" than to the middle class.

What it really comes down to is that we have misconceptions about wealth coupled with a horrendously complex tax code. Somebody who is "rich" might actually have very little income. I personally don't believe a progressive tax is fair, but many people do, I understand their point, and I respect that as a difference of philosophy. The bottom line, however, is that most of the people in the top tax bracket end up paying more as a % of their income than some of those in lower brackets. Sure, there are exceptions. But they are not the rule.

The problem is that without definitions for things like "rich" and "fair", it's impossible to say whether or not the rich are paying their fair share.

On another interesting note, I'm amused by the push towards higher corporate tax rates. It's relatively well documented that higher corporate tax rates are simply pushed down to the consumer, and are an effective way to tax the middle and lower class while claiming to tax the rich.
All of it -- taxes, government spending --OldEdScott
Jan 16, 2004 9:23 AM
is a giant circle jerk, a zero-sum game. As long as the money stays in America (big if, but let's posit it; if money's leaving America, it's not a welfare mother shipping it out) nothing really changes but patterns of distribution and where money is pausing.

Taxes, government spending etc. are partly and entirely appropriately means of wealth redistribution, which the current crowd wants to make a dirty word but isn't. Without wealth redistribution of some sort, we have ever-increasing concentration of wealth and finally either revolution or feudalism, which the current crowd may want, but I don't.

Say it loud: I'm for wealth redistribution and I'm proud!
How are laws loop-holes? (nm)czardonic
Jan 16, 2004 10:02 AM
All loop holes are lawsTJeanloz
Jan 16, 2004 10:21 AM
All of the "loop holes" are exploitations of law. I'd say that anything that decreases the amount of tax you pay is a "loop hole". But your definition may vary.
Key distinction: "exploitation". (nm)czardonic
Jan 16, 2004 10:29 AM
I've always thought of loop-holes as laws in theDwayne Barry
Jan 16, 2004 10:30 AM
tax code that the rich differentially benefit from because they (well their tax people) know about and exploit, whereas the common man doing his own taxes or having H & R block doing them doesn't take advantage of because of ignorance, etc.
The AMT has done a pretty good job of closing those...TJeanloz
Jan 16, 2004 10:33 AM
The AMT has pretty much shut down "loop holes" in that sense. I don't know, I can't think of many loopholes for individuals (though I can think of some good corporate ones).

But is it a loophole if it's available and exploitable by all? Or only if the "rich" take advantage of it.
I don't think it is necessarily ignorance,...94Nole
Jan 16, 2004 10:54 AM
however, it is difficult for a low to middle income taxpayers to take advantage of, let's say, rental property rules. They are often strapped by mortgage payments, auto loans, daycare, college tuition payments, etc. and are unable to "take advantage" of the rental property rules that allow a deduction of up to $25,000 in rental losses (subject to income limitations that begin to phasein at $100k AGI).

It is the people like my brother who he and his wife simply worked and paid taxes (everything was paid off). He "knew" (not ignorant) he could shelter income by doing this or that but was afraid to take the steps necessary to generate the losses to offset current income thereby lowering his taxes.

I think the better distinction is that opportunities that will result in "real" tax savings are often "unavailable" due to level of income rather than the taxpayer being ignorant to what is there. At least that is my experience.
good pointDuane Gran
Jan 16, 2004 11:46 AM
I have one rental property and do a little bit of consulting as a side business. Operating a business, even if it is not incorporated in any formal way, has been an easy way to lower my taxes. There are plenty of books on the topic and the tax code encourages people to do it.

It took me a while to figure this one out, but paying a CPA a few hundred dollars to save thousands of dollars makes sense.
Refreshing to hear (see) someone say (write) that.94Nole
Jan 16, 2004 12:08 PM
Need to have you talk with some of my clients. We, as CPAs, often get beat up because of fees but I've never had anyone complain about paying less in taxes.
Everyone deserves to be paid for their workBottomBracketShell
Jan 16, 2004 12:13 PM
especially if they're saving someone money. I've never understood that either. Sometimes my clients seem to think they shouldn't have to pay me, and as a counselor I'm saving their emotional life. Same thing.
All loop holes are lawsDuane Gran
Jan 16, 2004 10:53 AM
All of the "loop holes" are exploitations of law. I'd say that anything that decreases the amount of tax you pay is a "loop hole". But your definition may vary.

