The Truth About Taxes and Redistribution

Do the rich pay their fair share?

Editor’s Note: Reason columnist and Mercatus Center economist Veronique de Rugy appears weekly on Bloomberg TV to separate economic fact from economic myth.
 

Myth 1: The wealthy aren’t paying their fair share.

Fact 1: The wealthy disproportionately fund the United States federal government.

As you can see, the top earning 1 percent of Americans (or 1.4 million returns making more than $380,000) paid 38 percent of federal personal income taxes. However, they made only 20 percent of income.  The top 5 percent of income earners pay almost 60 percent of income taxes and make almost 35 percent of all personal income.  The Americans at the lower half of the income spectrum (or 70 million returns) paid 2.7 percent of the total. This chart also shows that roughly half of taxpayers pay for almost all of the federal personal income taxes.

It means that the income tax in America is extremely progressive.

This week, E.J. Dionne's Washington Post column quoted writer David Cay Johnston: "The effective rate for the top 400 taxpayers has gone from 30 cents on the dollar in 1993 to 22 cents at the end of the Clinton years to 16.6 cents under Bush. So their effective rate has gone down more than 40 percent.”

In fact, the top 400 aren't a static group. There's lots of income mobility in and out of the "top 400" every year, and most of their income is due to highly fluctuating capital gains (which is taxed lower than ordinary income).  IRS data for the top 400 over a 15-year period show that 72 percent of them appeared only once.  A little more than 12 percent appeared twice and a little over 15 percent appear three times or more. Trying to fine tune tax policy to attack the "top 400" will only tax different people tomorrow than are there today.

Myth 2:  Top earners in the United States are millionaires.

Fact 2: Only 2% of the top 10% of earners are millionaires.

 

When Americans think of the top earners in the United States, they often overstate the earnings of those with the highest reported earnings.  The top 10 percent of United States tax returns report $114,000 in earnings, the top 5 percent of households report $169,000 in earnings, and the top 1 percent report $380,000.

Furthermore, these earnings should be taken in their geographic context.  This chart shows what a worker would need to earn in each of 5 different cities in order to maintain the same standard of living as a person living in DC making $250,000.

As we can see, it takes roughly $170K in Kansas or Georgia to have the standard of living of someone making a $250,000 in Washington DC. However, to have that standard of living in New York, you need almost $400,000.

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  • Gigi||

    How ‘Atlas Shrugged’ Shocked Hollywood: Expanding to 1000 Screens!

    Despite its “awful” marketing plan, as one distribution exec calls it, the movie earned a $5,640 per-theater average opening: “Things have turned for us,” producer Harmon Kaslow tells THR.

    The power of Ayn Rand devotees have impressed some Hollywood distribution executives, who took note of the hefty $5,640 per-theater average scored by Atlas Shrugged: Part 1 during its opening weekend.

    ‘Atlas Shrugged’: First Movie to Target the Tea Party Atlas Shrugged Review”Shocking,” one executive said about the healthy business the low-budget film has been doing considering its “awful” marketing plan.

    Awful or not, business has been brisk enough for producers Harmon Kaslow and John Aglialoro to expand from 299 theaters to 425 this weekend and to 1,000 by the end of the month, they told The Hollywood Reporter on Tuesday.

    The two said they fielded 500 inquiries from theater bookers Monday but didn’t have enough film prints to fill orders.

    “Things have turned for us,” Kaslow said. “When we started, exhibitors were not embracing the film like we thought they would. Now, we can pretty much go into as many theaters as we want. It’s just a matter of logistics.”

    http://www.hollywoodreporter.c.....ods-179930

  • Sudden||

    I'm seeing it tonight. In a theatre that it wasn't in last week nonetheless.

  • Barack Obama||

    The success of Atlas Shrugged is clearly proof that Americans support my plan for high speed rail

  • e||

    Nonsense! If Atlas Shrugged was set in today's world, John Galt would be a heroic exurb developer who, in between creating parking garages for big-box retail complexes, also created a new SUV engine that runs on perpetual bootstrappyness.

  • ||

    This video is private?? Should probably put a publicly viewable youtube video in here.

  • ||

    The chart you will never see in a million years on Reason dot com...

    Here:

    http://www.tnr.com/blog/jonath.....reeloaders

    and Here:

    http://krugman.blogs.nytimes.c.....10317670A0

  • prolefeed||

    Technically, we just saw this chart on Reason.com. Your credibility just took a hit.

  • ||

    Where? It's not on this post. Those charts are different.

  • ||

    Wait. I get it. Haha! I'm a little slow on jokes sometimes.

  • Doc S||

    haha, that was silly. Glad you caught it though!

  • juris imprudent||

    I'm gonna go out on a limb and guess that jokes aren't the only thing you are a little slow on.

  • Snark||

    Interesting argument to consider...

    http://blog.american.com/?p=12547

  • some guy||

    Nice graph, but I just prefer to fix the original.

    http://tinypic.com/view.php?pic=dq5gk4&s=7

  • ||

    Nice. Using a graph titled "Shares of Income and Taxes Paid", to respond to a graph titled "Percentage of Personal Income Tax by Income Percentile". Definitely an apples to apples comparison.

  • ||

    Weak sarcasm. I smell fear.

    The chart is an argument-ender. It slams the door shut on the phony meme that that the rich are overburdened with taxes in comparison to everyone else.

  • juris imprudent||

    Funny how "taxes paid" suddenly includes SS & MC - aren't those contributions to my future retirement?

  • ||

    Short answer: No.

    Helvering v. Davis, 301 U.S. 619 (1937)

  • A Serious Man||

    Juris, you do not understand the thinking retarded statists. When they are fighting for the preservation of SS and Medicare, they happily refer to those taxes as investments for America's future senior citizens.

    When they are arguing for squeezing even more out of the rich in income taxes, they refer to FICA as an unfair regressive tax, but not unfair and regressive in the sense that it should be elimated all together.

  • ||

    I can't speak for anybody else. I only follow the law, and the law is Helvering v. Davis, 301 U.S. 619 (1937),

  • Contrarian P||

    That's a court decision, not "the law". A court decision interprets the law. It is not the law itself.

  • Colonel_Angus||

    A court decision is considered case law. All cases at lower courts will be interpreted based on this precedent. It is law unless a new precedent or legislative law is passed.

  • soonerliberty||

    Hmm, that's eerily reminiscent of what many Germans were saying around, let's say, 1933-45. "I was just following the law."

    In any case, the same mentality has lived on here. It's depressing to see the Hauptmann von Koepenick live on.

  • Gene Callahan||

    "the thinking retarded statists"

    Ah, libertarian "argument": call your opponents names and insult them!

  • A Serious Man||

    No see, you can insult the intelligence of your opponent so long as you actually attack his position as well.

    Yeah, I'm not the kind of guy that thinks we should treat exchanges over the internet like exchanges in real life since the whole purpose of the internet is to provide impersonal communication.

  • d||

    Thanks to the Earned Income Tax Credit and other loopholes, the 'poor' don't pay FICA either.

    And the 'poor' also get direct payments from the Gov., like Food Stamps.

  • ||

    Uh, no "Danny," it does not.

    The TNR graphs deal with discrete groups Top 1%, Next 10%, etc. Ms. de Rugy's graphs use aggregates Top 1%, Top 5%, etc. I'm sure I'd want to use discrete groups were I trying to hide the huge share of tax burden in the upper income-earners; just as de Rugy uses graphs which most eloquently illustrate her point. That doesn't make either side dishonest.

    Oh, and what F2B said.

  • ||

    Great point. Also, the TNR chart is comparing the share of total income, and the share of total taxes paid, for each group.

    If anything, the TNR chart strengthens de Rugy's argument. The graph shows that the share of taxes paid by the top 40%, exceeds their percentage of wealth. It's the exact opposite for the bottom 60%.

    Great job Danny!

  • Dick Fitzwell||

    The chart is an argument-ender.

    Really? It's an argument-ender because that's where your argument ends. We keep telling you that you're comparing apples to engine blocks (using a different chart and including payroll taxes) but you just keep pointing back at the chart.

  • cmace||

    So, once again, Medicare and SS are just taxes?

  • ||

    Unless the original argument presented, was regarding personal income tax.

  • adam||

    Argument ender? Actually, it shows that even when you include SS and Medicare taxes, the top half is still pay ing ~72% of all taxes and the top 1% is still paying nearly a quarter.

    And liberals love to tell us that SS and Medicare don't go into the general treasury to pay for general government operations; they go into the 'trust fund.' That's why there's no SS or Medicare solvency problem, remember?

  • Sam Grove||

    The problem is that the rich do not and cannot support the burden of government spending.

    As the very rich consume only a small portion of their income and holdings, the rest must necessarily be held in investments in future production and entrepreneurial experiments.

    The burden of government spending is largely consumptive in nature and must and can only be borne by those who labor to produce that which is consumed. The burden is borne by them in a reduced standard of living than would be the case if government spending was minimal.

  • Mike M.||

    Usually, these left wing scumbags like Krugman and Chait lecture us that Social Security isn't really a tax, but a pension program that workers contribute to over the course of their working years, and then get back in retirement. Now, suddenly they want to wail that it's a "regressive tax". I really wish they would make up their minds. Likewise, Medicare is supposed to help us defray our later health care expenses.

