If everyone paid taxes

[CuppaJoe]

It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.

I suspect "this group" is more likely a breakdown of:

1. Young people, people just getting started in careers, students, part-time workers: most of these folks will likely go on to earning more money and pay Federal Income Taxes (FIT). They have a lifetime of taxpaying ahead of them.

2. Seniors - probably a big chunk of the non-tax paying crowd as these folks tend to have lower incomes. A lot of seniors get by on pretty darn low income - especially if they are only living off of social security. A lot of these folks probably paid federal taxes for several decades and would feel pretty incensed by others claiming they are "free-loaders" whatever you think of SS and Medicare.

3. The recently unemployed and underemployed. The "47% pay no FIT" article mentions that in 2007, then number was lower - 38%. So that means 9% can be directly attributed to people whose income dropped due to the recession. You would hope for most of these folks this is a temporary situation And until 2 years ago these folks WERE paying FITs. To be mad at them now due to the economy seems pretty harsh.

4. Families. Families with children get HUGE tax breaks in this country - deductions AND credits. Whether a good idea or not, that is how the tax code is currently written. I can see how this might make some people mad and seem inappropriate and maybe the room for the biggest gripe is with this group. However, for most families, these tax breaks do not last all their lives, but rather for a couple of decades.

So, I suspect if you back out the above groups, you are probably left with a fairly small "permanent" non-FIT-paying group. And whether or not they religiously vote to keep themselves that way is still a debatable question.

Audrey

This bears repeating in its entirety.

 

[audreyh1]

You are right about the "read my lips" tax increase. One of my senior moment there.

There was a Clinton tax increase in 1993 - about 0.5% GDP. It's there on your chart.

For some reason the 1991 Bush I change is marked as a tax reduction? I suppose it dropped the top rate slightly, but increased other taxes.

There was a Reagan tax increase in 1982. It rescinded some of the large tax cuts from the year before (1981). It increased taxes 0.8% GDP. I only see one bar on the chart, not two.

Audrey

 

[winger]

If everyone paid taxes? Everyone DOES pay taxes. Maybe not the same ones that you pay. Last I noticed there are city taxes, county taxes, state taxes. The list is long, and I seriously doubt anyone in the US avoids them all. Isn't there even a death tax?

 

[flyfishnevada]

I don't get your distinction between stimulative wartime spending and social programs that remove money from the free market. The government's tax revenues all get spent, and I don't think it makes much difference to the economy if that spending comes in the form of missiles or food stamps... literally guns or butter. It all goes back into the economy.

There might be a small difference. Now that I think about it the jump is probably due to the preceding Depression. Suddenly, a lot more people had jobs in 1941.

 

[youbet]

4. Families. Families with children get HUGE tax breaks in this country - deductions AND credits.

Just sitting here reviewing my son's tax return. Family of five. Don't see any HUGE (as you put it) deductions and credits. What are you thinking of?

 

[ERD50]

Originally Posted by audreyh1

It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.

I suspect "this group" is more likely a breakdown of:

1. Young people, etc ....

So, I suspect if you back out the above groups, you are probably left with a fairly small "permanent" non-FIT-paying group.

This bears repeating in its entirety.

OK (and ignoring the claims of lack of upward mobility in the US), but is it really that important whether they are 'permanent' or not? We can't predict the future, so if we are currently in a group that benefits from 'taxing the guy behind the tree', I suspect that many will cheer that tax policy when a politician mentions it. Even if later on, they become (or were earlier) the guy behind the tree.

-ERD50

 

[audreyh1]

OK (and ignoring the claims of lack of upward mobility in the US), but is it really that important whether they are 'permanent' or not? We can't predict the future, so if we are currently in a group that benefits from 'taxing the guy behind the tree', I suspect that many will cheer that tax policy when a politician mentions it. Even if later on, they become (or were earlier) the guy behind the tree.

-ERD50

Yes, I think it does. Because expectations of higher future taxes can serve as a restraint on people who perhaps don't carry as much of the burden today.