That would make the standard deduction, child tax credit and mortgage interest credit all loopholes, by your definition. I believe the term refers to an unintended consequence of the complex tax code that permits a person to pay less taxes.
And for the most part, "loopholes" get exploited...94Nole
Jan 16, 2004 10:42 AM
and the result of this exploitation is that laws get changed to disallow the actions/positions taken to exploit those laws.

There has been a lot of press over the past 3 or so years about high dollar (millions or ten of millions in unrealized capital gains) in tax strategies, tax avoidance schemes, off shore transactions, etc. where taxpayers or their highly-compensated "advisors" design and set up multi-level entities in which non-economic losses are created usually in what are really sham entities, the results of which occur and are reported several levels below page 1 of the 1040 thus very difficult to detect. IRS has shut many of these practices down but it still occurs for those with high tolerance for risk.

Many of these arrangements comply with the letter of the law, but go well against the spirit of that same law (i.e., loophole). These strategies really caught fire as the internet bubble irrationally grew.

I have seen individual tax liabilities (amount the taxpayer sent to the IRS) in excess of 8 figures (to the left of the decimal point). Don't know what this says other than, in my experience, I have seen many well-to-do taxpayers pay millions in taxes. I have also seen those who pay no INCOME tax and walk out of a tax preparation office with "refund" checks in excess of $5,000.
The implication is that a "loophole" is legal,TJeanloz
Jan 16, 2004 10:52 AM
I think the consensus is that a "loophole" is a legal tax dodge, through a peculiarity in the tax code. The abusive tax shelters that KPMG et. al. are getting into trouble for are a problem because they are not legal. In this relatively obscure part of the tax code, the letter of the law is actually that you must comply with the spirit of the law, as interpreted by the IRS. So you can't violate the spirit without violating the letter. The problem was that these shelters were done under cover of confidentiality, so no-one could disclose the actual structure. It is now practically illegal to enter into this sort of confidentiality agreement.

Abusive tax shelters always were illegal, but nobody was allowed to say anything about them, and they were very hard for the IRS to break apart. Now it is also illegal to not say anything about them.
So, would you say...Dwayne Barry
Jan 16, 2004 10:54 AM
that the accusation that "the rich don't pay their fair share" is only true if you believe the rich should pay a greater percentage of their income in taxes than a middle-class or poor (which I guess really pay much less than their fair share because they don't pay any income tax at all below a certain income level, no?) person?
I think in "effective" tax rate terms.94Nole
Jan 16, 2004 11:10 AM
Total tax over total income.

I think your question is the $64,000 question that is batted around constantly.

In my experience, most people don't seem to care about rates. Most people can tell you the amount of their refund (or how much extra they paid) last year, but couldn't tell you what they paid in tax total. They don't care for the most part IMO and experience.

I am one who believes that liberalism stops at the driveway. It's good enough for everyone else but don't expect me to help out.
Last sentence = PERFECT! nmOldEdScott
Jan 16, 2004 11:25 AM
Indeed. It could be applied to anything. . .czardonic
Jan 16, 2004 11:45 AM
. . .and be equally valid.
Well I guess that's fine and you won't mindBottomBracketShell
Jan 16, 2004 12:24 PM
staying in your driveway and not driving on the socialist Interstate highway system or going to the socialist national parks or letting the socialist army and police protect you. After all if your not willing to *help out* by chipping in to help pay for those things why should you benefit from them?
I half expect TJ to claim that he doesn't drive on public roads.czardonic
Jan 16, 2004 12:26 PM
He is a slippery one.
LOL! Good stuff!!!!!!!!!!!!! nm.BottomBracketShell
Jan 16, 2004 12:27 PM
Mostly I walk,TJeanloz
Jan 16, 2004 12:30 PM
I drive less than 2500 miles a year, but I do pay licensing and gasoline taxes to support that infrastructure.