    It's true that there is little to no progression in most state income and sales taxes, but in most states the upper half of society now pays through the nose in property taxes. My Virginia property tax hit has become almost as big as my state income tax hit.

  • ||

    "scumbags" ... The smell of your fear is getting stronger.

    All this tendetious harping on one tax in isolation (fed income) comes to nothing but dust and smoke when the real analysis is set forth -- the total tax burden.

    As for the payroll taxes, the politicians and pundits can say whatever they want, because the law has spoken: according to the U.S. Supreme Court, SS tax is just another levy under the 16th Amendment like any other, and it gives no legally enforceable right to future social security benefits of any kind or amount whatsoever.

  • juris imprudent||

    Well, good for you - you know the truth. Now, do you tell it consistently or just when it is convenient?

    Perhaps you would tell us also why you support such a regressive funding scheme for SS/MC? Exactly how is it fair to pay out bennies to middle and even upper class retirees on the backs of todays lower income earners?

  • ||

    I say pop the cap on SS and make it an uncapped flat tax like MC.

  • Red Rocks Rockin||

    I say pop the cap on SS and make it an uncapped flat tax like MC

    Someone can't do basic math.

    SS is already revenue-negative, you dummy. And your solution is to allow the rich to take an even greater share from the pot than they already do upon their retirement?

  • ||

    You can't really expect lefties to do math...

  • Paul||

    You can't expect reason to include tax figures on charts for lower incomes like FICA. The "market" only matters if you're super-rich apparently. It's pretty sad actually. These charts show you shouldn't care about FICA being uncapped.

  • Red Rocks Rockin||

    These charts show you shouldn't care about FICA being uncapped.

    And again, another lefty pops up to demonstrate his inability to do basic math.

    If you can't see the problem with allowing the rich to take out a greater share of the pot in a program that's already revenue-negative, there's really no hope for you. Apparently, your big solution is, "And then, a miracle happens!"

  • Paul||

    I'm just pointing out that if you do care about that, maybe it should be included in the chart. I mean, since it doesn't really count according to the chart. I'm all for the miracle of cutting spending, but it doesn't look like it's happening. Guess where we're going to try and get the money from? Most of Europe doesn't seem to have a problem collecting a bigger portion of the GDP. I really don't give a rats ass about equality, but a matter of practical means of getting the budget under control. The rich can keep that money once we stop waging these wars and throwing around these ridiculous entitlements.

  • Red Rocks Rockin||

    I'm just pointing out that if you do care about that, maybe it should be included in the chart. I mean, since it doesn't really count according to the chart.

    Why? To make the point that the rich pay even MORE in taxes than the left claims they do? You're not exactly making your case here.

    Most of Europe doesn't seem to have a problem collecting a bigger portion of the GDP.

    Wake me up when these European countries match our toxic combination of high population, overscaled bureaucracy, and competing ethnic constituencies (on one level, the effects in Britian and France are highly amusing, if somewhat depressing, now that they are essentially trying to strongarm Iceland and the PIIGS into not defaulting and telling the banks to go screw). Then you might actually have an argument there.

  • Rrabbit||

    Most of Europe doesn't seem to have a problem collecting a bigger portion of the GDP.

    Probably not true. The European countries don't fake their GDP numbers to the extent the US GDP is faked. Some countries such a Italy and Greece have a huge black market economy which is not counted by their official GDP numbers.

    Then, to compare tax revenue, you have to add up all levels of taxation, rather than merely compare US Federal taxes against the complete taxes of a European country.

  • cynical||

    So why not just add the rate to the income tax, eliminate it as a separate entity, and transform Medicare and Social Security into means-tested welfare programs?

  • ||

    Sure. Just as soon as the GOP leadership signs an oath in their own blood, swearing on their mothers' eyes never to attack a means-tested welfare program again, in perpetuity.

  • cynical||

    Cool. First order of business will be to vote out the GOP leadership who signed the oath and replace them with people who cut funding, of course.

  • ||

    Hey! That's a very cynical thing to say!

    Oh -
    Yeah...
    Never mind.

  • Mike M.||

    OK, but if you're going to argue for the payroll tax as a straight-up tax, then I say that it's disingenuous to focus on individuals only. Full accuracy forces us to note that half of the payroll tax burden falls on employers (aka "The Rich"), and they will never receive anything back on the half that they must pay for their employees.

    As a matter of fact, they now shoulder MORE than half the burden. The new law passed at the end of last year reduced the individual SS rate from 6.2 to 4.2 percent, but the employer share is still 6.2 percent. So even the payroll tax isn't as regressive as some want to make it out to be.

  • richard noggin||

    The part that the employer sends in is also the employee's compensation. It's all part of the total cost of the business owner to hire an employee. The business owner wouldn't care if the total cost all went to the employee and the employee paid his own entire mc and ss or not. Doesn't make a difference to him.
    Look up uncle Milty and SS on youtube and he'll explain it to you better.

  • ||

    The usual argument for progressive taxation is that the wealthy enjoy greater benefits from society so should bear more of the costs of society.

    That argument is absolute horseshit in the context of the major entitlement programs. Not only do the wealthy not benefit from those programs to a disproportionate degree (given that wealthy people are a smaller cohort of the overall population), but they don't NEED them. The beneficiaries of the major entitlements are, overwhelmingly, non-wealthy people.

    Lumping payroll taxes in with income taxes to harp on the overall tax burden is a fundamentally dishonest argument given the realities of what those taxes actually pay for, and how those benefits are actually allocated throughout society.

  • Draco||

    The usual argument for progressive taxation is that the wealthy enjoy greater benefits from society so should bear more of the costs of society.

    I agree with you that this argument is horseshit. But you don't even need to bring in the special context of entitlement programs. The reason it's horseshit is because it is stated only to deflect attention from the real argument, which is:

    You wealthy people have more stuff than we do, but we outnumber you. Pay up, or die.

    You might think of it as the ultimate in "collective bargaining."

  • C||

    That's exactly what you should be afraid of.

    As the income disparity in the West grow ever wider, eventually the people on the losing end of the curve are going to realize that the difference in resources is just too great and that they will NEVER make any meaningful progress up the social ladder.

    Then it's revolution time.

    And not the idealistic lets-fight-for-less-government style revolution,

    It will be the French style down-with-the-aristocrats-off-with-their-heads style revolution. It will be ugly.

    So pretty please, let the poor keep their safety net, because at the end of the day, there are a lot of them, they have guns, and you have to sleep sometime.

  • Gilbert Martin||

    "when the real analysis is set forth -- the total tax burden."

    Nope.

    The only real analysis would be total dollar amount of federal taxes of all types paide by each individual compared to the dollar value of demonstrable, specific direct benefits received by each individual calculated on a user fee basis.

  • Red Rocks Rockin||

    The smell of your fear is getting stronger.

    Close your legs, Danny.

  • ||

    I already have a retirement plan so I would like to drop out of social security please.

    What? I can't drop out? Your relying on my contribution to fund current benefit payments? Oh I see how retirement plans should work now. Real good example to set for the evil bastards on Wall Street.

  • Red Rocks Rockin||

    If Danny had any guts, he'd promote making Social Security an optional retirement program rather than a coerced one. Progressives don't have the fortitude to call for the "public option," though, because they know that would be the end of Social Security within the span of a year.

  • ||

    Unfortunately the word "privatization" is akin to giving old people the shaft in progressive circles.

  • Dick Fitzwell||

    If you want to include payroll taxes in the discussion, you should (as one commenter noted) also include contributions on pensions and retirement plans and so forth.

    Or are you just arguing that it's not fair that the poor have to pay for SS and Medicare?

  • ||

    Try to keep up, Fitz:

    Helvering v. Davis, 301 U.S. 619 (1937)

  • Dick Fitzwell||

    Ok. Tell us, then...what is social security?

  • ||

    A tax on one end. A benefit payment on the other. And nothing connecting the two in between except the bloviation of politicians.

  • Dick Fitzwell||

    A tax for what purpose? It obviously isn't to raise revenue.

  • richard noggin||

    you are correct except it is a benefit on the other end AND the leftover spent on foreign wars, dept of education, and every other convoluted rube goldberg scheme congress comes up with.

  • ||

    Translation: "I am fully aware that payroll taxes are, at least in theory, revenue sources dedicated to fund social-welfare entitlements that overwhelmingly benefit non-wealthy people, not wealthy people. I'm just too much of a pussy to admit it, because it makes me and Chait and Krugman look like a bunch of ridiculous hacks when we try to lump payroll taxes in with income taxes and whine about the overall tax burden."

  • Paul||

    FICA sure as hell doesn't benefit entrepreneurs, start-ups, and basically anyone whose income is GROWING. This applies to pretty much everyone under 30. Never mind the SS funds not being there for those people too.

  • Paul||

    On this line of thought, I'd like to nominate Veronique de Rugy as nanny of the month.

