Progressive Nature of Tax Code

[ladelfina]

I like the sound of that: "peace dividend".
On "sin" taxes I made no argument for or against them; I merely pointed out that they affect people with lower incomes disproportionately even if you take out class or other demographic factors. For the same six-pack and Marlboros the poor guy pays more of his income in taxes than the rich guy. (The REALLY rich guy can get cheap Cuban rum and cigars smuggled in tax-free, most likely..).

The merely "well-off" in the middle do share a disproportionate amount of the burden, but as opposed to those higher up on the scale rather than lower down. It serves those in the top 1% to have 99% of the people fighting each other for 50% of the pie rather than to see the situation with clarity.

[ikubak]

Quote:

Originally Posted by ladelfina The merely "well-off" in the middle do share a disproportionate amount of the burden, but as opposed to those higher up on the scale rather than lower down. It serves those in the top 1% to have 99% of the people fighting each other for 50% of the pie rather than to see the situation with clarity.

Your numbers are a little off.

The top 1% earn 21.2% of the nation's income. That leaves the other 99% to fight over the other 78.8%. The top 1% earn 21.2% of the income and pay 39.4% of the income tax burden and the amount of the burden has been rising for years. Back in 1995, the top 1% shouldered 29% of the burden...1990, 23.8% of the burden, 1985, 21.2% of the burden, 1980, 17.4% of the burden.

And if you think the merely "well-off" in the middle share a disproportionate amount of the burden, consider that the top 1% pay more in income tax than the bottom 90%. I am not one of the top 1%, but I feel grateful to them for the large portion of the Federal Income Tax bill that they do pay.

[NW-Bound]

Quote:

Originally Posted by ladelfina It serves those in the top 1% to have 99% of the people fighting each other for 50% of the pie rather than to see the situation with clarity.

I am suspicious of that too, but don't know how to prove it. I would say it is not the top 1%, but the top 0.1%. For example, look at the meager IRA deduction allowed for the self-employed or small private companies. Then look at the higher 401k for the average worker. But that pales compared to the deferred compensation for executives of corporations. How about special privileges that our honorable Congress members create for themselves?

[Texas Proud]

Quote:

Originally Posted by Abreutime The National Budget, Debt & Deficit :: MarkTAW.com Here's a bunch of cool graphs, showing revenue and government spending (real and nominal, gross and as % of GDP). What I am struck by is the steady upward trend of spending. It is soooo difficult to cut a program that already exists, and that's what scares me the most about our current budget trends. Is government going to continue to increase spending indefinitely, at a rate far exceeding the rate of inflation? The idea of creating a series of increasing entitlement programs bothers me, since government at its root is not about entitlement. Government should not be one's primary provider of goods and services, and I'm afraid more and more people will come to rely on government in the coming decades. It's not a sustainable model, nor do I want this to be the future of US govt.

You are right in the cutting of a program. But it is even worse than you think. Most programs are on auto-pilot. They get their increase by law. SS and medicare and others like this are mandates. The true amount of the budget that Congress fights about is a small percent. I am sure one of the die hards here can find that number.... but even if they cut 100% of spending for ALL these programs it would not make much of a dent... they need to cut some of the mandated programs to fix the problem.

[Independent]

Quote:

Originally Posted by stephenandrew I thought this was interesting. From the IRS Statistics of Income Bulletin, Spring 2008. In 2006, slightly less 4.1 million tax returns were filed with adjusted gross income of $200,000 or above. The total income reported on these forms was about $2.4 trillion. This works out to an average of about $594,000 per return. Average tax liability was $136,300. In the same year, about 37.6 million returns were filed where adjusted gross income was less than $15,000. Total income for this group was $189 billion, or an average of $5014 per return. Average tax liability: $151. Obviously, there is a huge disparity in income. The higher earning group reported income that was about 118 times what the lower earning group reported. The higher earning group also paid taxes at about a rate of 900 times what the lower earning group paid. I knew the tax code was progressive, but never realized it was this progressive. Disclaimer--I am not in the $200K+ group.