I have been taking a cab to and from work since the temperature stopped going above 0.
LOL! More good stuff!!!!!!!!BottomBracketShell
Jan 16, 2004 12:31 PM
Yes! Let them take cabs. (nm)czardonic
Jan 16, 2004 12:35 PM
We have good public transit, it's just too cold to walk (nm)TJeanloz
Jan 16, 2004 12:37 PM
Sorry, I should have been more clear. I have no problem...94Nole
Jan 16, 2004 12:47 PM
paying taxes or "helping out". Really.

I should have said that I believe that most people have feelings that "this program is fine or raising that tax is okay, just don't make me pay for it." In that sense, liberalism stops at the driveway. "It's okay to turn into the neighbor's yard but don't expect me to play."

It only took one trip to a third world country to remove any problems I ever had with paying taxes or "helping out".
Rich = anyone who makes more money than I do.Spoke Wrench
Jan 18, 2004 11:11 AM
And every blessed one of them is overpaid!
for households, 84k=top 20%, 150k=top 5% in 2003.dr hoo
Jan 19, 2004 9:09 AM
From the census bureau.

Right around $43,000 household income is the middle of the middle class in the USA today. Half of households make less, half make more.
Three words: Total Tax Burden.dr hoo
Jan 16, 2004 10:52 AM
What do people pay in ALL taxes as a percentage of their income?

What changes in that tax burden have the Bush administration's policies created.

Once you throw sales tax, property tax, car license tax, etc. etc. into the mix, then we can start to talk about fair shares, and what "fair" might be.

The finding of changes in "total tax burden" over time is left as an exercise for the reader. (in other words, I have to go make lunch)
I agree with you, but,TJeanloz
Jan 16, 2004 10:58 AM
I agree with you that total tax burden is a useful measure. But practically all other taxes are flat in nature, and flat + progressive income tax means that the TTB will be progressive, albiet more mildly progressive than the income tax structure.

However. The rich still pay more in sales tax, property tax, and car license tax than everybody else, though it is likely a similar, maybe even smaller, % of their income.
State and local taxes are not flat, they are regressive.dr hoo
Jan 16, 2004 12:06 PM
How about some links, TJ? How about some numbers?

Jan, 2003. http://www.tompaine.com/feature.cfm/ID/7083

"Nationwide, middle-income families pay almost 10 percent of their earnings in state and local taxes and poor families pay more than 11 percent. But the richest people effectively pay only 5.2 percent of their income in state and local taxes.

Since 1989, state and local taxes have risen on low- and middle-income taxpayers, but have fallen on the very wealthiest. "

Everyone pays the same PERCENTAGE in, say, gas tax. So you can say it is a "flat" tax. However, the gas tax paid by low and middle income families is a MUCH HIGHER percentage of their total income than for the wealthy. It is a larger BURDEN on them. That's what tax burden means.
so lets charge the "rich" $12.36 for a loaf of bread and thebill105
Jan 16, 2004 12:17 PM
poor can have it for $1.09.
Brilliant! You really have a grasp on the issue. (nm)czardonic
Jan 16, 2004 12:20 PM
How much for paint thinner?? nmBottomBracketShell
Jan 16, 2004 12:32 PM
I'm not sure that I agreeTJeanloz
Jan 16, 2004 12:22 PM
I understand your point. But I don't really agree with it, simply on a philosophical basis. I suppose I do, on some levels. I agree that some of these taxes are regressive. But unless the solitary goal of the Government is to redistribute wealth, it seems reasonable to me.

Is the cigarette tax regressive? Yes. Is that bad?

Gasoline tax? Yes. Is that bad?

As long as we're working with a %, the rich are always going to pay a lower % of their income on consumption taxes. Why should a particular good cost me more than it costs you? Is it fair for me to pay $2.00/gallon while somebody else pays $0.50/gallon, because I can "afford" it?

I don't know what the answer is. You'll have a hard time convincing me that the rich don't pay enough. As is well advertised, I've stopped paying [income] taxes altogether, and will not pay a dime until others in my cohort pay their fair share.
I understand your perspective.dr hoo
Jan 16, 2004 12:42 PM
My point is that taxes are paid in many ways. By focusing on the progressive income tax, and cutting those rates, the rich get a big benefit. However, since the poor-middle pay a lot more of their income in NON-income taxes, they do not get similar levels of benefits on their lives.