  • richard noggin||

    contributions to pensions and retirement plans are not included in government revenue. SS and MC taxes are included in government revenue and then spent on anything congress wants it to. Now if it was only in a lock box (calling Al Gore) and not spent on anything but actual ss or mc then veronica's charts might have more meaning. But ss and mc are taxes and are based on income therefore they are income taxes. The bad part about ss and mc taxes is that they are collected from working class poor people (as well as middle class) and then transferred in a lot of cases to wealthier retirees. what a con job. talk about wealth redistribution. let people invest in their own retirement and not have to have it taken from them by the government and given to wealthier retirees.

  • ||

    Danny, I am not sure who is the bigger imbecile, you or Jonathan Chait. The bullshit graph that you linked to showed the bottom 4 quintiles separately and then spread the top quintile into 4. Why not five equal columns? Oh, that's right, the facts don't fit the meme so you "massage" them?

    Perhaps you are not imbeciles but simply lying pieces of shit?

  • ||

    "imbeciles ... pieces of shit..."

    The smell of fear becomes the stench of outright panic.

    What, pray, do you think a further breakout of the quintiles would show? Nothing materially different, of course. You're just grasping for anything.

  • ||

    The smell of fear becomes the stench of outright panic.

    .

    If you stink that bad, maybe it's time to get out of mom's basement, and take a shower.

  • ||

    You have nothing. You're throwing stones in an artillery duel.

  • sevo||

    Danny|4.22.11 @ 4:50PM|#
    "You have nothing. You're throwing stones in an artillery duel."

    That's not artillery, you twit. That's your ego blocking your view.

  • Confederal_Republic_by_2030||

    I'm going to go ahead and guess that Marshall Napier is calmly sipping his favorite drink while browsing political websites, Sevo's laughing his ass off at your magnanimous bullshit, and Free2Booze is probably getting laid, or something else worth spending the time on. I'm ordering ammunition for some target practice next week. And I'm pretty sure that whatever they're all doing, it isn't in fear, or panic, or in any concern. They know people of your ilk are full of shit, and always will be. I honestly don't see what they'd fear.

    If somebody says, "One plus one is two, Danny," and somebody else says, "You stupid, mother-fucking, ball-gobbling fuck bag - don't you fucking know that one plus one is two, for fuck's sake?", their statements are one and the same.

    The guys here could sugarcoat their responses and make you feel special and pretend they have respect for your unjustifiable blather, but that would be ridiculous, disingenuous, and idiotic. They're voicing their opinions in the context you've provided them with--outrage at your stupidity--and that neither lessens the validity of their arguments nor somehow grants any to your nonsense. Deal with it, and grow the fuck up. You want mandatory civility, go live in fucking Europe.

  • ||

    I'm the one giving the basic truth: a tax is a tax.

    You're the one's who can't handle it.

  • soonerliberty||

    The problem the left has is that they don't realize their tax schemes and regulation benefit the rich at the expense of the poor. Oh, sweet and sorrow irony!

    The sad thing is that when the rich get more privileges from their legislation, they think that more legislation is necessary, and then they can't figure out how the rich got richer again.

    But at least the left is consistently anti-market. The right just destroys free markets with free market rhetoric while signing crony legislation into law. We don't need enemies with Republicans around.

  • ||

    Bravo!

  • ||

    Fuckin awesome!

  • ||

    If "artillery" is defined as "the gaseous emanations from Danny's bleeding asshole, distended as it is from servicing Paul Krugman."

  • ||

    What, pray, do you think a further breakout of the quintiles would show

    Further breakout? How about putting the top quintile in the same column instead of dividing it into four?! Of course, that would mean adding the last four columns together and would show that, indeed, the top 20% pay the majority of taxes. Exactly the opposite of your bullshit claims. Big surprise there!

    Again, are you an imbecile or simply a liar? I can't tell which. Both?

  • ||

    Marshall, the chart is showing that taxes paid versus income earned is pretty even across the spectrum: combining the top quintile into one bar would have absolutely no effect on that finding.

  • ||

    combining the top quintile into one bar would have absolutely no effect on that finding.

    ???! It wouldn't? Did you look at Chait's chart? If you add the last four columns, ie the top quintile, together it will tower over the others. It isn't "even across the spectrum" unless the spectrum changes as it nears the wealthy? Some kind of wealth red-shift? Why not break the bottom quintile into four groups?

    That chart shows that the bottom 20% pay under 5% and the top 20% pay (it doesn't show exact numbers) paying well over 60%.

  • ||

    Yup. Based on the numbers from the chart, the top quintile earned 59% of the income, and paid 63.4% percent of taxes. The bottom 4 quintiles earned 41.2% of the income, but paid 36.5% on the tax.

    Long story short, we do have a progressive tax structure, and the top earners to pay their "fair share".

  • ||

    Krugman's links to the Institute of Justice website, where the numbers come from.

    I tried to link to the page, but the Reason spambots rejected my post.

  • Sudden||

    Its a pretty commonly accepted and statistically/methodologically sound principle to compare like groups- that is, quintile to quintile- not unlike groups (i.e. 20% of the population to 1%, 5%, etc.).

  • some guy||

    http://tinypic.com/view.php?pic=dq5gk4&s=7

    Fixed that graph for you. Does it still show what you think it shows?

    I totally understand why they split the last 20% out into four columns, though. It's so tall I ran out of space and had to crop it...

  • ||

    Well done!

  • ||

    Myth #2 misuses the term "millionaire". A millionaire is someone whose net worth is at least a million dollars, not someone who makes a million dollars every single year.

  • Doc S||

    Yeah I was thinking that too.

  • silent v||

    This.

    It's one thing for an economic illiterate like a Congressman to not get the distinction, but I expect more from VdR.

  • Barack Obama||

    In terms of property taxes you are a millionaire if your net worth is one million dollars or more. In terms of income taxes you are a millionaire if you earn a million dollars or more per year.

    Unless you are suggesting that people should have their incomes taxed based on their net worth. That's a good idea!

  • bey||

    I thought property taxes were based on the worth of your property, rather than your net worth.

  • ||

    But the Forbes 400 richest pay an average rate of 17% on federal taxes, fwiw.

    Your average 75k standard deduction filer is the one shouldering the burden - percent wise.

  • Pip||

    Yes. And man does it suck.

  • ||

    So let's take some of the burden off that 75k earner. I'm willing to do without some government services to make that happen.

  • ||

    Agreed

    Fed=National Defense and Federal Courts
    State=State Courts and roads
    County/City/Local/=Police and Schools (if they decide they want them)

  • Realist||

    All welfare programs!

  • Red Rocks Rockin||

    So we'll get rid of the roads, but the free school lunches and Section 8 housing will stay in place?

  • Doc S||

    "The Americans at the lower half of the income spectrum (or 70 million returns) paid 2.7 percent of the total."

    Anyone have a quick statistical breakdown of the income level that range (max, avg, median, or a graph of some sort)?

  • Doc S||

    Wondering because I'm currently going through
    http://www.census.gov/hhes/www.....01_001.htm

    And didn't know if anything more readily available

  • Doc S||

    According to census data, the bottom 50% made less than about $30,000 a year. Of those, 33% made less than $10,000 ($10,890 is considered poverty level for 1 individual). The average salary of those bottom 50% was $15,200. It seems fairly intuitive why you won't be getting much tax revenue out of those bottom 50%.

    Obvioulsy this isn't a flawless methodology since it considers things like kids with part time jobs living with their parents, but it displays the point.

  • adam||

    Not sure the census is looking at the same thing. Tax data usually looks at taxable units (i.e. person filing alone, couple filing jointly, with dependants, etc.). That data looks like it's looking at individuals. So a two earner couple with each making $50k would show up twice at $50k in the census data at $50k and once in the tax data as $100k.

  • ||

    Being a "millionaire" hardly means much anymore.

    As "Who want to marry a millionaire" proved, you can be a millionaire merely by owning a house in California. Or you could up until the housing bust. Still net worth can easily reach $1,000,000, if you count all assets.

  • Sudden||

    Not entirely accurate. Your net worth is the value of your assets less your liabilities. Namely, if you live in a million dollar house, but you have an outstanding mortgage debt of $800,000, and you have no other assets to speak of, your net worth is only $200,000.

  • Colonel_Angus||

    With the government around, anyone's net worth could potentially be near zero, or negative even.

  • ||

    Steven Landsburg just made the point on his blog that the legal incidence of a tax is not identical to its economic incidence. That implies that de Rugy's charts mean nothing important: they just show who taxes are COLLECTED from, not who is really paying them.

  • ||

    Ultimately, all this business about the fairness of the tax burden is interesting but beside the point.

    Taxes at bottom are the forcible confiscation of private wealth from its rightful owner. They effectively appropriate a portion the life of the individual who earned that wealth. That is a moral atrocity, and the precise degree of involuntary servitude imposed on individuals does not matter worth a bucket of runny shit.

  • Concerned Citizen||

    Exactly. The income tax is the one of the geatest scams ever pulled off. The Federal Reserve being the other.

  • ||

    Anything titled "the truth about taxes" which only looks at income taxes and conveniently leaves out payroll taxes (nearly half of federal government revenues) is a bit deceptive, no?

