I have posted this chart before, but I think it might be useful to revisit it in the wake of the president’s speech about how rich Americans aren’t paying their fair share of taxes.
As you can see, the top 1 percent of earners (a household income above $380,000) shoulder 38 percent of personal federal income taxes and make only 20 percent of income. The top 5 percent of income earners pay almost 60 percent of income taxes and make under 35 percent of all personal income.
One important reason why the bottom 50 percent doesn’t pay much income tax is because lawmakers have decided to pay for social programs though the tax code and most of these people are either relatively poor or really poor.
Here is another relevant chart, showing the effective federal tax rate (individual income taxes, social insurance (payroll) taxes, corporate income taxes, and excise taxes) by income quintile:
As you can see, the tax system is progressive. Does it mean that the rich pay their fair share? I guess it depends on how one defines fairness. But if the progressivity of the income tax doesn’t signal fairness, what does it signal?
That being said, it’s important to remember that, fairness aside, raising the marginal tax rates on any group, especially those already paying the highest rates, could reduce GDP and income across the board, not just for the people paying the initial tax bill. Why? Because the burden of higher taxes on capital formation falls largely on labor in the form of lower wages and hours worked.
The same is likely true of an increase in the capital-gains tax, which is what the president seems to have in mind with the Buffett tax. This move would increase the double taxation of corporate income and would seriously reduce capital formation and wages. And for these reasons, it is unlikely to raise much revenue.
If you go to the link below, you can see the CBO numbers for ALL Federal taxes, not just income taxes. This includes payroll taxes.
Even when you factor in payroll taxes, the top quintile still pays more of a percentage than their percentage of income (second chart in the gallery, or the tables in the documents).
External Link
Reply to this commentLinkReport AbuseCan you please post a chart showing the effective tax rate on the top 1% throughout the last century?
Then post another chart showing the level of tax on the top 1% compared to other industrialized nations?
Then can you post a chart comparing top tax rates with GDP growth over time and see if there s a correlation?
I think it would help put the argument in context if you didn't post ONLY charts that favor your position.
Reply to this commentLinkReport AbuseThis is awesome. Too funny! The answer is "no."
Reply to this commentLinkReport AbuseBobby - here's an idea .... Why don't -you- go round up all those charts and then post links to them here. The author isn't some errand boy that you can task to go collect information for your argument.
Reply to this commentLinkReport AbuseYou'll have to forgive him, but he's a liberal and that's just how he thinks. In bobytwotime's world, other people put in the hard work and he reaps the benefits.
Reply to this commentLinkReport AbuseNo doubt. bobytwotime's world is equal parts sad and pathetic.
Reply to this commentLinkReport AbuseUnfortunately, I don't doubt that in the real world bobbytwotimes is living off the effort of others.
Reply to this commentLinkReport AbuseHow is the tax level for "other industrialized nations" relevant? Unless you cherry-pick your time frames the U.S. has had overall stronger growth and lower unemployment with our system. Who gives a whit how our underperforming peers do things?
Reply to this commentLinkReport AbuseHow about this: It doesn't take a chart to teach you how to keep your hand out of the pocket of someone else.
It's not you money. Stop worrying about other people's money. I honestly do not understand that gall some people have with their opinions on how much money others (who probably make more) get to keep from what they've earned.
The rich pay the overwhelming majority of taxes in this county. Nearly half of all US households pay no taxes.
It's nothing more than envy and class warfare. Totally un-American in my opinion.
Reply to this commentLinkReport AbuseYou have precisely the wrong temperament to lead a lemonade stand, let alone a company, let alone any kind of agency at the state or federal level.
"It's not your money"? That's your response? Good, very constructive, not at all simple-minded. (And the notion that the money belonging to, say, the CEO of Goldman Sachs is entirely "his money" is borderline meaningless, though I'm sure you'd defend him to the death.)
Here are some ideas for future comments:
"It's not your stop light!"
"It's not your police officer!"
"It's not your trash dump!"
"It's not your protected wildlife!"
"It's not your uncontaminated medicine!"
"It's not your war!"
Taxes exist. They will always exist, as long as society exists. Get over it, move on, add something new to the debate. No one's stealing anything from anybody. That's conversation-stopping drivel.
(Oh, and this? "Nearly half of all US households pay no taxes"? Factually wrong. Unless you consider payroll taxes not-taxes, which, who knows, you probably do, because you're into counterfacts.)
Reply to this commentLinkReport Abuse"Nearly half of all US households pay no taxes."
Factually incorrect. Unless you're discounting payroll taxes, which are, last I checked, taxes. Or did you intend to exaggerate to get your simplistic point across that all taxes are theft?
Also: "It's not you money." Great point. Try these, as well:
"It's not your stop light!"
"It's not your police officer!"
"It's not your protected forest!"
"It's not your protected animal!"
"It's not your uncontaminated medicine!"
"It's not your war!"
Taxes exist. Accept it. They always have, and always will, as long as civil societies, as we know them, exist. Taxes pay for public services, they are not "theft," and if you seriously care about the deficit, and don't wish to inflict massive pain, a little bit of progressive taxation is a great way to do that. Moreover, proposing a more progressive tax rate isn't the product of "envy," and accusing your political opponents of "envy" and being "un-American" is empty, moralistic, frankly useless rhetoric.