Also, when federal taxes are cut, state and local taxes go up. Property taxes go up. Tuition at state schools goes up. Taxes are interconnected. So cutting federal tax rates (including dividends, cap gains, etc) puts more money in the pockets of the rich, but NOT in the pockets of everyone else NET of all other tax changes.

Bush's tax policies are a net shift in tax burden away from the rich and onto everyone else. They pay less and less in total taxes as a percentage of their income, and everyone else pays a HIGHER percentage.

Do I want you to pay more for gas than everyone else? No. But a progressive income tax can and does flatten the "total tax burden" out so that everyone pays closer to the *same percentage of their income* to pay for government services, services that benefit the society as a whole.

Given that real incomes in constant dollars for the wealthy have gone UP AND UP, while income for everyone else has been flat to slightly down over the past 20+ years, this shifting of total tax burden away from the rich seems fundamentally unfair.
Take the bus or heck, ride a bike = No gas tax paid!!!94Nole
Jan 16, 2004 12:36 PM
I run risk of being eaten alive by one who is better at logic and debate, but I must challenge your quote as not comparing apples and oranges and being very broad brush. I actually muttered "duh" after reading it. I don;t think this says anything very profound.

State and local taxes (SALT) obviously vary greatly throughout the country form state to state. Here in FL, the majority of our SALT is in the form of sales (I'll include gas in this because if you don't buy gas, you don't pay the tax) and RE taxes.

I moved here from NC where we paid NC income taxes. Thus the same income taxpayer living the same life in NC(assuming all other expenses are the same) pays a higher % of his income in taxes than do I. Is that unfair taxation? I don't believe so. All I had to do was move to FL to avoid NC state income tax and the weather is much much better.
And if neither are practical, pick up and move.czardonic
Jan 16, 2004 12:37 PM
The answers are so simple.
Many answers really are that simple, but we aren't willing...94Nole
Jan 16, 2004 12:54 PM
make the necessary changes to effect those changes. One big problem I see is that people want to keep doing what they are doing and want others to pay for their lack of willingness to change. Where does fairness for one end and for another begin?

I know that life isn't necessarily that simple but there certainly are things that people could do to lessen their burdens. How many low income people smoke and drink? Not only is this money poured down a rat hole, they are also paying even MORE in tax and eventually the US taxpayer will have to take care of them when cancer and emphysema is killing them. Where does it begin/end?
How many eat?czardonic
Jan 16, 2004 1:08 PM
Think of the money wasted on food alone. And if they worked more, they would a) earn more and b) (after a certain point) no longer need to waste money on housing. Simple.

But seriously. . .

While logically true, your argument ignores that throwing off certain burdens may have no real quality of life benefit. Sure, the poor could quit smoking and drinking. But they would still be poor, and absent two guilty pleasures at that.
But we discount those things as insignificant...94Nole
Jan 16, 2004 1:17 PM
2 pack a day smoker will spend (assuming a $30 per carton cost) over $2,000 per year. For someone who earns only $20,000 per year, that is significant.

Let's add a case of beer per week (3-4 beers per day) for Bubba Sixpack at a cost of what $8-$10 (I haven't had a drink since '86 and have no idea its cost). Using $8, that is another $400-$500 per year and I would expect that the cost is likely double that.

We are now between $2500-$3000 for a guy who earns $20,000 per year. Please don't tell me that's not significant.
Your numbers don't reflect reality.czardonic
Jan 16, 2004 2:31 PM
$2000-$3000 sounds like big money weighed against a $20000 per year salary. But what can it really buy you over the course of a year? (We know one answer: some cigaretts and beer.)

So lets say that they forgoe these luxuries and save the money. Let's say that they invest that $2000 to $3000, and by some stroke of luck double it, thus increasing their yearly income to $23000. Is that going to have a significant impact on the quality of life they can afford?