    I generally agree with the article, but why try to fool those of us with little time to do research of our own? There is nothing special about income taxes that means that we should look at those separately from other federal taxes paid by individuals.

  • cmace||

    I agree Medicare and SS are just scams to make people pay more taxes ("contributions"). This money is just part of the general revenue.

    They should both be abolished.

  • Gilbert Martin||

    "There is nothing special about income taxes that means that we should look at those separately from other federal taxes paid by individuals."

    And there is nothing special about payroll taxes that should excuse those paying no income tax from being required to pay that also.

    The one's who ARE paying income taxes are paying all those other taxes as well.

  • Confederal_Republic_by_2030||

    Abolish income taxation. Period.

    Eradicate these:

    Department of Agriculture (USDA)
    Department of Commerce (DOC)
    Department of Defense (DOD)
    Department of Education (ED)
    Department of Energy (DOE)
    Department of Health and Human Services (HHS)
    Department of Homeland Security (DHS)
    Department of Housing and Urban Development (HUD)
    Department of Justice (DOJ)
    Department of Labor (DOL)
    Department of the Interior (DOI)
    Federal Reserve (FR)
    Department of Transportation (DOT)
    Department of Veterans Affairs (VA)
    Domestic Policy Council
    Drug Enforcement Administration (DEA),

    anong COUNTLESS others,

    and then we'll talk about tweaking this and tweaking that and deciding on specifics. No more compromise.

  • Confederal_Republic_by_2030||

    *Department of Defense should be rechristened as the Department of War, just because it sounds cool. :D

  • Ancap||

    Abolish the political class and the rest will take care of itself...

    Laissez faire...

  • soonerliberty||

    Libertarians need to learn not to defend the rich. We should realize that a lot of them got rich through subsidies and privileges handed out by government in order to crush their competition.

    Abolish all taxes and privileges. While we're at it, taxation is irrelevant as long as we're spending billions per second. Eliminate spending, then taxation.

  • ||

    Why not just be against dumb subsidies and graft rather than allowing class warfare to go un punished?

  • ||

    I don't think we're defending the rich. We're defending liberty. Collectivist "ethics" are required to punish a class of people for the sins of some of the members of this class. This we reject.

    More than anyone however we understand that the state actually coercively redistributes to the rich as much or more so than to the poor. The left progressives can't explain how the Fed does this. The left progressives can't explain how regulation does this. The left progressives can't explain how agriculture, oil, or anything subsidies, all tariffs, forcible collective bargaining "rights", etc do this. The left can't explain anything because the progressive elite want to use the same tools to in turn steal.

    However we can explain it to the ones who don't want to steal, but want to stop being stolen from.

  • Tony||

    You don't have to have a single number or de Rugy brand deceptive chart to address the questions that actually matter. If we want to move the budget toward balance, what's the least painful means? Does anyone still believe that what's wrong in this country is that the poor have it too good?

    If the answer to the question "what's fair?" is "give more to the rich and less to the poor" then you're just not engaged with reality--which the numbers will explain perfectly if you look at them in a way that's not deliberately obtuse.

  • Sudden||

    not taking =/= giving

  • Tony||

    Yes, I really do know about the clever little nuggets of bullshit you guys use to distract from what really matters. That is to solve a problem, are we causing the least amount of pain possible?

    Or is the effect in policy of these stupid philosophical bon bons a more regressive tax system and thus more pain for the non-rich and thus a meaningless increase in comfort for the rich?

    Have the balls to say what the effects of your policy are, because that matters a lot more than whether they satisfy the demands of cute little anarchist platitudes.

  • Confederal_Republic_by_2030||

    I'm a rabidly patriotic constitutionalist/libertarian. I don't recall advocating the complete termination of government, and a majority of this site's users have never demonstrated support for statelessness. "Anarchist platitudes"? Your gargantuan capacity for obfuscation, intellectual dishonesty, unreason, patent immorality, and illogic are appalling.

    The only problem we're faced with, and which it would be prudent to face without delay, is the colossally repressive and oversized governments we toil under.

  • Tony||

    Oh is that really the only problem we face? Too much government? That sounds like a reliably nuanced understanding of the world. Do you have a newsletter?

    Yeah I get it. You're for the state doing the things you want. And anyone who disagrees with you on your policy preferences is an evil tyrant with illegitimate viewpoints. What could be more intellectually dishonest than the central bullshit presented here: that taxes can never ever go up because the rich are so oppressed already.

  • Confederal_Republic_by_2030||

    You're grouping people according to wealth in consideration of taxation policy. You're a cock-sucking, ball-gobbling, shit-stain quasi-socialist. Go fuck yourself.

  • Tony||

    At least I suck human cock, racist redneck idiot.

    But we group people according to wealth because wealth corresponds to standard of living. The distribution of wealth in a society is a matter of policy. It's best not to let too much be concentrated at the top. That leads to nasty things like riots and beheadings.

  • ||

    Only because people like you run around inciting such things.

  • ||

    Tony, let's face it. And I'm not being funny. I mean no disrespect, but you're a cunt. You're a cunt now, and you've always been a cunt. And the only thing that's going to change is that you're going to be an even bigger cunt.

  • Tony||

    The only thing I may be guilty of is not explaining my points well enough, but I'm still right and you guys are wrong, so I can only assume the lashing out stems from the horrible realization of this fact.

  • ||

    Tony it's question of morality, which you have a sick and twisted sense of, which is entirely fluid and changes minute by minute.

    I believe that theft is wrong, no matter what supposed good the loot supposedly provides for. I believe that aggression is wrong, no matter if the aggressor professes that his aggression is for a noble cause.

    You believe theft is ok under certain circumstances, and aggression is ok as long as it's stated ends are yours. My credo is that men have rights, your credo is that the ends justify the means.

  • Red Rocks Rockin||

    The only thing I may be guilty of is not explaining my points well enough, but I'm still right and you guys are wrong

    Obvious flame.

  • bey||

    Tony, the problem is that you are neurotic. Unhappy, self-conscious, anxiety ridden and easily panicked. Like most liberals. Not all, but most. And your viewpoints stem from that weird psychology. Not from facts or any kind of logic.

  • Confederal_Republic_by_2030||

    *is

  • Sudden||

    Tony said "If the answer to the question "what's fair?" is "give more to the rich and less to the poor"'"

    I responded that taking does not equalit giving.

    Tell me Herr Tony, how the fuck is that some "cute little anarchist platitude"? You fucking lied, I called you on your bullshit. Get over it.

    Now, if you want to make the argument that it is morally right to take from the better off to give to the less well off, that's a different story. I'll argue against the merits of it to a degree, and more importantly, I'll prove that you ideal society would require taking (as in actual fucking taking, not "not giving") a significant portion of the money earned from a much broader swath of humanity than you actually realize. But first argue in good faith, until then, I will call you out on bullshit verbal masturbation every time.

  • ||

    But first argue in good faith

    Dude, set down the bong. Step back. While in some wonderful Libertopia of the future there might not be people as stupid and intellectually dishonest as Tony, alas, you and I will not live to see such a day.

  • Tony||

    I'd prefer not to make a moral case, because anyone can disagree from their own moral premises. I certainly wouldn't expect anyone here to share mine.

    I prefer to make the case that this entire argument is a bogus lie. Taxes are by no measure too progressive in this country. If this country only had an income tax at our rates, there might be a case to be made.

    I realize that the argument that the distribution of wealth is a matter of policy is a bit controversial. But think about it. The only "natural" distribution is what would exist sans government. But that's never going to be reality, and if it were, there would still be something to take its place that might not be so judicious with your rights. So tax policy and thus the distribution of wealth in this country is a matter of policy. Nothing "belongs" to anyone in the abstract--law determines what possession means. It either belongs to the person or it belongs to the Treasury, something entirely determined by policy.

  • soonerliberty||

    If it belongs to no one, then there is no superior right for government to claim it, for government is someone. You cannot transfer rights to a government that you yourself never had. I'm constantly amazed by this basic misunderstanding of rights. I'm sure you'll coat it in "a government grants rights" argument, but you might stop to wonder how the government ever got to that point.

  • soonerliberty||

    No, the poor are being crushed by spending, inflation, and debt. The ones who benefit from such a situation are banks, politicians, and corporations. None of this is fair.

    Now, if we compare our poor to the rest of the world, then, yes, they have it good, but that's not good enough.

  • Colonel_Angus||

    You don't think this distribution of tax rates is insanely lopsided even for a progressive system?

  • Tony||

    Absolutely not. Our overall tax system is only very slightly progressive. There's no reason to talk about only income taxes--whose progressivity just about balances out the other regressive taxes people pay. Unless you are trying to deceive on the issue to push for more regressivity.

  • Confederal_Republic_by_2030||

    So here's the solution - abolish most taxes.

  • Tony||

    That's the solution to something, but I'm not sure that it's anything any sane person cares about.

  • soonerliberty||

    Many German leftists are considering such solutions, because they understand the burden taxes place on the poor. Unfortunately, your leftism is behind European leftism, which has had a rude awakening in the face of debt crises.

    Taxes are irrelevant and a distraction. The real problem is borrowing and debt consumption.

