jobs news July 8--losing government jobs

[haha]

It might be true that a low-middle income earner spends a higher % of their income on these things - but the tax itself is still flat. They don't change the tax rate based on income.

There are no US taxes that I can think of were a lower income person pays a higher rate than a higher income person.

But it's not a bad idea, that might get 'em voting to lower expenses, though on a strictly in and out basis, the lower income would likely still be $$ ahead to vote for any redistribution that they can, as so much of what they gain will be non taxable anyway.

Ha

 

[MichaelB]

There are no US taxes that I can think of were a lower income person pays a higher rate than a higher income person.

Social security taxes % of total wages. The rate is flat but then goes to 0. That is a extremely regressive. Payroll taxes are not included in the tax analysis linked earlier, otherwise they would lead to a different conclusion, one not favorable to higher income earners.

 

[MichaelB]

I don't think your terms here are correct. AFAIK, sales and property taxes are a "flat tax", as are "sin taxes".

It might be true that a low-middle income earner spends a higher % of their income on these things - but the tax itself is still flat. They don't change the tax rate based on income.

And then there are fixed taxes (sometimes call a "head tax"), like the sticker for my car, the connect fee I pay the (monopoly) utility company, etc. Same amount regardless how much I use the product.

-ERD50

Sales tax is generally considered regressive because lower income people spend a larger portion of their total incomes, and therefore have a higher effective rate. Sin taxes are as well, but because people are not compelled to consume in this category, it is more difficult to frame a moral argument. Property taxes aren't clearly regressive or flat because of assessment and zoning, but because housing consumption rises in line with income they are generally considered "flat".

 

[ERD50]

There are no US taxes that I can think of were a lower income person pays a higher rate than a higher income person.

Social security taxes % of total wages.

Yes, SS is what I would call a mathematically 'regressive' tax system.

The rate is flat but then goes to 0. That is a extremely regressive.

Of course, this gets complicated because the payouts for SS are highly progressive, with lower income earners taking a higher % of relative to what they put in, so IMO, when you consider input and output, it gets muddy. That amount that the high earners do not pat in isn't going towards any benefit either, so it's all a bit fuzzy.

Sales tax is generally considered regressive because lower income people spend a larger portion of their total incomes, and therefore have a higher effective rate.

I see what you're saying, and the dictionary definitions I glanced at use that approach also. However, it seems to me that renders the term almost useless, because it all depends on the individual (although some trends would be strong). Whereas my definition holds based on the math. A tax is either progressive, flat, regressive or a 'head tax', based on how it is levied, rather than how it fits in an individuals personal budget.

Clearly, some wealthy people spend a higher % of their income on expensive wine and scotch than some poor people do (tea totalers, or very light drinkers). So a sin tax isn't always regressive. But mathematically, it is always 'flat'.

I guess it just makes for odd math to try to measure a tax in terms of income, unless it is a tax levied on income. Just seems like apples-oranges to me. But, my thinking seems to be at odds with conventional usage - not the first time!

-ERD50

 

[samclem]

It's a false dichotomy.

Please point out the dichotomy--I didn't pose one (false or valid).

 

[Hamlet]

This is why I included the word "generally" in my description. Sales and sin taxes are generally, but not universally regressive.

It's remarkably challenging to pin down exactly how regressive. The studies I've seen for Minnesota put the middle class as paying somewhere around 12% of their incomes in state and local taxes, while the top 1% are paying about 9%.

From a practical standpoint, there is really no way around this. If you are extremely wealthy, it is pretty easy to establish residency in a state with no income taxes.

I'm not sure that the studies have measured the number of people living in one state but claiming "residency" in a different state to avoid income taxes.

This is one reason that the Federal tax system should remain progressive.
It's a lot harder to cut ties with the country than a state (although I think this may become an issue in the future).

Clearly, some wealthy people spend a higher % of their income on expensive wine and scotch than some poor people do (tea totalers, or very light drinkers). So a sin tax isn't always regressive. But mathematically, it is always 'flat'.
-ERD50

 

[GregLee]

But, my thinking seems to be at odds with conventional usage - not the first time!