Our hypothetical Mr. Sixpack is still poor with two fewer "luxuries" to get him through his dreary life. (And lets not forget that smoking is a luxury that millions are willing to die for).
How's this for significance: smoking reduces hunger pangs...nmbicyclerepairman
Jan 18, 2004 10:09 PM
did you read the link I provided?dr hoo
Jan 16, 2004 1:02 PM
The question is not any specific tax, it is to total of all taxes combined. The article discusses the difference between no income tax states and those with an income tax. Those without an income tax are more REGRESSIVE, meaning that the total tax burden on the poor and middle class is HIGHER.

You said " I moved here from NC where we paid NC income taxes. Thus the same income taxpayer living the same life in NC(assuming all other expenses are the same) pays a higher % of his income in taxes than do I."

I don't know that you have proven anything. What is the sales tax in the two states? What is the property tax? What are the other taxes paid? Different gas tax? Different sales tax? Different property tax? TOTAL TAX means all the taxes added together, not just income tax.

If you are saying you don't pay INCOME tax, so your INCOME tax is lower... to use your term...duh.

Since you clearly did not read the article, or not closely, let me post a relevant portion for you:

"Ten states -- Washington, Florida, Tennessee, South Dakota, Texas, Illinois, Michigan, Pennsylvania, Nevada, and Alabama -- are particularly regressive. These "Terrible Ten" states ask poor families -- those in the bottom 20 percent of the income scale -- to pay up to five-and-a-half times as great a share of their earnings in taxes as do the wealthy. Middle-income families in the "Terrible Ten" states pay up to three-and-a-half times as high a share of their income as the wealthiest families. "
Dr Hoo, the one thing I would disagree with.........Len J
Jan 17, 2004 3:20 PM
from my personal experience, is that the income taxes, plus medicare taxes plus maximum FICA ovrewhelm the regressive all other taxes. As an example, somone with $200,000 in income will end up with an effective rate of around 30% or $60,000. Add in $6,000 in property taxes and another $5,000 in sales taxes and other and they have paid $71,000 in taxes or 36%.

Now take someone who makes $50,000 He'll pay around $11,000 in state & Fed, Fica & Medicade, probably $3,000 in Property and $2,000 in sales tax. Total of $16,000 or 32%

The higher income person is still paying 4 points higher but $55,000 more in real dollars. Is he using more services? some but not $55,000 worth.

It is wealth distribution pure & simple. That's OK....I think the argument is about the amount of distribution. There is a balance here, too much redistribution and there is a reduction in motivation to invest & earn more, too little & class warfare breaks out.

I personally think that Bush has cut too much, but I understand the counter arguments.

As with most things, it's never simple.

Len
Len, FICA is not progressive, it is regressive.dr hoo
Jan 18, 2004 5:57 AM
It is taxed only to a certain point, and all income past that point has no FICA. That's pretty much classically regressive.

It seems that the only thing keeping the wealthy paying a similar rate of total tax burden is progressive income tax. But cutting those taxes disproportionally for the wealthy, by cutting cap gains taxes, dividend taxes, and the like, there are benefits that go directly to those at the top. Few of these benefits go to those at the bottom. Unless you think people making 20k a year are getting a lot of dividend checks.

Add on top that state and local taxes ARE going up to cover lost federal speding, and those taxes are REGRESSIVE.

Now, what's the net effect on income and wealth distribution of the Bush tax cuts? Is it equal? That would lead to NO change in inequality in America. Nope. Is it progressive? That would lead to a decrease in inequality. Nope. Or, are the effects regressive? Leading to an INCREASE in inequality of income and wealth in america? That seems to be the case.

I have no problem with the wealthy. However, the gap between rich and poor is growing, and growing worse. That is a very problematic situation for a society. Especially one that prides itself on opportunity. The bigger the gap, the harder it becomes to OVERCOME that gap. Combine a larger gap with less social programs and you have a recipe for a permanent and growing underclass.

As yourself the question that is central to all good speculative fiction: if this goes on, what happens next?
Don't agree completely............Len J
Jan 19, 2004 7:47 AM
but I do un derstand your logic.

The bottom line point is that the person making 4 times as much is paying 5 or 6 times as much in taxes.

Again, I believe in a progressive tax system, Where we differ is in where it crosses over into an overly severe penalty for being successful.