  • TheCheeseStandsAlone||

    There have been several
    prominent wealthy individuals
    recently that have said that
    they can afford to pay more
    in taxes...???

  • JohnD||

    There is nothing to stop them from paying more. The government can accept financial donations from individuals.

    These people are just stirring the pot.

  • Colonel_Angus||

    You're right. Having dozens of different tax schemes that are often linked to choices is very regressive and unproductive. I am for flat taxation of income and/or consumption only.

  • Tony||

    Social security does have utility. Anyone arguing otherwise is probably planning to spend what they'd gain by not paying a payroll tax on short-term wants, leaving their retirement the burden of their children or society. And we pay one way or the other--with no social safety net, no amount of wishing upon a star will change the fact that there will be more corpses in the streets. Scolding people into retirement savings is simply not as effective as one that's guaranteed.

  • soonerliberty||

    The assumption that people would not plan for their own retirement is absurd. It's typical for those whose starting assumption is "people are idiots, except for people in government." Of course, to be fair, it's a logical conclusion to draw when people have unfortunately depended on the government to dole out benefits that simply won't be there when they reach such an age. The promise never should have been made in the first place. Then people would've planned accordingly.

  • Tony||

    We tried your system. It necessitated the invention of a safety net. What makes you think things would be different now? Are people better at planning?

    What's moral about forcing people to have a lower standard of living--going even to the edge of oblivion--because the markets happened to turn down? Government's use is that is has a lot of power to back up its guarantees. Keeping people in a wealthy country from starving for the crime of being too old to work is something that warrants a government guarantee. Because why the fuck not? Because taking a few pennies from billionaires is so much worse?

  • Colonel_Angus||

    Hahaha, Stephen D. has no idea why social security started.

    Retard, there will be no corpses in the streets. Even if there was no safety net at all, no one in this country would die. If anyone died it would literally be passive suicide.

    I already know I will not be getting social security. Aside from the fact that it will be bankrupt (not that that would stop the government from sending out checks) I have a disability that is likely to kill me before I could get any of "my money" back. So fuck all the people who are stealing from me. Social security is highly regressive for people like me and poor people.

  • Edwin||

    Tony, you're flat out wrong on this one.

    It was useful in the 30's, but nowadays people can save for retirement. I mean for God's sake, my car can tell me exactly where I am on a map of the U.S. and there are toys that work by telepathy. I don't think we're that fucked as a society. Even the immigrant laborers I hire manage to have iPods.

    Given the money instead, and taking into account the subsequent uptick in the economy from lower taxes (among the less-rich who produce that kind of a response in the economy), people could easily save for retirement. And you don't have to invest in financial instruments - there's always real estate, which will generate an income as long as it's still standing. Any idiot could buy a condo in East Orange for like $150k and rent it out from then on - you don't need to be richie rich here.

  • Alan||

    Many nations have mandatory retirement schemes that actually invest the money in diverse investments that get reasonable returns, and which allow the funds to be inherited in case of early death.

    In contrast, the Social Security system "invests" all of its funds into general revenues - which ultimately means it becomes government debt - and in a best case scenario the "investor" gets a 2% rate of return - only if they live to a ripe old age.

    There's no two ways about it. Social Security is a scam. A Ponzi scheme, to be precise.

  • Draco||

    I feel compelled to point out, once again, that Social Security is not a Ponzi scheme, and is not an "investment." Whether it's a "scam" is, however, open to debate, since 99% of participants don't seem the understand the basic facts.

    While I don't agree with the politics of the creature identified as "Danny" above, he does accurately state the facts about the SS system, and what the courts have ruled about it. See the link for more.

  • bey||

    More corpses on the streets? You mean the gangbangers are going to start shooting more people?

    Seriously, Tony, NO ONE lives on Social Security. If they had to, you just might see "corpses in the street".
    (Or use some other neurotic hyperbole).

  • ||

    "fair" does not mean one group gets treated differently than another. In fact, "fair" means just the opposite. So how is it fair for one class of people to pay almost all of the taxes in this country and then have another much larger class pay almost none at all?

    I hope that answers your question about "what's fair?"

  • Tony||

    In typical fashion, you treat income groups as different classes in the same way as different sexes or races. It must be terribly unfair to tax a rich person at a greater percentage than a poor person! Doesn't this ignore something obvious? That the poor person might be put on the streets due to a tax rate that would be a trifle to a rich person? I prefer the method Jefferson endorsed: taxes should pay for what we buy and not be a burden on anyone. Like a standard-issue objectivist or libertarian, you treat monetary value as the only value in the world. Do you really think that the problem in this country is that the poor have it too good and the rich are too oppressed? Do you not see how absurd that claim is?

  • ||

    Dude you are reading into this a bit too far. Nobody wants to put poor people out on the street, but you can't have an income tax code where only some people pay while others simply receive services and welfare without making a contribution.

    End the income tax and begin a consumption tax. Same rate for all goods except food and food means all food from Kobe beef to generic cheese so there is no favoritism or dietary values being pushed through tax code.

    It's easy to say the rich should pay more, but the rich are people. And while it is convenient to pick on some easy targets, most "rich" people are doing more for the poor than the government ever could by investing in businesses so they can hire more people.

    Demonizing the rich all the time is not healthy. The rich are people just like the poor. They have the same human failings and the same noble spirit as everyone else. Most "rich" people have a lot of skills that are in demand and they put those skills to work. They work hard and they get compensated based on the value of their work. Poor people work hard too, but in a free economy, hard work is only one part of the equation, your work has to have value if you want to get rich doing it.

    If you work and create something of value, why should you have to relinquish it to the government so they can do with it as they please. If you pay 50% tax on your income, that means that half the time you spent working was for free and somebody else is benefiting. That sounds an awful lot like slavery to me.

  • some guy||

    Give it up Dude (I'm into the whole brevity thing). Tony has stated here many times that he believes luck is the primary cause of success in this world. Luck about who you were born to. Luck about where you were born. Luck about whether you succeed in your chosen career. In his mind, government must be used to even out the rewards of that luck. I've yet to see him explain how it is that some people succeed despite being unluckily born into poor, broken families in poor, broken neighborhoods.... I'll bet he ignores those people because they shoot a gaping hole in one of his primary assumptions....

  • ||

    I know. I was thinking I have already had this discussion with him probably more times than I am able to recall. I think someday I might break through . . . A man can dream.

  • Tony||

    What we need is an accounting of how much of a role luck plays. If it is overwhelming, then the central moral argument of libertarianism is false. You can then argue for pure Darwinian competition being the most morally acceptable system, but most would find that ridiculous. Government exists to mitigate the horrors of nature. It shouldn't hold them up as the end of morality.

  • ||

    "What we need is an accounting of how much of a role luck plays. If it is overwhelming, then the central moral argument of libertarianism is false."

    The argument for libertarianism is not necessarily an argument for meritocracy. Of course, you'll jump on every little argument made by a libertarian as being "the central point of libertarianism."

  • ||

    Helping the unlucky is the duty of the individual, not the government. If your neighbor is suffering YOU help him.

  • ||

    In Tony's world, you stand by and idly watch your neighbor suffer. Sure, this may seem cruel, but big picture it is the right thing to do.

    If "regular" people stepped up, and helped out their neighbor, think of the unintended consequences. EMT's, fire fighters, police, social workers, community organizers, all would have their livelihoods threatened. I'm sure performing tasks outside of a person's role, is also against union rules.

  • some guy||

    Still, Tony. How do you explain the people born into impoverished, broken families who then go on to achieve wealth (by means other than gambling)? They aren't exactly common, but they do exist. Doesn't their existence prove that the circumstances of one's birth can be overcome by hard work and responsible living?

  • ||

    The same way he explains everything else; an argument for even greater government intervention.

  • Tony||

    Anecdotes don't prove anything.

  • Edwin||

    I'd say it's a mixture of luck, and the fact that people tend to be lazy(ish) in America, since we won't chop your hand off or send your daughter to be raped by the local chieftan just because you don't have money; high wealth is sevrely overrated. Knowing what I know now, I wouldn't kill myself to afford a giganto house here in Jersey or otherwise be super rich, were I not born into wealth. I value my free time and other things more than the supposed amazingness of more money; it's the little things in life that matter.

  • Mr. FIFY||

    Oh, that was a BIG help, Edwin. Thanks so VERY much.

  • bey||

    Oh and let me guess. The reason you are so unhappy and unsuccessful is because you are UNLUCKY!!

  • Bucky||

    u.s.a. poor and lefties don't have enough violins...

  • ||

    Does anyone still believe that what's wrong in this country is that the poor have it too good?

    That's not the question at all.

    The question is how to benefit everyone, including the poor.

    Redistribution destroys wealth. This is a economic necessity and cannot be avoided.

    There is no valid economic reason to redistribute, only a moral one.

    And if you invoke the moral one then you are morally obliged to understand how to redistribute best in order to cause the least economic harm and benefit the recipient the most.

    Instead we have special pleading and crony capitalism masquerading as socialistic policy. This is certainly not new with Obama, he's just expanded the process immensely.

    The spending has had it's necessary effect and predictable and predicted effect, it has stifled the economy and job creation.