It wouldn't bother me if the under $15,000 group paid zero FIT. If they did, the ratio of taxes between the over $200k and the under $15k would be infinite. So "900 times" is not scary.

I think the real story here is that AGI is so skewed. When you have 3% of the population earning 30% of the AGI, almost any "progressive" tax system will give them 50+% of the tax.

Remember, we are only talking about the individual income tax here. And "AGI" doesn't necessarily include all income.

[Independent]

Quote:

Originally Posted by ikubak Your numbers are a little off. The top 1% earn 21.2% of the nation's income. That leaves the other 99% to fight over the other 78.8%. The top 1% earn 21.2% of the income and pay 39.4% of the income tax burden and the amount of the burden has been rising for years. Back in 1995, the top 1% shouldered 29% of the burden...1990, 23.8% of the burden, 1985, 21.2% of the burden, 1980, 17.4% of the burden. And if you think the merely "well-off" in the middle share a disproportionate amount of the burden, consider that the top 1% pay more in income tax than the bottom 90%. I am not one of the top 1%, but I feel grateful to them for the large portion of the Federal Income Tax bill that they do pay.

You give a trend for "share of the tax burden", but you don't give a trend for "share of nation's income". Does your source have that as well?

[unclemick]

Hmmm - they never mention the SS tax burden at lower incomes do they. The fishermen, shrimpers/crabbers when I lived down in LA always paid way more except for the few big operators on their first dollar in SS.

When I think about filing single - even in ER - I can really get out the old soapbox.

And then, and then there is sales tax, state income tax, and property tax and new found fee's for this and that.

Dog Catcher - hmmm maybe ok - but a stinking fee to hold a garage sale!!! O come on!

heh heh heh - where did I put that soapbox? .

[haha]

Quote:

Originally Posted by ladelfina The merely "well-off" in the middle do share a disproportionate amount of the burden, but as opposed to those higher up on the scale rather than lower down. It serves those in the top 1% to have 99% of the people fighting each other for 50% of the pie rather than to see the situation with clarity.

You've been too long in Italy. Return to The Land OF The Sky BLue Waters, and cut out this communist BS.

Ha

[mb]

Quote:

Originally Posted by ikubak Your numbers are a little off. The top 1% earn 21.2% of the nation's income. That leaves the other 99% to fight over the other 78.8%. The top 1% earn 21.2% of the income and pay 39.4% of the income tax burden and the amount of the burden has been rising for years. Back in 1995, the top 1% shouldered 29% of the burden...1990, 23.8% of the burden, 1985, 21.2% of the burden, 1980, 17.4% of the burden. .

To make your numbers meaningful you should also provide the % of the nation's income that the top ten percent earned historically. It may be that their tax burden is going up only because their share of the income is going up? The ratio is probably more significant.

MB

[ladelfina]

mb is correct.
(I apologize for having exaggerated figures for general illustration above.)

Quote:

Mr. Greenstein’s organization will release a report today showing that for Americans in the middle, the share of income taken by federal taxes has been essentially unchanged across four decades. By comparison, it has fallen by half for those at the very top of the income ladder. Because the incomes of those at the top have grown so much more than those below them, their share of total income tax revenue has risen despite the reduced rates. The analysis by the two professors showed that the top 10 percent of Americans collected 48.5 percent of all reported income in 2005. That is an increase of more than 2 percentage points over the previous year and up from roughly 33 percent in the late 1970s. The peak for this group was 49.3 percent in 1928. The top 1 percent received 21.8 percent of all reported income in 2005, up significantly from 19.8 percent the year before and more than double their share of income in 1980. The peak was in 1928, when the top 1 percent reported 23.9 percent of all income. The top tenth of a percent and top one-hundredth of a percent recorded even bigger gains in 2005 over the previous year. Their incomes soared by about a fifth in one year, largely because of the rising stock market and increased business profits. The top tenth of a percent reported an average income of $5.6 million, up $908,000, while the top one-hundredth of a percent had an average income of $25.7 million, up nearly $4.4 million in one year.

http://www.nytimes.com/2007/03/29/bu...=1&oref=slogin

Maybe it's too simplistic to look at the last peak in income disparity in 1928 and draw conclusions from that, or maybe not...