So you give yourself special credit for being daring and unconventional, and all because you misused a term?

 

[samclem]

You're ignoring that those people are also paying FICA, Medicare taxes, gas taxes, corporate income taxes whenever they buy goods, etc. Income taxes only make up about 42% of the Federal government's revenues, but people keep pretending that they are the whole story.

- I wrote "income taxes" for this reason.
- Corporate taxes: Yes, they are ultimately "regressive" for poor people, I cannot imagine why folks who claim to represent the poor continue to champion higher corporate tax rates--it simply represents the triumph of demagoguery over facts.
- Let's disaggregate the whole federal revenue picture to see why voters won't put the brakes on spending. For this discussion, it's important to remember that the median AGI on US income tax returns for (2008) was $33k. "Median" = just as many returns (and, for our purposes here, voters) below this number as above it.
-- SS/Medicare payroll taxes (40% of federal revenue): Almost all the money now taken in for these programs is also spent on these programs. Those below the median income receive a very good "return" (expected benefit) for every dollar they pay into SS and Medicare. The overall return is highly progressive. Those above this level receive a progressively worse deal. And yet, the talk today, when it concerns increasing SS payroll taxes, is all about how we can extract still more money from those who earn in the upper quintile. The lower 50% of earners cannot be expected to argue for lower SS or Medicare expenditures in the present environment, not when they pay far less than $1 for every dollar in benefits they receive. So, no homeostatic pressure here--those below the median income will vote for more pie.
-- Individual income taxes: 42% of government revenues. The 50% of people below the median paid almost none (again, on average it was less than 3% of their earnings). These taxes pay for all types of benefits received disproportionately by the 50% of voters below the median income: EITC, the upcoming huge health care subsidies, block grants that pay for services to the poor, food stamps, etc. So, no homeostatic pressure here--those below the median income will vote for still more pie and higher taxes--for others to pay.

-- Corporate taxes (9% of revenues): As above, these pay for disproportionate benefits for those below the median income, but unlike the above, those below the median income pay a large portion of these taxes (indirectly). Again, logic alone cannot explain why the poor, and their advocates, do not appear to be pushing for lower corporate tax rates.
-- Other revenues (excise taxes, customs, etc) 9% of revenues: Effectively below the radar in our national debate.

 

[Hamlet]

I think that you need to separate this out a little further. The people paying these taxes are not the ones receiving the benefits currently. A large portion of the people paying into these systems are not real confident that they are going to see any return at all for their money.

I suspect that support of these programs breaks down more by age than by income. The older a person is, the more likely it is that they will actually receive benefits from these programs. Obviously, if someone is already receiving benefits, they will generally be opposed to cuts in benefits, regardless of how much income they made when they were paying into the system. Likewise, the young working poor probably don't care about cuts to SS and Medicare, because they won't receive those benefits for decades, and have pretty much accepted that the people in charge now will eat the seed corn long before they get a chance to collect.

You're worried about the working poor voting themselves extra benefits. I'm worried about the non-working elderly doing so.

-- SS/Medicare payroll taxes (40% of federal revenue): Almost all the money now taken in for these programs is also spent on these programs. Those below the median income receive a very good "return" (expected benefit) for every dollar they pay into SS and Medicare. The overall return is highly progressive. Those above this level receive a progressively worse deal. And yet, the talk today, when it concerns increasing SS payroll taxes, is all about how we can extract still more money from those who earn in the upper quintile. The lower 50% of earners cannot be expected to argue for lower SS or Medicare expenditures in the present environment, not when they pay far less than $1 for every dollar in benefits they receive. So, no homeostatic pressure here--those below the median income will vote for more pie.

 

[samclem]

You're worried about the working poor voting themselves extra benefits. I'm worried about the non-working elderly doing so.