    Spending in itself is unhealthy for the economy as we see now, as Japan saw, and as we saw in the Great Depression

    (sorry Uncle Milty, you were dead wrong on this)

    Raising taxes are going to add to the problem, however failing to address the deficit cannot be done indefinitely without consequences.

    Deficit funded tax cuts produce a moderate improvement, but over time do not pay for themselves.

    Deficit funded spending shocks (stimulus) produce a very brief and local benefit, but in very short order do not pay for themselves.

    No deficit pays for itself in any time frame in which the debt incurred is paid. It's economically impossible for this to happen.

    The fundamental reason for this is that prices drive costs.

  • ||

    Are we including everything a person recieves as income each year as taxable income? Are we including the massive stock benefits CEOs receive each year as income to tax? If so, then I'll be fine with that assumption, but if you're just talking about money that someone recieves in income, CEOs in general are making less in yearly income then they do in stock profits through their contracts.

  • TheCheeseStandsAlone||

    Excellent point, Matt...

    High income earners are
    reporting only about 20 percent
    of their actual taxable income...

    Also:

  • bey||

    Do you suppose that the reason they are making more in stock options than in yearly income is that the income is they CHOOSE to do so because of the taxes? Higher taxes don't punish the rich - they'll still live pretty much at the same level. But the higher taxes become a disincentive to earn more, to employ more, to develop more, or even to stay in the country.

  • TheCheeseStandsAlone||

    It doesn't matter whether
    taxes are increased or de-
    creased for the rich...

    They have the comparative advantage
    of tax loopholes and exemptions
    that aren't offered to small
    businesses or middle-class wage
    earners...

  • ||

    I would TRIPLE the taxes on the privileged. You folks think you are so much better then working people. The so called wealth makers.

  • A Serious Man||

    Why not quintuple? Why not exponentially increase it to the power of 42? See, I can pull random rhetorical numbers out of my ass too!

    Seriously, "tax the rich even more" is not a solution to any of our problems, unless your problem is your inability to conquer jealousy and envy.

  • Tony||

    But what if the problem were a government budget imbalance? It's at least plausibly part of the solution.

    But perhaps it does make sense to make any tax increase, ever, for any reason off limits and justify it with the most vulgar bit of snobbery ever invented: they just envy us!

  • A Serious Man||

    "It's at least plausibly part of the solution."

    Not really since we'd just be pouring more water into a bucket that has a huge, gaping hole in it.

  • some guy||

    Tony, Government spending has gone up 60% in the past decade. Do you really feel that government services are 60% more valueable now than they were when W. took office? Do you feel like your are getting 60% more value out of the Feds than you did back then? The problem is spending. The problem is politicians who want to control people, but have to settle for controlling people's property. The problem is fairy tale promises about what government can deliver and what it will cost.

    Revenue is not part of the problem and should not be part of the solution.

  • Mr. FIFY||

    No... the most vulgar bit of snobbery ever invented is "that rich bastard has more than I do... go get 'em, IRS!".

  • ||

    A tax increase without a spending cut will do very little. The spending is the primary problem, because the spending is a tax. Everyone knows the spending has to be paid for. Debt crises all over the world have finally (and for good this time one hopes) put the Disney economics idea that debts forever is great to bed.

    Enterprise doesn't just judge by conditions today in making hiring or capital improvement decisions. If it does it will not exist for long.

    Spending is the metric they have to judge by, and they do.

    And if you think this current Obama rhetoric is making anyone think "gee, investing now is a wonderful idea, not only will I be taxed, if I actually manage to make a profit I might be branded a political target and taxed even more!"

  • ||

    This. They blather all the time about how the rich should "pay a fair share" but couldn't come up with a coherent definition of "fair share" if their lives depended on it. It's all just emotions and tantrums.

  • Tony||

    Fairness means the aggregate success of a community is distributed in a way that lifts all boats and is not hoarded by a tiny elite.

  • ||

    Bullshit. Fair means that I get treated the same way as everyone else. I am not rich, but I am wealthier than average and that is because I worked for it. My work has value and therefor I am compensated for it according to the value of my work. I get paid more than others because I have more valuable skills. How is it fair that I should get the same compensation for my hard work as someone whose labor is less valuable than mine? If we are all supposed to be at the same level, how fair would it be if I suddenly decided to fart around all day while you do all the work?

    You shouldn't use the word fair until you know what it means and it does not mean everybody has the same outcome. It means everybody plays by the same rules.

  • Tony||

    But it depends on how we're defining "treated equally." You could define it as having the same percentage of your income taxed as everyone. Or you could define it as having the same dollar amount taken as everyone else. Why not? Same numbers-based standard. Or you could define "treated equally" as having roughly the same burden placed on you by taxes as everyone else. That would imply a heavily progressive system. I simply don't agree on your definition of fairness, and I don't think it's the most useful.

  • ||

    Treated equally means you do not change the expectation based on status or income.

    I'm not interested in defining a rational income tax code because I do not believe taxing income is a good idea, but as I have said, you can't have some pay all and most pay little or none. Keep the rate the same for all and keep it low enough for the poorest person to be able to eat and I might be okay with income tax.

    Consumption tax would be better because people choose to buy non essential goods, which is what I would suggest taxing. And no I dont care if the govt would have to take a huge cut in revenue due to this scheme. Stop spending money and you won't have to worry as much about revenue.

  • some guy||

    Why not define "treated equally" as "Everyone pays for what they use?"

    When you speak of burdens, do you accept that even the poor should have some tax burden placed on them? If not, what income level would you start taxing people at? Poverty line? Four times poverty line? A dollar more than your own income?

  • Tony||

    The system we have right now is almost flat. Yes the income tax is progressive, but that is balanced by all the other regressive federal taxes. As a general principle I simply believe in paying for the programs we buy while inflicting the least burden possible.

  • ||

    Tony, your being completely dishonest. Even when expanding "taxes" beyond personal income tax, the top 20% still pay a vast majority of the taxes. Based on Krumans chart, which is based on data from the Institute of Justice, the top quintile earned 59% of the income, and paid 63.4% percent of taxes. The bottom 4 quintiles earned 41.2% of the income, but paid 36.5% on the tax.

    It doesn't matter if we're discussing personal income tax, or all taxation, the rich bare the heaviest tax burden.

  • Tony||

    That looks slightly progressive to me. I think it should be more so.

  • some guy||

    "...inflicting the least burden possible."

    Does that mean that all incomes greater than mine should be taxed until they are equal to mine before I pay any taxes at all? Almost sounds like you're advocating a national salary cap or something...

  • Tony||

    I think people should be able to be as rich as possible provided certain minimum standards of civilization are met.

  • Red Rocks Rockin||

    Fairness means the aggregate success of a community is distributed in a way that lifts all boats and is not hoarded by a tiny elite.

    Says the moron that can't do basic math.

  • Emperor Wears no Clothes||

    "Fairness" is marxist double-speak for "what's yours is mine."
    Hands off, Tony.

  • Bucky||

    it is not fair that you think that your fair is fairer than everybody else's fair...
    what are you The Fair Faerie?
    i think you are the King of Conundrum...

  • some guy||

    Fairness means the aggregate success of a community is distributed in a way that lifts all boats and is not hoarded by a tiny elite.

    Who's hoarding? In your eyes are the rich just a bunch of Scrooge McDucks, swimming in money bins filled with gold coins? Last time I checked, most people got wealthy by making smart, job-creating investments. In other words, they share their wealth in a very effective way.

  • bey||

    The "aggregate success of a community"? Now you're just making shit up. Maybe everyone is entitled to be as beautiful as Angelina Jolie and as athletic as Derrick Rose?

  • Tony||

    And kindly explain what's fair--since your camp is the one insisting on austerity--about the rich shouldering none of the burden?

  • ||

    Fair is everybody pays according to the same formula. I am not a fan of income tax, but if we are to have one then everybody should be expected to pay.

    If the percentage rate were the same for all levels, then everyone would be paying the same proportion of their income. And yes, the poor will have a greater burden, all the more reason to keep the tax low.

    Really income tax is not a great idea. A consumption tax would be better as people would be able to keep what they earn for their labor and poor people could better manage their tax burden by limiting spending, which they should be doing anyway because they are poor. And of course food and other necessities could be taxed at a lower rate, but you have to treat all food the same,not one tax for twinkles and McDonalds and another for carrots, that is when we start to get into trouble with crazy tax codes and industrial favoritism.

  • ||

    A consumption tax gives more power to individuals, by allowing them to protest the government with their wallets.

  • ||

    Especially if it is only on non essentials.

  • some guy||

    The Fair Tax takes that into account.
    http://www.fairtax.org/site/PageServer

  • Tony||

    Fair is everybody pays according to the same formula.

    They do. The law applies to everyone. That law happens to include a progressive income tax. Such a thing was not invented in order to oppress the rich.

    In fact, legislators give disproportionate attention to the needs of the rich because of the influence that wealth buys. It is an absurdity to claim that the poor are too well-off in this country. And why don't you go tell that to their face. Include a lament on the horrible plight of millionaires. I'm sure they'll be won over by the moral consistency.

