Income tax distribution

[snopes]

Comment: Here are the numbers. You'll be stunned. The overwhelming
majority of federal income taxes are paid by the very highest income
earners. The top 1% of income earners pay about 32% of all income taxes.
The top 5% pays 51.4%. The top 10% of high income earners, pay 63.5%.
The top 20% of income earners pays 78% of all federal income taxes.

IS THIS TRUE?

[Silas Sparkhammer]

Of course it's true. It also shows that the only way to balance the budget is to increase the tax on these very, very wealthy persons, rather than to cut their dues.

Silas

Originally Posted by snopes

Comment: Here are the numbers. You'll be stunned. The overwhelming
majority of federal income taxes are paid by the very highest income
earners. The top 1% of income earners pay about 32% of all income taxes.
The top 5% pays 51.4%. The top 10% of high income earners, pay 63.5%.
The top 20% of income earners pays 78% of all federal income taxes.

IS THIS TRUE?

Yes and no. The specific numbers are wrong, but the point is correct -- except it leaves out that the vast majority of income is earned by the top 20 percent.

And, of course, it leaves out that only income, and not wealth, is the main sources of taxation.

Here are the real numbers:

The top 1 percent of income earners paid 26.2 percent of personal federal income tax in 2006. They had 18.4 percent of the pre-tax income -- averaging $1.2 million.

The top 5 percent paid 44.4 percent on 33.5 percent of the income, and the top 10 percent paid 56.6 percent on 44.7 percent of income. The average income of the top 10 percent was $281,205.

As for the top 20 percent, it earned 60 percent of all income, and paid 72 percent of the taxes.

Pogue

[Mr. Furious]

Originally Posted by Pogue Mahone

And, of course, it leaves out that only income, and not wealth, is the main sources of taxation.

Indeed. The current income tax system impacts the rich, but not (as much) the wealthy. I don't remember where I heard it, but I once heard that the difference between the rich and the wealthy is that the rich make a lot of money, and the wealthy sign the checks.

Flat tax. No deductions. No IRS (or at least a minimal workforce)

[snapdragonfly]

Originally Posted by Shang Kwon Phat

Flat tax. No deductions. No IRS (or at least a minimal workforce)

But now would that flat tax be on all wealth OTHER than just one's paycheck? Such as investment income and such? The flat tax that Steve Forbes was pushing was HUGELY unfair, IIRC, because he only wanted to tax us working slobs. People with eNORmous wealth in the form of investment income and other means got off scott free. I call BS on that, it puts all the burden on the people who have to work hard for their money.

Many of people with the most money don't even get a paycheck at all and under Forbes plan (as it was explained to me) it was a really sweet deal for them, indeed. Screwed the rest of us, but sweet for them.

[AnglRdr]

Originally Posted by Shang Kwon Phat

Flat tax. No deductions. No IRS (or at least a minimal workforce)

Flat rate or flat base?

One is more important than the other, and most "flat tax" proponents have no idea which.

[snapdragonfly]

Originally Posted by AnglRdr

Flat rate or flat base?

One is more important than the other, and most "flat tax" proponents have no idea which.

I don't know what flat base is either. Has that something to do with my objection of not taxing forms of income other than a paycheck?

[AnglRdr]

Originally Posted by snapdragonfly

I don't know what flat base is either. Has that something to do with my objection of not taxing forms of income other than a paycheck?

Pretty much, yeah. Not all "income" is treated equally under tax law.

[Dreams of Thinking Machines]

Originally Posted by Mr. Furious

Indeed. The current income tax system impacts the rich, but not (as much) the wealthy. I don't remember where I heard it, but I once heard that the difference between the rich and the wealthy is that the rich make a lot of money, and the wealthy sign the checks.

I think Chris Rock says something an awful lot like that in one of his HBO specials.

Originally Posted by Shang Kwon Phat

Flat tax. No deductions. No IRS (or at least a minimal workforce)

I love these arguments. One of the big hidden items in these proposals usually is that they only tax "wages" and not "investments", "interest", "dividends", or "stock options". So who gets "wages" and who gets these other forms of money? Who is going to get the shaft with such a proposal?