As you note, I didn't make any distinctions by age, only by income. I think we are both right--those receiving benefits for which they pay nothing (or very little) will vote to increase those benefits. If their number exceeds 50% of voters, then we have no effective mechanism to restrain this spending. That, in my opinion, is the fundamental "political/architectural" problem that underlies our present budget crisis and government spending orgy.

It's easy to find a hundred heartfelt emotional reasons to argue for a more "progressive" tax system. The situation above highlights the objective rationale for a less progressive tax system (or, even more controversially, a voting system weighted by taxes paid--but let's not have that discussion here).

 

[MichaelB]

States that vote for Democratic presidential candidates pay more in taxes and receive less in benefits, while states that vote for republican candidates pay less and receive far more. You can cut and dice the numbers to show anything, especially when you start with the conclusion and work your way back into the data.

This whole argument about who pays and who benefits is a red herring. People and companies in the US add more value and create more wealth that anywhere else in the world. We are productive and well educated, have a fantastic legal system and judicial process, the best universities in the world. We also have the biggest and best physical infrastructure. People before us paid for all that and we benefit. If they focused as much on who pays and who benefits as people do now we would probably be suffering a lower standard of living today.

 

[samclem]

States that vote for Democratic presidential candidates pay more in taxes and receive less in benefits, while states that vote for republican candidates pay less and receive far more. You can cut and dice the numbers to show anything, especially when you start with the conclusion and work your way back into the data.

I agree with the bolded portion, and cite the balance of your post as an example. Your red state/blue state hypothesis suffers from data aggregation errors and is effectively countered by the study synopsis here. In part (emphasis added):

For decades, Democrats have been viewed as the party of the poor, with Republicans representing the rich. Recent presidential elections suggested a reversal in this pattern, with Democrats performing well in richer "blue" states of the Northeast and West Coast, and Republicans dominating a central swath of poorer "red" states in the South and Midwest.
To reconcile this paradox, Park and his colleagues examined more than four decades of data on income and voting patterns and compared trends at the individual, county, state and national levels. Results shed light on what's really behind the seeming shift in rich-poor voter affiliations and debunk a number of common misconceptions about current political realities.
'Gross oversimplification'
"Our results suggest that the popular journalistic image of rich latte-drinking Democrats and poor NASCAR Republicans is a gross oversimplification," Park says. "Income varies far more within states than average income does between states, and it is these with-in-state variances that explain national voting patterns."

The bottom line, the study suggests, is that little has changed in terms of income's general influence on individual voting patterns: in every presidential election since 1952, the richer a voter is, the more likely that voter is to vote Republican, regardless of ethnicity, sex, education or age.
What's changing, the researchers argue, is how differences in income are playing out at the county and state levels. A key finding is that relative income is a much stronger predictor of voting preferences in poor states than it is in rich states.

And the reverse: The poorer a voter is, the more likely the voter will vote Democratic. And to the degree poor people receive more benefits than they they pay for, and to the degree Democrats are more likely to favor increasing these benefits, my previous point is supported.

The whole idea that "Blue states vote for X" obscures the point that the state "votes" for whoever a majority of their voters choose. It's those voters, not the states, who are apparently voting for their economic self-interests.

 

[Hamlet]

I would say that our voting system is currently being weighted to a large degree by the wealth people have.

Money buys ads, and ads to a large degree determine who wins elections.

People in general are not voting based on some well-thought out analysis of their economic well-being, as you suggest.

To a large degree, they vote for whoever the TV tells them to.

It's easy to find a hundred heartfelt emotional reasons to argue for a more "progressive" tax system. The situation above highlights the objective rationale for a less progressive tax system (or, even more controversially, a voting system weighted by taxes paid--but let's not have that discussion here).

 

[samclem]

People in general are not voting based on some well-thought out analysis of their economic well-being, as you suggest.

I'd welcome any evidence you've got. I'd also agree with the general point that perhaps the only counterweight to a "tyranny of the majority" is the ability of those above the median income to make their position known through political speech--which they fund. This is another reason that campaign contribution limits and other barriers to the free speech are dangerous.

I'm guessing you won't agree.