This is a trend that was present even before the Bush cuts:


If the AFTER-TAX income of the top tier keeps rising, while for most it stays flat.. it's pretty hard to argue that taxes on the first group are too onerous or disproportionate, and that they are holding these earners back somehow.

[ikubak]

The bottom 90% obviously aren't doing their part to make more money!

[Frugality_of_Apathy]

that graph is pretty meaningless because there is a large population that makes no money at all dragging down the average. In 2006 there were only 150.6 million jobs including self employed and unpaid family members, and 298.8 million people in the US. Half the country makes Zero dollars.

[HFWR]

Let's get those kids and old people off their duffs, and on the job!

[HFWR]

Quote:

Originally Posted by ladelfina I like the sound of that: "peace dividend".

I think some folks didn't get the memo...

[Caroline]

Interesting thread -- lots of sources quoted and charts and graphs going around.

Being from the slow class as I am, I tend to ignore all that and try to simplify such questions whenever possible.

Stipulated: I get taxed a lot on my 6-figure income, while other folks get taxed a lot less, percentage-wise, on their $20-30K per year incomes.

Question: Would I trade my life for theirs?

Answer: No, I would not.

Next question.

[Independent]

Quote:

Originally Posted by Frugality_of_Apathy that graph is pretty meaningless because there is a large population that makes no money at all dragging down the average. In 2006 there were only 150.6 million jobs including self employed and unpaid family members, and 298.8 million people in the US. Half the country makes Zero dollars.

You seem to be assuming the graph is about earned income of individuals. I don't think so.

The text says "tax filers". Most couples only file one return. Children are included with their parents. People who have too little income to file a return aren't included at all. People with only non-earned income (most retirees) who have enough to file a return are included.

If you are looking at the top 1% of tax returns, dividends and capital gains are important sources of income.

You can get similar data here: SOI Tax Stats - Individual Statistical Tables by Size of Adjusted Gross Income Look at Table 1.1 for 1998.

[DragoMuseveni]

Quote:

Originally Posted by Texas Proud OHHH, and just to throw in one of my pet peeves.... I still have never figured out that if someone in a previous admin put in a ridiculous high growth rate for some program... and the new prez said, instead of a 10% increase, let's increase it only 3%.... and get accused of CUTTING the program.... that math does not add up for me....

That doesn't account for population growth or inflation. For instance: in year one you spend 10k on a program that covers 1000 people, in year two you might have 1100 people in the program so the amount you spend on it should be increased proportionally. You also need to increase for inflation. If you don't do this then you are in a very real sense cutting the program.

[Texas Proud]

Quote:

Originally Posted by DragoMuseveni That doesn't account for population growth or inflation. For instance: in year one you spend 10k on a program that covers 1000 people, in year two you might have 1100 people in the program so the amount you spend on it should be increased proportionally. You also need to increase for inflation. If you don't do this then you are in a very real sense cutting the program.

Yea..... Let me try to use that logic at work....

Hey... I had a baby this year so because of 'population growth' you need to give me more money or else you are 'cutting' my salary....

Or... hey, that 2% raise is NOT a raise, because inflation is 3%... so you are cutting my salary....


Just bad logic IMO.... and the exact point I was trying to make... and increase is cutting in Washington speak...


Now, you can say that the PER PERSON amount has been cut... or the purchasing power is lower if you do not increase the funds... but you are NOT cutting the spending...

[HFWR]

Quote:

Originally Posted by Texas Proud Or... hey, that 2% raise is NOT a raise, because inflation is 3%... so you are cutting my salary....

Sounds like my last employer, and, quite likely, my new employer. I've "lost" money every year since 2000.

So, yeah, they're not "cutting", but the end result is that I'm falling behind...

[free4now]

To see how the tax code is becoming less and less progressive, compare the middle class (not those in poverty) versus the rich. The middle class has seen their tax rates stay largely unchanged through the Bush era, and they are getting squeezed with AMT starting to hit them. But the rich have seen significant decreases in ordinary income rates, and huge decreases in cap and div rates.