    Even though in our system the claim that taxes are too progressive is a vicious lie (zombie lie as Krugman put it). If someone is only talking about income taxes, they are lying on purpose.

  • ||

    Krugmans data comes from the Institute of Justice. Are you suggesting that, based on the data provided, our tax system isn't progressive?

    To ensure we are arguing the same facts, for purposes of this question, I am defining "taxation" the same as the data listed by Krugman - Federal, State and local taxes.

  • ||

    Then why are we talking about raising taxes on the rich? Our tax code allows the majority who do not pay income tax to vote for legislation that they do not have to pay for themselves. This is not "fair" because one group is forced to pay for the benefits of another. The law does not apply evenly to everyone.

    If I murder someone, I should be punished in the same manner as any other murderer regardless of who they may be. You can't have a law that applies to one and not the other.

  • Tony||

    Fine, since we're interested in being fair, why not confiscate all wealth beyond a certain point so that everyone has equal wealth, so that our tax code is fair, according to your numerical assessment of fairness? You can define fair numerically any way you want. I prefer to focus on what kind of life people are able to live as a result of the tax code.

  • ||

    For your proposal to be considered fair, we would have to ensure that everyone capable of productive work, has the opportunity to contribute to the pot.

    For those who don't have marketable skills, they can be conscripted into the military, so that they can learn a trade, as well as make a contribution to society. Of course, not everyone will be fit for service, but will still yearn for the opportunity to contribute their labor to the greater good. These individuals can be shipped to communities in need of low skill laborers. Those with out jobs can report daily to the community day labor center.

  • Tony||

    I don't think anyone should be forced to work. I just don't think that, in a country that can afford it, being lazy should be punishable by death. It doesn't matter if someone is morally fit for social help. It benefits us all when there isn't a sector of extreme poverty. It's in our naked rational capitalistic self-interest to understand this.

    The obsession with the morality of work that libertarians have is all too similar to Protestantism for my taste.

  • CJ||

    I don't think anyone should be forced to work. I just don't think that, in a country that can afford it, being lazy should be punishable by death.

    When your system is implemented, and I do believe it will be eventually since the only opposition is too small or incompetent, we'll see what happens when not just the extremely rich but ALL citizens are faced with the choice of being either stupid (working when they don't have to) or evil (taking much and giving nothing). I will say this, though. It's sure interesting that you're arguing this when you said upthread:

    "Social security does have utility. Anyone arguing otherwise is probably planning to spend what they'd gain by not paying a payroll tax on short-term wants, leaving their retirement the burden of their children or society."

    So I guess you also believe that a large number of people would jump at the chance to burden society. I wonder how many, and I wonder how long your system will last when it comes. I might just choose evil myself. Looking forward to it. (No sarcasm. It'll be fascinating to see play out, if nothing else. And if enough people don't work, maybe at least the government won't take enough money to fund most of the evil it can fund today.)

  • ||

    So in your world, Tony, fairness is taking more from the person who studied hard, got good grades, took out loans to go to college, worked two jobs to build some savings, then risked those savings on starting a business, worked eighty to a hundred hours a week for decades to build that business and provide jobs, goods and services for the community so you can give it to someone who chose to drop out of high school and spends every day standing on the street corner drinking out of a brown paper bag and every evening watching the big screen tv that I paid for with my tax dollars? The higher income levels not only pay for most of the services and entitlements in this country, they also contribute the most to charity and to the community.

    People don't just become rich or poor. Some people take advantage of the enormous opportunities in this country and some don't. Some choose to better their situation by getting an education, job training, signing up for a trade school, taking a night course, working longer hours or taking risks. Others don't and that's their choice, but childishly demanding an equal outcome for both groups and claiming it's only fair that someone who has put in the time and effort to move up the income ladder should pay more to ease the burden on those who chose not to is ridiculous.

    You think it's fair that no one should be forced to work to support themselves and their family and that someone who works eighty hour weeks should support the "lazy" instead and you think anyone except the "lazy" is going to take you seriously? Wow. Just wow.

  • Stalin||

    Exactly. I would send all low skilled workers to the front lines or up north to my prostegous labor camps. That is what I call fail. I mean fair.

  • Red Rocks Rockin||

  • ||

    And then they go on, and on, about "duh ritch" and "duh corpuhrachins", but never make the connection that the government, both parties, are the enablers who make it happen.

  • Tony||

    Yes the problem is government policy that favors the powerful over the powerless. What, is your solution getting rid of the middleman?

  • ||

    Fairness means the aggregate success of a community

    Because fairness also requires aggregate work? Why would it be "fair" for me to work 80 hours a week and you to work 20 and split the "aggregate"? From each according to his ability, to each according to his need? Hey, no problem, there weren't 100,000,000 people in the 20th century killed by their own governments who believed like you do. Oh, yes there were.

    Tony, I wish that you were only stupid. It is more likely that you are simply evil.

  • Tony||

    Xanax?

  • sevo||

    Tony|4.22.11 @ 9:46PM|#
    "Yes the problem is government policy that favors the powerful over the powerless..."

    And your 'solution' is to provide more power to the government?
    You claim to be educated and yet you propose such stupidity. Why is that?

  • Tony||

    You see bad policy and your solution is to get rid of the policymakers... I say make good policy, because none at all is the worst of all worlds.

  • ||

    Yes the problem is government policy that favors the powerful over the powerless. What, is your solution getting rid of the middleman?

    .

    If the middle man is the federal government, then absolutely. We should bring the decision making closer to home. Centralization of power, has only led to the centralization of corruption.

  • Tony||

    Localizing policy does not automatically mean increasing freedom. There are countless examples of localities oppressing people unacceptably where the feds had to step in (Jim Crow comes to mind).

  • ||

    Hardly "countless" examples. There are also "countless" examples of the Federal government forcing bad policy on the states. The point is that local government has to be more responsible to YOU. The bigger the electorate and the geographic area being taxed, the less your vote will matter and the less you are going to see your own tax dollars being spent in your own neighborhood. It's similar to foreign rule.

  • Tony||

    I think we have a decent balance. My local government isn't anymore accountable to me than the federal government is, since I live in a very conservative area. It's in my interest for the feds to counter some of the excesses. Governments should be appropriately sized for their jurisdictions, and I don't really think our system is so far out of balance to care about.

  • ||

    The problem with local politics in this day and age is that nobody pays attention to what is going on. Everybody focuses on the national elections, and I bet your neighbors couldn't name their local city council members. If we abolished the national government, people would take a lot more interest in local politics, which would dramatically change things. Also, if you are living in a conservative area, at least you'd be able to get up and move. It is a lot easier for me to move to the next town or the next state than it is to move to another country.

  • ||

    You and your local representatives most likely shop at the same grocery store, eat at the same restaurants, or have children that attend the same school.

    Accountability is a bitch.

  • Tony||

    But so lacking where I live. Doesn't matter how long things don't improve. As long as you keep screaming about gay people, mexicans, and muslims, you can get 70% of the vote.

  • Mr. FIFY||

    Jim Crow is long dead, and won't ever be coming back.

    Quit bringing up long-deceased shit, Tony.

  • ||

    So who pays you? Are they poor? Or are they wealthy?

  • Red Rocks Rockin||

    You folks think you are so much better then working people.

    You wouldn't know real work if it fell on you, you dumb poz.

  • some guy||

    Jobs don't grow on trees. Most jobs exist because someone risked their own financial health to create them. Most people must make jobs to make wealth. In that way, they share the wealth.

    And yes. If you're providing jobs to 100 people I would say you are better than anyone who is simply "consuming" a job. I'll bet most of those 100 people agree with me...

  • G Mc||

    To say the rich pay "their fair share" or not is a complete value judgment. You can't use a descriptive argument - aka this is what rich people ACTUALLY pay - in order to make the point. Thus, the flaw in both the libertardians and the liberaltardians thinking.

  • sevo||

    Tony|4.22.11 @ 7:27PM|#
    "That is to solve a problem, are we causing the least amount of pain possible?"

    I agree! I'll take the least pain and you can take the most.

  • Tony||

    I've said it before, I'll say it again: I had a boyfriend just like you once.

  • sevo||

    A boyfriend who declined to suffer the pain you offered?
    My goodness! Where would you find such a person?
    Oh, and did you offer to suffer that pain yourself, or just ask that someone else be forced to do so?

  • Tony||

    There's always a little pain involved. Being exceptionally well-hung can be a curse, though.

    But in this political debate I'm the only one not asking for people to suffer pain.

  • Emperor Wears no Clothes||

    A Marxist and a f@ggot.
    I knew it.
    Get AIDS and die.

  • ||

    Pain is natural you can't expect people to never experience pain. And I am talking about financial hardship, not boo boos. Pain is the natural mechanism that drives our survival, without it we become fat, lazy and stupid. And let me tell ya, there are plenty of poor people in the USA that could use some pain to rouse them from the recliner to better themselves before they die of atrophy of the will.

  • Tony||

    I just think that if you actually understand the recent history of distributive policy in this country, we are so far off from "the poor have it too good" being the big problem here. Wealth has been funneled to the top for decades and it isn't because they worked 1000 times harder.