The top rate dropped from 36 or so to 33%, where so you think it should be? and at what income level? & why?

Len
Asking what "rate" is fair cannot be answered.dr hoo
Jan 19, 2004 8:29 AM
Since the point I am making is that income tax rates are not a good way to measure tax burden, I can't just focus on federal income tax rates can I?

Now, that being said, I think it is much easier to look at the EFFECTS of CHANGES in the tax rates. I would be against any changes that are effectively regressive in terms of total tax burden. I can easily support changes that keep total tax burdens flat. And given that recent changes have been VERY regressive in effect, I would be for a shift that would be progressive in change. But even that is too simple.

For example, I could envision a tax break that would benefit the rich that I would support. A break on capital gains for bonds, for example. Bonds are issued for the most part for capital expansion, which I think is a very good thing for the economy as a whole. The wealthy would benefit far more from such a change as individuals, but it would encourage capital expansion that would benefit society at large

Muni bonds, among others, get tax breaks. I think that is a good thing.
Unfortunatly.............Len J
Jan 19, 2004 8:43 AM
Income tax rates are the largest portion of most peoples tax burden and therefor are the easiest to "Manipulate" to acheive the "progressive" goal you have.

I don't agree that they have been "Very" regressive (from a historical context). Yes they have been regressive, but they actually have not been much of a reduction in rate compared to the massive rollbacks that occured in the 70's & 80's.

The real problem is that taxes policy is used more as an economic tool than a simple collection of revenue tool. In as complex an environment as our economy is, any change will hurt some & help others, both intended and unintended.

A 5 to 10 point change in the highest income tax rate will act to slow the economy. It might make the rates more progressive, but it would put way more of the lower income people out of work. How do you deal with that?

What would you replace the current system with?

Len
no no no no no!dr hoo
Jan 19, 2004 9:03 AM
Yes, income tax is progressive. I never said they were VERY regressive. I said changes in the tax structure in recent years have been regressive. Not JUST THE INCOME TAX. Dividend tax changes, capital gains tax changes, and a host of other tax changes at the federal level. These changes have had a HUGE benefit for the upper classes, and not so much for the lower classes. Combined with these tax breaks for the rich, tax increases at the state and local level have shifted the burden to the poor and middle class. More regressive, as the link I posted shows.

"A 5 to 10 point change in the highest income tax rate will act to slow the economy. It might make the rates more progressive, but it would put way more of the lower income people out of work. How do you deal with that? "

Prove it. Really, prove it. Show your work. Don't just assume it, prove it. And no one is talking about 5-10, at most people are talking about 3, at least that I have heard.

Do I have a system to replace the current system? Not off the top of my head.
I think we are violently agreeing!Len J
Jan 19, 2004 11:14 AM
LOL

VERY & HUGH mean the same thing to me.

I agree that the recent changes have been skewed towards the rich..........HUGH may be overly dramatic, but your point is well taken.

The point I am so ineffectivly trying to communicate is that Getting too progressive is just as bad IMO, as getting to regressive. I used the 5 to 10 point example (Which has within it a HUGH range) to try to indicate that too large a move towards progressivism can have unintended consequences. The same is also true of too large a movement the other way.

The problem both of us have (and anyone who is honest on the subject) is that due to a combination of tax law complexity and general economy complexity, it is very difficult to predict what "Unintended consequences" will occur with any broad brush tax change. Wiil unemployment rise or fall?, will investment rise or fall? will tax collections rise or fall? In certain cases tax revenue can actually rise from a tax cut (if it stimulates the economy to grow fast enough).

Where I think we differ, is that I would simplify the tax code and attempt to seperate it from other social endeveors (Like income redistribution). Force us to face the real issues of disparity in our economy as opposed to masking the application of philosophy by imbedding it in tax code changes. You, on the other hand, seem comfortable in using the tax code to redistribute wealth. I understand that, it has a compelling argument behind it. I just don't agree.

I believe that wealth disparity needs to be addressed. I agree on the aim, just not the methods.

Len
the interesting thing about federal taxes is how FLAT they aredr hoo
Jan 19, 2004 11:50 AM
I was actually hoping someone else would bring this up, but...