 

[ERD50]

This is why I included the word "generally" in my description. Sales and sin taxes are generally, but not universally regressive.

....


This is one reason that the Federal tax system should remain progressive.
It's a lot harder to cut ties with the country than a state (although I think this may become an issue in the future).

Fair enough, but I just feel it lessens the meaning of the word - it just gets fuzzy. And I'm also in favor of a progressive tax system. I think it just makes sense on many levels. What the slope should look like is a big question.

So you give yourself special credit for being daring and unconventional, and all because you misused a term?

Special Credit? I dunno, but I'll stand by what I said - my definition remains consistent under all circumstances, the 'conventional' definition does not - that appears to be factual to me (mathematically correct). IMO, there should be two different terms used, but I certainly don't expect Websters to adapt to my view. But I can still point out the inconsistency, no?

-ERD50

 

[Hamlet]

I don't have any hard evidence, just an observation that the better-funded candidates win more elections. Do you really think that the parties would spend all that money if it didn't sway voters?

IMO, that is the primary reason that Republicans are attacking unions-- their goal is to destroy the funding of the Democratic party. The fact that they might get budget savings is a secondary consideration.

You talk about a "tyranny of the majority", but the wealthy of this country have done a remarkable job of lowering their tax burden over the last 30 years. If there really is a class war going on, the rich are the ones winning it.

Note that I don't have a good answer to the money problem. Campaign finance laws have been mostly useless. I don't think that they are likely to make much difference. The money always finds a way to get heard.

I think the fundamental problem is the medium of Television. The medium does not lend itself to reasoned debate, but to propaganda. People will buy almost anything if you advertise it well.

The success of Axe body spray proves that to me.

I'd welcome any evidence you've got. I'd also agree with the general point that perhaps the only counterweight to a "tyranny of the majority" is the ability of those above the median income to make their position known through political speech--which they fund. This is another reason that campaign contribution limits and other barriers to the free speech are dangerous.

I'm guessing you won't agree.

 

[samclem]

You talk about a "tyranny of the majority", but the wealthy of this country have done a remarkable job of lowering their tax burden over the last 30 years.

Please show me how that works. Here is the percentage of AGI paid in income taxes by the top 10% of returns since 1987, and for the bottom 50% of returns (the definition of AGI changed in 1987, so that's as far back as comparable figures can go).

Format: Year
Top 10% Effective Tax rate
Bottom 50% Effective Tax Rate

1987
19.77%
5.09%
1988
19.18%
5.06%
1989
18.77%
5.11%
1990
18.50%
5.01%
1991
18.63%
4.62%
1992
19.13%
4.39%
1993
20.20%
4.29%
1994
20.48%
4.32%
1995
20.97%
4.39%
1996
21.55%
4.40%
1997
21.36%
4.48%
1998
21.42%
4.44%
1999
21.98%
4.48%
2000
22.34%
4.60%
2001
21.41%
4.09%
2002
20.51%
3.21%
2003
18.49%
2.95%
2004
18.60%
2.97%
2005
18.84%
2.98%
2006
18.86%
3.01%
2007
18.79%
2.99%
2008
18.71%
2.59% Source: IRS

Again, who is winning the "war" of shifting the income tax burden?
Top earners: Have sometimes paid more or less than 2008, but it has always been more than 18%
Lower earners: Have generally been on a downward trend, have never paid more than 6% of their income in FIT, and in 2008 paid the lowest rates in at least 21 years.

I agree that folks need to watch less propaganda on TV and start looking for facts.

 

[GregLee]

Special Credit? I dunno, but I'll stand by what I said - my definition remains consistent under all circumstances, the 'conventional' definition does not - that appears to be factual to me (mathematically correct).

I haven't the foggiest idea what you're getting at. What would it mean for a definition to be inconsistent? A statement or theorem, or the conjunction of a set of those, is inconsistent when it is always false. Definitions can be appropriate, useful, traditional, and a lot of things, but they can't be true or false, hence they can't be inconsistent. And what does mathematics have to do with factuality, anyhow?