The other idea usually is a "national sales tax" that only affects "final sales", that is, no taxes on wholesale purchases. Now that sounds great because the rich do buy more stuff, so it seems they would pay more taxes. However, if you are smart, you set up your household as a wholesale business. Then you pay no taxes on ANYTHING (because everything you own is for later re-sale). So the only people who will pay taxes under that method are those too poor to set up a corporation. Again, who do you think will get the shaft in THAT proposal?

The other issue I have with the "X% of the people pay XX% of the income taxes" type things are that the income levels listed are (often) not net (pre-deductions) incomes. I don't know about others, but my "gross" income is quite large. However, when I take out all my deductions for mortgage, kids, donations, etc., my TAXABLE income drops by 25-50%. I know of people who's income drops even more. You set yourself up correctly, and you can have almost NO taxable income.

As the old statement goes, "follow the money".

[snapdragonfly]

Originally Posted by Doug4.7

I love these arguments. One of the big hidden items in these proposals usually is that they only tax "wages" and not "investments", "interest", "dividends", or "stock options". So who gets "wages" and who gets these other forms of money? Who is going to get the shaft with such a proposal?

The other idea usually is a "national sales tax" that only affects "final sales", that is, no taxes on wholesale purchases. Now that sounds great because the rich do buy more stuff, so it seems they would pay more taxes. However, if you are smart, you set up your household as a wholesale business. Then you pay no taxes on ANYTHING (because everything you own is for later re-sale). So the only people who will pay taxes under that method are those too poor to set up a corporation. Again, who do you think will get the shaft in THAT proposal?

The other issue I have with the "X% of the people pay XX% of the income taxes" type things are that the income levels listed are (often) not net (pre-deductions) incomes. I don't know about others, but my "gross" income is quite large. However, when I take out all my deductions for mortgage, kids, donations, etc., my TAXABLE income drops by 25-50%. I know of people who's income drops even more. You set yourself up correctly, and you can have almost NO taxable income.

As the old statement goes, "follow the money".

That was exactly the sort of unfairness I was referring to.

[Troodon]

Regarding fair taxation: I've thought that the best way to do it would be to have a progressive tax based on the value of everything a person owns, like a property tax but applicable to everything (including money in the bank and the value of investments and even one-use things like vacations, which would be taxed only once unlike permanent things that would be taxed every year). Of course this is practically undoable because everything a person owns and its value is very hard to determine and track.

[Singing in the Drizzle]

Taxing investments is a bad thing, because it is tax job production. Therefor hurting the growth of jobs. We want to weathy to invest in US jobs. The earning on investments is another thing and should be taxed.

National sales tax is a bad thing because it hurts the poor more than the rich. Almost all of the poor's income goes to buying goods were the wealthing does not need to spend as much percentage wise on goods. The wealthy will have more money to save, invest or buy big houses that are only taxed once.

The poor should pay less in taxes since they need the money to live. Middle class will pay their fair share to support the goverment. The rich should be taxed alot more than than the other, becuase they can afford it. That is unless the money is being invested in things that will creat US jobs or help the economy.

[snapdragonfly]

Originally Posted by Singing in the Drizzle

Taxing investments is a bad thing, because it is tax job production. Therefor hurting the growth of jobs. We want to weathy to invest in US jobs. The earning on investments is another thing and should be taxed.

Maybe, maybe not. What I mean is, I don't think *all* investments bring jobs, especially good paying jobs, but I think they get special tax treatment anyway.

If my information is correct, right now the tax laws are really sweet for people who are shipping our good paying jobs overseas and making foreign investments. I'm not the owner of a business engaged in doing that nor a CPA so I don't know the tax laws on this from experience but I've seen this mentioned in a variety of articles in recent years. If that's true, I don't see how that sort of investment is doing diddly for American jobs.

Also not having extra millions at the end of the year that my accountant is begging me to spend somehow, I don't know this by experience either, but I bet there's a lot of things you can spend your money on that is more beneficial to one's own tax liability than to the rest of the economy. When I get that much money (which I'm sure to soon, as my husband works 75 hours a week so we'll be rich, right?) I'll let ya'll know. Hah.