You could say that there is still the senior population who is past their highest paying tax days, and this group perhaps presents the biggest threat as they are active voters and receive a lot of government-funded benefits.

But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.

Audrey

 

[FinanceDude]

Do you truly believe this?

Look at the record capital gains taxes collected under the Bush tax cuts, and there's your answer............

 

[ziggy29]

But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.

I think there are largely two kinds of advocacy groups among seniors. One is trying to protect the benefits they are currently receiving from being cut. The other sees that our present course (spend, spend, spend) seems to be financially screwing their kids and grandkids, whom they would like to see have a better life than they had.

Obviously there are more than these two extremes and it's possible to want to strike a balance between these two concerns, but in terms of activism there aren't too many "radical centrists."

 

[FinanceDude]

But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.Audrey

I have been to three Tea Party rallies and they have been free of incident. However, the media will focus on those that involve shouting matches in order to sell ads............

 

[audreyh1]

I think there are largely two kinds of advocacy groups among seniors. One is trying to protect the benefits they are currently receiving from being cut. The other sees that our present course (spend, spend, spend) seems to be financially screwing their kids and grandkids, whom they would like to see have a better life than they had.

Obviously there are more than these two extremes and it's possible to want to strike a balance between these two concerns, but in terms of activism there aren't too many "radical centrists."

I think it's also worth noting that seniors as a group have been in about the same situation in terms of taxes and benefits for many decades. Yet the US has gone through various cycles of rising and falling government spending.

Audrey

 

[audreyh1]

I have been to three Tea Party rallies and they have been free of incident. However, the media will focus on those that involve shouting matches in order to sell ads............

More specifically the representation at the town hall meetings of last summer which definitely involved a concerted campaign of shouting. And an amazing number of the shouters appeared to be seniors.

Audrey

 

[ERD50]

Yes, I think it does. Because expectations of higher future taxes can serve as a restraint on people who perhaps don't carry as much of the burden today.

I agree that is an influence. How strong it is/isn't I couldn't begin to guess.

You could say that there is still the senior population who is past their highest paying tax days, and this group perhaps presents the biggest threat as they are active voters and receive a lot of government-funded benefits.

ziggy's post #34 was my feeling also. Personally, I am concerned for future generations, and I really should be paying more FIT than I have in some recent years.

But I notice that the tea-party groups seem to be full of screaming seniors.

Please don't tell me you came to this conclusion based on what the media presented.

-ERD50

 

[FinanceDude]

More specifically the representation at the town hall meetings of last summer which definitely involved a concerted campaign of shouting. And an amazing number of the shouters appeared to be seniors.

Audrey

Do those seniors have the right to complain? Obviously, they are upset about something..........

 

[seabourne]

My degree in Econ is now 11 years old, but I remember we had a senior seminar class on taxes and the effect of cuts/raises in tax rates on revenue was clearly dependent on the current marginal rate. The graph was an upside down "U" with significantly higher revenue if cutting from say, a 70% marginal rate to 60% but revenue starting to decrease again once it reached a certain marginal rate floor (it was somewhere in the high 30% range, I believe).

I'm pretty sure that you're talking about the Laffer curve, sketched on a napkin over lunch by Arthur Laffer, sitting across from Dick Cheney, and was then used by Reagan to argue for a reduction in taxes to create more revenue. So far as I recall, it's never been verified empirically as to effect at different rates, but is logically consistant overall.

My econ degree is also close to a decade out of date, so take with salt...

 

[IndependentlyPoor]

Look at the record capital gains taxes collected under the Bush tax cuts, and there's your answer............

I'd like to... got a link?

 

[Rustic23]

Do corporations really 'pay' taxes or do they do nothing more than collect for the government. It has always seemed odd to me that people harp on corporations not paying their fair share. When was the last time Walmart gave you a 'Sales Tax Holiday'. You can bet if they did, they intend to make it up somewhere. Everyone knows the consumer pays sales tax, why do they believe Corporate Income Tax is any different. So if you are going to do a flat tax, don't tax corporations. It is just another hidden tax that politicians have been hiding behind for years!