 

[haha]

I would say that our voting system is currently being weighted to a large degree by the wealth people have.

In general, I support this. The only way democracy can possibly work in a society like America is if it is subverted. I pray for blizzards on election day.

Ha

 

[Hamlet]

Three things--

1. Once again, you are picking out the only progressive piece of the tax picture. Income taxes are only 42% of Federal tax revenues. FICA, the other large part of the Federal revenue picture, is highly regressive. State and local taxes are generally regressive as well. Should we examine the rate a person making a million dollars a year pays in FICA compared to someone making $20,000? If you include the employer's half (and you should), that is substantial.

2. You show a relatively steady tax rate for the top 10% over the last 24 years, but their share of the income pie has exploded. If the tax code had held steady, their tax rate would have increased.

3. The big reductions in taxes have been in the capital gains and dividend rates. Huge wealth only translates to high AGI if they choose to realize income. Someone living off of wealth (earned by themselves or inherited) is paying much lower rates than they were in the 80s. They may be all over the income distribution, depending on how much income they choose to realize.

The person paying the highest tax rate in this country is the self-employed single renter making just over 100k/year. That person pays a much higher rate than the billionaire children of Sam Walton.

That doesn't make much sense to me.

Please show me how that works. Here is the percentage of AGI paid in income taxes by the top 10% of returns since 1987, and for the bottom 50% of returns (the definition of AGI changed in 1987, so that's as far back as comparable figures can go).

Format: Year
Top 10% Effective Tax rate
Bottom 50% Effective Tax Rate

1987
19.77%
5.09%
1988
19.18%
5.06%
1989
18.77%
5.11%
1990
18.50%
5.01%
1991
18.63%
4.62%
1992
19.13%
4.39%
1993
20.20%
4.29%
1994
20.48%
4.32%
1995
20.97%
4.39%
1996
21.55%
4.40%
1997
21.36%
4.48%
1998
21.42%
4.44%
1999
21.98%
4.48%
2000
22.34%
4.60%
2001
21.41%
4.09%
2002
20.51%
3.21%
2003
18.49%
2.95%
2004
18.60%
2.97%
2005
18.84%
2.98%
2006
18.86%
3.01%
2007
18.79%
2.99%
2008
18.71%
2.59% Source: IRS

Again, who is winning the "war" of shifting the income tax burden?
Top earners: Have sometimes paid more or less than 2008, but it has always been more than 18%
Lower earners: Have generally been on a downward trend, have never paid more than 6% of their income in FIT, and in 2008 paid the lowest rates in at least 21 years.

I agree that folks need to watch less propaganda on TV and start looking for facts.

 

[samclem]

Three things--

1. Once again, you are picking out the only progressive piece of the tax picture. Income taxes are only 42% of Federal tax revenues. FICA, the other large part of the Federal revenue picture, is highly regressive. State and local taxes are generally regressive as well. Should we examine the rate a person making a million dollars a year pays in FICA compared to someone making $20,000? If you include the employer's half (and you should), that is substantial.

And once again, it's proper to exclude FICA (and Medicare) because their benefit ratio is already highly progressive. Have payroll tax rates increased over this time period? If not, they've got nothing to do with your claim that the tax burden has been shifted from the wealthy to the poor.

2. You show a relatively steady tax rate for the top 10% over the last 24 years, but their share of the income pie has exploded. If the tax code had held steady, their tax rate would have increased.

Pardon me, but I AM showing the tax rate. What are you talking about?

3. The big reductions in taxes have been in the capital gains and dividend rates. Huge wealth only translates to high AGI if they choose to realize income. Someone living off of wealth (earned by themselves or inherited) is paying much lower rates than they were in the 80s. They may be all over the income distribution, depending on how much income they choose to realize.