Older numbers, but instructive. From:

http://www.dallasnews.com/business/scottburns/columns/archives/2000/001126SU.htm

------------------------
The Middle Quintile. Those in the middle 40 to 60 percent of all households had an average income of $40,637 and paid income taxes of $3,611. Their combined employment tax payments, $6,218, were still nearly twice as much as their income tax. Their total tax payment, $9,829, absorbed 22.6 percent of their income.

The Near-Affluent Quintile. In the 60th to 80th percentile, the average income was $59,457. In that bracket the average income tax payment was $5,636 and the combined employment tax was $9,096. The total tax burden was 23.0 percent. In other words, the tax burden hardly changes even though income rises by about 50 percent.

The Affluent Quintile. Those in the top 20 percent of all earners have an average income of $119,453. They paid income taxes of $18,927 and combined employment taxes of $11,052. Their total tax burden, $29,979, takes 24.0 percent of their income.

-------------------

Not so progressive as it stands, huh?
Those numbers are bogus.Len J
Jan 19, 2004 12:43 PM
Read the fine print. They assume that the employer paid portion of SS & Medicaid are income to the employee thus grossing up both income & taxes and (since the higher income earner has a ceiling) overstates the effective tax rate for the lower income earners.

The real numbers are
4th quartile effective rate of 13.6% or $3,259
the middle quartile effective rate of 17.9% or $6,720.
The near affluent quartile effective rate of 18.5% or $10,184
The affluent quartile effective rate of 21.5 % or 24,453.

A little more progressive than what you show. In addition, the most "progressive" tax there is is social security and medicare since the largest contributions are made by peoples whose payment from SS is capped.

Finally, while the rates don't show as much "Progressivness" as you would like, the affluent are still paying almost 8 times as much in real dollars. Remember, progressivity is really about dollars paid, not percentages. The most "Un-progressive" tax policy would be for everyone to pay the same dollars.

Progressivness is always a relative term. The affluent are paying $8,133 in taxes just as a result of the difference in rate from 13.6 to 21.5..

Again, we are debating the leveal of progressivity, not the need.

Len
I do not think that word means what you think it means.dr hoo
Jan 19, 2004 4:11 PM
"the most "progressive" tax there is is social security and medicare "

Ummmm, progressive in terms of tax rates are those that tax the wealthy more than the poor. Regressive taxes tax the poor more than the rich. Since SS taxes are capped, they tax the rich less than the poor as a percentage of their total income. SS tax is REGRESSIVE.

Now, you can argue that medicaid is a PROgressive program, in that the benefits are not linked to payments into the program. However, cash SS cash payments ARE linked to payments into the program, so those monthly checks are not progressive in the classical sense.

I'm sorry you find the numbers used by the Joint Economic Committee bogus. My employer considers all sorts of things they pay for that don't show up in my check as MINE, and a benefit to ME. They remind me of it every year.

And even if we go with your numbers, there is still the regressive nature of state and local taxes to consider. Will that make up for, or MORE THAN make up for the (by your numbers) 3.6% between the 40th and 100th percentiles?

"Finally, while the rates don't show as much "Progressivness" as you would like, the affluent are still paying almost 8 times as much in real dollars. Remember, progressivity is really about dollars paid, not percentages."

Whaaaaaaa? Ever heard the term "flat tax"? Flat, progressive, regressive are terms that refer to tax RATES. I have NEVER heard them used to refer to tax AMOUNTS. But hey, if you want to make up your own definitions, feel free. You are in a lot of company.

In the great words of Inigo Montoya "Hello. My name is Inigo Montoya. You killed my father. Prepare to die."

Oops, wrong Montoya quote!
My point about SS.......Len J
Jan 21, 2004 6:18 AM
being progressive is not about rates. I agree with you from a rate standpoint, rather my point is about wealth redistribution (Which is really the distinction between progressive & regressive). A person who is maxed out on SS annually throughout his lifetime recovers a dramatically lower percentage of contributions made in his name over his lifetime than does a lower wage earner. He is "Contributing" proportiantly more than the benefits he will ever receive. His "wealth" is being redistributed to other leass wealthy SS beneficiaries.