 

[lets-retire]

Do corporations really 'pay' taxes or do they do nothing more than collect for the government. It has always seemed odd to me that people harp on corporations not paying their fair share. When was the last time Walmart gave you a 'Sales Tax Holiday'. You can bet if they did, they intend to make it up somewhere. Everyone knows the consumer pays sales tax, why do they believe Corporate Income Tax is any different. So if you are going to do a flat tax, don't tax corporations. It is just another hidden tax that politicians have been hiding behind for years!

Either tax the coporations or tax the shareholders' dividends, not both. It makes no sense taxing the same income two times.

 

[Rustic23]

My point is people pay taxes not business. If a business is going to continue it must take in enough to cover all expenses, and that includes taxes. When we allow the politicians to 'tax those big corporations and force them to pay their fair share' they in turn add it to their cost of doing business, and the people who use their goods and services pay. Mr. GE does not exist.

 

[mb]

Either tax the coporations or tax the shareholders' dividends, not both. It makes no sense taxing the same income two times.

It makes a lot of sense if you're the guy collecting the taxes

 

[lets-retire]

It makes a lot of sense if you're the guy collecting the taxes

Good point.

 

[Texas Proud]

My point is people pay taxes not business. If a business is going to continue it must take in enough to cover all expenses, and that includes taxes. When we allow the politicians to 'tax those big corporations and force them to pay their fair share' they in turn add it to their cost of doing business, and the people who use their goods and services pay. Mr. GE does not exist.

Yes, business pays a part of the tax. It is hidden, but can be shown in economics... I have not done this since college, but will try and make it simple...

If you sell X for $1... you can sell a certain amount of them.. I will say 1,000...

Now, add a tax to it... a 20% tax... you try and sell them for $1.20.. but your sales drop by a big amount... say you sell only 500...

But, if you sell them for $1.10, your sales go up to 800... so you choose to sell them at $1.10... (I have not check the math to see if this is the right decision.. just putting this down as an example...).

You can now figure out that the price you are charging is $1.10 / 1.2 is about 92 cents... so you are paying part of the tax.... and have lower sales...

 

[FinanceDude]

I'd like to... got a link?

Government Taxes and Revenue Chart in United States 2000-2008 - Federal State Local

 

[youbet]

Yes, business pays a part of the tax. It is hidden, but can be shown in economics... I have not done this since college, but will try and make it simple...

If you sell X for $1... you can sell a certain amount of them.. I will say 1,000...

Now, add a tax to it... a 20% tax... you try and sell them for $1.20.. but your sales drop by a big amount... say you sell only 500...

But, if you sell them for $1.10, your sales go up to 800... so you choose to sell them at $1.10... (I have not check the math to see if this is the right decision.. just putting this down as an example...).

You can now figure out that the price you are charging is $1.10 / 1.2 is about 92 cents... so you are paying part of the tax.... and have lower sales...

Tryin' ta follow ya here TP......

You're sayin' that if the demand curve for a product is elastic and the producer tries to add a cost increase (tax in this case) to the price (raise the price), total revenue will decrease. I get that. So the producer absorbs some of the cost to lower the price (defacto paying part of the tax) and increase volume until total revenue = total cost on the incremental unit sold, thus maximizing profit.

Is that it? If the product has an elastic demand curve, the producer will not be able to pass the tax on to the customer without reducing total revenue and likely profits?

I think you're on to something there TP.......

 

[Rustic23]

Yes, but if he is not covering his cost plus return on investment, he will shut the business down. Over time with all producers of the product in question paying the same tax, they will all attempt to cover the total tax in their price. The degree of elasticity of the supply and demand curve has an effect on their ability to recover this tax cost just as it does all other cost. When a tax is first enacted, most normal elasticity curves would indicate that the producer would eat some of the tax, however, over time, the producer will have to cover this cost. Oh, I forgot, or get a massive bailout from the federal government. And don't even ask how the airlines stay in business.