If a person doesn't have income, then that "non-income" isn't taxed. It's the same whether a person chooses not to work an extra hour at McDonalds or chooses not to sell a stock. No income =no taxes. The tax rates I posted included all income that is included in AGI (cap gains, dividends, wages, etc). It has bounced around between 18.49% and 22.39% for the wealthy, and in 2008 it was still in that range: 18.71%. Meanwhile, FIT rates for the bottom 50% of Americans by AGI have been on a fairly steady downward slope and were at their lowest point in 2008 (2.59%). A wealthy person (top 10% of AGI in the US) pays over 7 times the FIT on each dollar earned as those in the lower 50% of AGI. Still not "fair" enough for you?

It's been fun, but I'm bowing out of this one now.

 

[MichaelB]

I agree with the bolded portion, and cite the balance of your post as an example. Your red state/blue state hypothesis suffers from data aggregation errors and is effectively countered by the study synopsis here. In part (emphasis added):
And the reverse: The poorer a voter is, the more likely the voter will vote Democratic. And to the degree poor people receive more benefits than they they pay for, and to the degree Democrats are more likely to favor increasing these benefits, my previous point is supported.

The whole idea that "Blue states vote for X" obscures the point that the state "votes" for whoever a majority of their voters choose. It's those voters, not the states, who are apparently voting for their economic self-interests.

Your link was to an article about wealth and partisan voting - nothing to do with my post.

I mentioned something that is apparent in tax data but really for me meaningless - that some states pay more and receive less in federal funds, while others pay less and receive more, and there are partisan trends there.

The bigger point, however, continues to be the entire discussion about who pays and who benefits is a red herring. Everyone benefits because the US social, cultural, legal and and physical infrastructure enables the creation of wealth, and the greatest benefit is to those that generate the greatest wealth. Taxes are the cost of that wealth generation and most folks acknowledge that. Stop paying them and what will suffer most is the capacity to generate wealth.

 

[Hamlet]

I'm not really looking to increase the slope dramatically. Mostly I want that slope maintained at relatively recent levels.

For example, I'm strongly against the Republican's constant efforts to remove all taxation from dividends, capital gains, and estates.

I would set the capital gains and dividend tax rates back to 20%, and set the estate tax at whatever the highest marginal income tax happens to be, with a 5 million dollar inflation indexed exemption.

I would make hedgefund managers pay the same tax rates as everyone else, rather than allowing them to treat their earned income as long term capital gains.

We currently have Federal tax revenues bringing in less than 15% of GDP. That is not sustainable, unless we go back to pre-FDR government ideas (remove SS and Medicare).

I advocate trimming back deductions and loopholes to start getting us back to the historical norm of federal taxes at 18% of GDP.

We are still going to have to have a tough conversation about spending, but determining that all-time low taxation levels are now the absolute highest we can have is insane.

Fair enough, but I just feel it lessens the meaning of the word - it just gets fuzzy. And I'm also in favor of a progressive tax system. I think it just makes sense on many levels. What the slope should look like is a big question.
-ERD50

 

[youbet]

FICA, the other large part of the Federal revenue picture, is highly regressive. .

That isn't really true. While FICA appears to be regressive on the collecting end, it is highly progressive on the payout side. Sure, someone with a low lifetime income pays a higher percentage of income than someone who earns above the taxable level max. But that same low income person receives a far higher percentage of his income as an SS benefit at retirement. You need to take that into account. It's part of the SS benefits calculation formula.

SS has a much better ROI for the low income folks than for the high income folks.

 

[haha]

Your link was to an article about wealth and partisan voting - nothing to do with my post.

I mentioned something that is apparent in tax data but really for me meaningless - that some states pay more and receive less in federal funds, while others pay less and receive more, and there are partisan trends there.

The bigger point, however, continues to be the entire discussion about who pays and who benefits is a red herring. Everyone benefits because the US social, cultural, legal and and physical infrastructure enables the creation of wealth, and the greatest benefit is to those that generate the greatest wealth. Taxes are the cost of that wealth generation and most folks acknowledge that. Stop paying them and what will suffer most is the capacity to generate wealth.

Certainly has not been true in Hong Kong, or in the US in times prior to WW2 when we had low taxes.

In fact, what you put forth as a causation may be really be wroking in the opposite direction.

Ha