[Silas Sparkhammer]

Originally Posted by Singing in the Drizzle

Taxing investments is a bad thing, because it is tax job production. Therefor hurting the growth of jobs. We want to weathy to invest in US jobs. The earning on investments is another thing and should be taxed.

snapdragonfly already rebutted this... I'd add that *any* tax is a burden on the economy. All government operations limit "free enterprise." Money spent on the military, especially, is a near-total economic loss. However, the costs of not having sufficient regulations on our liberties -- crime, foreign invasion, etc. -- are worse.

National sales tax is a bad thing because it hurts the poor more than the rich. Almost all of the poor's income goes to buying goods were the wealthing does not need to spend as much percentage wise on goods. The wealthy will have more money to save, invest or buy big houses that are only taxed once.

Most national sales tax proposals exclude necessities. The first $X of food, clothing, housing, etc. is not taxed. The same is true of the better flat-tax proposals: the first $X of income is not taxed, thus removing your (correct and cogent!) objection.

The poor should pay less in taxes since they need the money to live. Middle class will pay their fair share to support the goverment. The rich should be taxed alot more than than the other, becuase they can afford it. That is unless the money is being invested in things that will creat US jobs or help the economy.

I personally agree. A lot of people don't. For my part, I see taxes as the "admission price" we pay to be allowed to attend the show. If you want to have a really good seat, you will pay more. The crummy seats in the back cost less.

Also, the rich get more from the government: better police response time, better access to the courts, etc. (If O.J. Simpson had not been a rich man, do you think he'd be out of prison today?) At very least, they owe more taxes for these benefits.

Silas

[Jay Temple]

Originally Posted by Silas Sparkhammer

I personally agree. A lot of people don't. For my part, I see taxes as the "admission price" we pay to be allowed to attend the show. If you want to have a really good seat, you will pay more. The crummy seats in the back cost less.

Silas

At the very least, your analogy is badly worded. It could easily be extended to support the notion held by some that people on welfare shouldn't have any "seat" at all.

[Beachlife!]

Originally Posted by Jay Temple

At the very least, your analogy is badly worded. It could easily be extended to support the notion held by some that people on welfare shouldn't have any "seat" at all.

I have no idea what that anology even means. What exactly is 'the show' here? And what is a good seat versus a bad seat? Are the people on welfare the show? Who's watching and why?

[Silas Sparkhammer]

Originally Posted by Jay Temple

At the very least, your analogy is badly worded. It could easily be extended to support the notion held by some that people on welfare shouldn't have any "seat" at all.

A lot of libertarians believe exactly that.

Silas

[Dog Friendly]

Beachlife, at the risk of speaking for Silas (who is more than capable of speaking for himself), I'll offer the following opinion. The "show" you asked about, and to which I believe Silas was referring, is everything that taxes buy. Things like bridges, hospitals, libraries, roads, schools and so forth.

I will admit that some things, like the Emir of Kuwait's putative gold-plated toilets, don't exactly fill me with patriotic pride. That, though, can be left for another thread.

What I inferred from Silas' analogy is that the rich enjoy far better access to the services provided by government than the rest of us. He mentioned police response time, and better access to the courts.

I'll suggest that there's far better maintenance on infrastructure in fashionable neighborhoods. I admit I've never been to Lansing, Michigan, but I'll suggest an experiment. Drive through a very expensive neighborhood after dark and count the number of street lights that aren't lit. Then, drive through the nastiest neighborhood you can find, and make the same count. Be sure to make a note of where the broken lights are. Then, go through the expensive neighborhood the next night, and see if the broken lights are still broken. Wait a month, and drive through the poor neighborhood. Count the number of lights that have been repaired -- oh, and mind the potholes.

While people fiddle with statistics constantly, I really don't think anyone seriously disputes that more money is spent per student on schools in fashionable neighborhoods; whether it's three times more or twenty times more is all anyone really tries to argue.

This, in abbreviated form, is what I understand to be the point of Silas' analogy, and it's plenty good enough to illustrate the point I think he was making. Whether you agree or not that the rich should pay more in taxes, it's pretty obvious that the rich get a lot more value for their taxes.

And if I'm off base, I'm sure Silas himself will be along in a minute.

Dog (Poverty is one thing money can't buy) Friendly