"...progressive, regressive are terms that refer to tax RATES. I have NEVER heard them used to refer to tax AMOUNTS." Maybe you should get out more (tongue firmly in cheek). I was taught that progressivity and regressivity was a reflection of the amout of wealth redistribution that was occuring. I was taught that the most regressive tax was one where every individual paid exacly the same amout in dollars (a head tax as it were) anything other than that was progressive. Obviously, the amount of progressivity can change and when comparing one tax to another one can be more progressive or more regessive. Rates and dollars are different ways of expressing this relativity. Believe me when I tell you that I have extensive experience with various methods of taxation. Where this discussion started was comparing different tax postures and, relative to each other, which is more progressive and which is more progressive.

Where our current rate structure is is less progressive than it was, but more progressive than it could be.

I still contend that the SS tax, even though at a fixed rate with a cap, is a progressive program.

Len
Len, FICA is not progressive, it is regressive.Duane Gran
Jan 20, 2004 7:07 AM
I have no problem with the wealthy. However, the gap between rich and poor is growing, and growing worse. That is a very problematic situation for a society. Especially one that prides itself on opportunity. The bigger the gap, the harder it becomes to OVERCOME that gap. Combine a larger gap with less social programs and you have a recipe for a permanent and growing underclass.

I'm genuinely sympathetic to the poor, but your argument hinges on the notion that social programs are an effective tool for people to cross the jordan of poverty to wealth. My understanding of wealth building comes primarily from reading "The Millionaire Mind" and "The Millionaire Next Door" (both by the same author). From this reading I know that 80% of millionaires achieved their status in one generation and less than 10% of them inherited their wealth. In surveys they rank hard work and being willing to take a risk as the factors in their success.

From what I've seen, most social programs are geared toward helping a person be an employee of someone else, which is generally a safe route, but it is the least likely path to wealth. I think social programs may help keep people from abject poverty, but I can't imagine how they help anyone become wealthy. Possibly I'm misunderstanding your point.
Wealth building, from the bottom, is a multi-generational ...dr hoo
Jan 20, 2004 8:36 AM
... process.

If you look at the wealth numbers, the bottom 20% of the US population owns -1% of the nation's wealth (negative net worth), the next 20% owns 1%.

I would agree that social programs at best get people to a self-support level. That gets them off the dole and turns them into taxpayers. But that is a good thing for wealth creation, since it allows their children to get the education and tools they need to start to move up the social ladder. So, a poor person gets some help, and transfers onto their children the willingness to work (by example) and that next generation will have the tools to start to build wealth.

It is education that is, imo, the big hurdle that is needed. What paths are open to those without a college education, especially compared to 30 years ago? But being in education it is not suprising that I hold that idea.
Len, FICA is not progressive, it is regressive.Len J
Jan 21, 2004 6:33 AM
I'm a proponent of social programs that help people help themselves. I'm a proponent of SS as it was intended, which was to put a "safety net" under people as they age, to make sure that some Minimum needs were met. I believe that the current programs redistribution of wealth from those that make more to those that make less implicit in SS is the correct way to go. The only point I am making is that SS does redistribute money from those that make more to those that earn (or have earned) less, as such it is progressive. Could it be more progressive, absolutly, but it is still progressive.

Again, the most regressive tax is a head tax where every individual pays the same dollar amount regardless of ability to pay.

Len
re: The "rich paying their fair share of the taxes"...Duane Gran
Jan 16, 2004 11:36 AM
As TJeanloz pointed out, much of this depends on what you mean by "rich" and "fair". A common argument for wealth distribution is to look at what the top 1% of Americans pay in taxes compared to the middle class, but this is a deceiving comparison in my opinion. The elite rich are rich because of what they control, not what they own.

A better comparison comes from starting at the middle, namely the fact that the top 7 percent of those filing returns (those reporting adjusted gross income of $75,000 or more) paid 51 percent of total U.S. income taxes. I would think the top 7% qualifies as rich. As a statement of fact, the rich do pay more in taxes both in terms of total dollars and as a proportion of income until you start looking at the elite rich (top 1% in wealth).