Of course, this isn't an obscure point. But, if your comment's to be taken at face value, ScorchedEarth, you misunderstand some very basic facts.
Reply to this commentLinkReport AbuseYou can find something useful in about 5 minutes of googling around.
External Link
As indicated in the Corner article, the richest have consistently paid a slightly higher effective tax rate than the next rung down and ditto from there.
That means the argument from Buffett that his secretaries pay a higher percentage than he does is absolutely NOT true as a general matter, so the whole basis for Obama's tax plan is (surprise!) a flat-out lie.
Reply to this commentLinkReport AbuseBK - what you're missing is that these numbers are distorted because a lot of the "income" that wealthy people earn comes in the form of returns on investments, which aren't treated as income for federal tax purposes. The link you provided makes this very point:
"[Note: This very top income group actually has a lower average effective income tax rate than the rest of the top 1 percent of returns because these extremely high-income returns are more likely to have income from capital gains and dividends, which are typically taxed at lower rates. It's worth pointing out that in the case of capital gains and dividends, usually the income has already been taxed once by the corporate income tax, which is not included here, meaning the average effective tax rate numbers can be somewhat misleading.]"
Reply to this commentLinkReport Abuse"Then post another chart showing the level of tax on the top 1% compared to other industrialized nations?"
That is completely and utterly irrelevant to a discussion about US tax rates.
"I think it would help put the argument in context if you didn't post ONLY charts that favor your position."
So you've seen these charts? Then share them instead posting this snarky questionnaire.
Reply to this commentLinkReport AbuseRE: "That is completely and utterly irrelevant to a discussion about US tax rates."
Aw, c'mon. It's useful in demonstrating just how much "other industrialized nations" suck the big one.
Our Constitution rocks. One of those other countries wants to impress me, adopt an equal document. Short of they, they're just relegated to being somebody else's problem of their own doing.
Reply to this commentLinkReport Abuse"Does it mean that the rich pay their fair share? I guess it depends on how one defines fairness."
Our President seems to define fairness as "however much money we need to pay for our harebrained schemes." On exactly how much that means, he'll get back to you.
Reply to this commentLinkReport AbuseForget the complications of brackets and marginal rates and cap gains vs ordinary income.
Obama means ALL of our money should be forked over to pay for running the government, and then the balance will be distributed as the government functionaries sees fit.
The more complex Obama makes it sound, the more distracted we are while he picks our pockets. We're halfway there already.
Reply to this commentLinkReport AbuseIf only you were correct. If Obama got everything he's asked for, it would still not be nearly enough to cover the harebrained schemes. The real definition is "however much we need to only have to borrow for our harebrained schemes less than a number scary enough as to make us completely unelectable."
Reply to this commentLinkReport AbuseThere. Fixed it for ya.
I missed the data point about the wealthiest 1% accounting for nearly half of the nation's wealth. Or was that purposely left out? Would it make sense for the folks who account for half of all income in this country to shoulder half the bill? I think it would, and so does a majority of the country.
As to the notion that restoring Clintonian levels of taxation will put a damper on growth, I'll believe it when I see it. It didn't happen then and it won't happen now, especially when our biggest corporations are sitting on a big fat pile of cash. If your CEO makes 400% more than the guy on the line, my guess is that a 3% jump in his personal income tax rate isn't going to lead him to lay off or abstain from hiring folks. He probably won't even notice it. If he wants to get really greedy and scream like a stuck pig over it, I'm sure consumers and clients will be happy to reward him for that kind of greed and childish behavior in the marketplace.
Higher taxes on millionaires will also resolve the "uncertainty" issue the right likes to gripe about. Now we'll be able to say - with certainty - that they'll pay a bit more into the nation that helped them prosper so. Once they have this certainty, I'm sure they'll carry out those grandiose plans for product and sales expansion they've been sitting on since low taxes haven't motivated them to date. LOL!
But you know what's really going to settle this? The military. Come November when that trigger gets pulled and the military faces huge forced cuts I imagine we'll see a new degree of introspection on the right - do we contribute another percentage point to unemployment and pair back pay and bennies for the military by cutting them? Or do we increase by a few percentage points the top rate on the wealthiest folks in the nation? Seems like a no brainer to most folks. As you say, these increases are small and might not contribute "much" to national revenue, but if it's enough to keep a few thousand vets employed, educated and cared for I'm guessing it will carry a majority.
Reply to this commentLinkReport AbuseMoe - well, the author does show what percentage of taxable income each bracket represents, but he doesn't break it down by accrued assets (i.e. wealth).
But, let's say that your figure of the top 1% of income earners controlling 50% of the nation's wealth is correct .... my response is "so what?". Who's to say how much wealth each bracket should control? You? The government? No thanks, history has shown that giving that amount of power to a person or the state is a recipe for disaster. Remember what Lord Acton said about power. If it's all the same to you, I'll leave it to the market to decide how much wealth each income bracket gets to control. You may not like the market's answer, but it has a history of a much lower body count that the alternative.
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