    I'm talking about the specific debate about balancing the budget. If liberals had their way, we wouldn't even be talking about it until we had full employment. But since we are, the question is how do we solve the problem with the least amount of pain? Leaving taxes for the rich the same, or even cutting them as the GOP plan does, is really not the way. You have to realize this--don't fall into the GOP's trap. They don't want to minimize pain. They want to use the fiscal situation as an excuse to gut programs they are ideologically against, either too evil to care about the pain it will cause or too stupid to appreciate it.

  • ||

    Raising income taxes takes money out of the private economy. This is not a GOP thing, it is a fact. "The rich" INVEST their income in stocks, bonds, mutual funds, IRAs and even their own businesses. This is what is known as capital and it is what employers need to hire people.

  • ||

    Those examples are all mostly speculation. Starting a business is the only investment in your list but that is not where the money is. Hedge funds are it...

  • ||

    Please provide examples of "rich people" who have not worked for their wealth.

  • ||

    It's not just how hard one works that determines income, it's the value of their work to others as well. I can work all day long digging a ditch with a spoon, but at the end of the day if my ditch has no value, neither does my work.

  • Tony||

    The recent financial crisis completely disproves this happy fiction of rewarding value. Our economy was turned into a giant casino where the house covered losses. I know you don't support that, but then why do you assume that all money made was done in a way that should be considered legitimate according to law?

  • ||

    We don't have the time, resources, or insight needed to try every rich person to make sure that every penny they or their ancestors earned was 100% legitimate. The only thing that we can change is what happens moving forward. Correcting the sins of the past is always a ridiculous and tragically comical endeavor.

  • ||

    Most "rich" people actually did earn their income. The most recent crisis involved a very small number of "rich" people who do not represent anyone other than themselves.

    It is important to note that the crisis was facilitated by political motivations to see to it that everyone who wants a house can get a house. The government encouraged lending to people who could not afford loans and groups like Acorn put pressure on banks to make these loans by suggesting they were racist. It also did not help that Fannie and Freddie used their considerable resources to purchase these terrible securitized mortgages, which further enabled the banks to take on the risk.

    So yes, when government encourages and institutionalizes bad lending, terrible consequences ensue. If these mechanisms were not in place it would be unlikely that a bank would be willing to take on the full risk of most of these loans, but since they could sell most of the risk to Fannie and freddie, they were okay with it.

  • Tncm||

    Say it with me, folks:

    Artificially low interest rates cause the business cycle!

    Even if FannieMae and FreddieMac didn't exist, even if FDIC didn't exist, even if the government wasn't essentially insuring the mortgages made to the poor, we would still have a business cycle if we kept the Federal Reserve.

  • Obama||

    Hey, shutup. I helped cover those expenses Wallstreet gambled. Otherwise, we would have experienced a total financial collapse.

    Let me be clear.

    Corporations are evil, unless they funded my successful presidentoak campaign. Like Goldman Sachs. Don't hate. Isn't that right, Timmy G?

  • some guy||

    We aren't saying that "the porr have it too good". We're saying that your approach to helping the poor is both counter-productive and immoral.

  • rather||

    exceptionally well-hung
    prove it ;-)

  • ||

    Why you gotta mess up all our class/gender/race warfare propaganda with your facts and research???

    Government is our Mother, Science is our father is suppossed to tuck us in cozy at night not poke holes in our waking dreams. If you'll excuse me I need to call the unpaid clergy of Al Gore or Sheryl Crow and pay the fee for my indulgences this week to the church of secular humanism.

  • Robbie||

    Admittedly I didn't read every one of the 193 comments in this thread, so I apologize if I'm saying something already stated 100 times. In my opinion the concept is simple: To figure out who pays what share of the government, you should consider payroll taxes and any other fee paid to the government, but then be sure to subtract out any benefits paid back to the people from the government via entitlements. Obviously the poor are getting more back in benefits than they are paying out via their payroll taxes, or else why would we have these payroll taxes at all? For this reason, I think it is reasonable to ignore payroll taxes entirely when considering who pays what, since the net paid by the poor is of course 0, or likely even negative.

    And Tony, the rich aren't rich because they "worked" 1000 times harder, rather they provided some good or service which other people decided to give their money away for. Unless they are committed fraud or theft, which is outside this conversation, they received their money justly.

  • Tony||

    So in a discussion about whether our tax code is regressive or progressive, we should just ignore the regressive elements... because it makes your argument better? You can't quantify all of the benefits people get from government, so focusing on the quantifiable benefits is to obviously assume that the poor get more, since they tend to get the cash handouts.

    The benefits to the rich might be in policy that rewards merely being rich already. You're right--since no one's gone to jail, the vast uptick in wealth at the top (but nowhere else) is legitimate. Doesn't mean it's right or reflects even the values you believe in.

  • ||

    Technically, both payroll taxes and the workers income taxes act as a sales tax on labor that has to be paid by the employer. Also, all taxes will eventually be paid by the poor through higher prices or less opportunity.

    Taxation is both infinitely progressive and infinitely regressive.

  • Robbie||

    I'm not ignoring the regressive parts because it is convenient, rather because it is appropriate. While I agree many benefits of government are not easily quantifiable, many benefits, such as entitlements, are quantifiable. If we first subtract out entitlements received compared to amount paid into entitlements, we will have a clearer picture of who is paying for what parts of government other than entitlements. And, as you said earlier, the poor are the ones getting the cash handouts, so I think we can ignore what the poor pay in payroll taxes since they get that money back in other forms directly.

    The reasoning you seem to give is that the rich benefit from other parts of the government more than the poor, and therefore should pay more in taxes. If that is your contention, that's fine, but it doesn't change the fact that when you are determining who pays what in taxes, you should first subtract out any direct benefits people get back.

    If you had a government where the top 50% paid 100% of the taxes and the lower 50% paid nothing, you would say the rich are footing the bill. If you then add to that system a second system where everyone pays 100 dollars, then receives 100 dollars back at the end of the year, no one would argue that the rich are no longer paying 100% of the taxes, or that the system became more regressive.

  • ||

    I contend that any arguments that start with trying to determine what is "fair" is an argument that cannot be won. The words "fair" and "deserve" are so subjective and so variable among people that all discussion based upon the concepts are useless. The concept of social justice is simply a game played by the left on the rest of the world in an attempt to achieve their ends by means of guilt induction. Crying "it's not fair" is based on school yard justice and is appropriate only for those with elementary school levels of intelligence.

  • ||

    "fair" does have an objective measurement, but unfortunately the left does not really use the word fair correctly. When they say "fair," they mean unsatisfactory to their aesthetic sense, which puts the onus of taking care of the poor and less fortunate on the government and not on the individual.

  • ||

    In other words, it satisfies their desire to turn the individual's responsibility to take care of others to the government and taking from the rich is the only way to achieve those ends so taking more from the rich.

    In their mind, the economy is a zero sum game, so the more you have, the less others have. They believe this despite evidence to the contrary.

  • ||

    Okay, I accidentally deleted something here, but you get the point...

  • Tony||

    The economy is only zero-sum when the capitalists make it that way.

  • Musolini||

    You're talking about fascism. Big difference.

  • Mr. FIFY||

    We can't tax our way out of this, Tony. There isn't enough wealth - earned or accumulated - to bail our asses out.

    But keep dreaming. It's kinda cute.

  • Alan||

    When will someone do an accounting that includes sales tax, property tax, social security and medicare, and all the OTHER taxes that ordinary Americans pay?

    Focusing on income tax gives a false impression of taxation levels. I know I make about $40K per annum, and pay about 40-50% in tax - only a small portion of which is income tax (both state and federal). I pay about 3% of my income in property tax, average about 5% in sales tax, 5% state income tax, 5% federal income tax, about 12% for social security - that's 30% before I've even got to Medicaid/Medicare and other assorted taxes.

  • ||

    There's your problem. You're living in a state with a state income tax.

  • Objectivist||

    I really, really hope that the swing to fiscal conservatism in this country can reverse our direction. ASAP.

    objectivistpolitics.blogspot.com

  • ||

    Maybe?

    Adopt a teabagger. Once, and if, the GoP gets back in power they won't be as open to education.

  • Neu Mejican||

    So I am late to the discussion, but this seems germane:

    http://crookedtimber.org/2011/.....economics/

    The teaser:

    If everyone believes Obama’s proposal is fair, no one will ‘go Galt’, out of a resentful belief that the system is unfair. (A pernicious tendency to ‘go Galt’, i.e. not work hard out of belief that meritocracy has been compromised, is what Brooks is warning against.) People will be heartened by the thought that the system is fair, will work hard.
  • ||

    That's the problem with socialist planning in general. People aren't fooled.

    Any economic policy that depends on people being stupid is doomed to fail, and has, and will continue to.

  • Draco||

    Are the kind of people who think it is moral for their government to adjust how "hard" someone works (by adjusting incentives) more, or less, despicable than 19th century plantation owners or ancient pharaohs trying to get more out of their chattels? Serious question.

  • Edit me please||

    "The key to our deficit problems rests in our ability to increasing the top marginal tax rates leads to increased tax revenues"

  • Gphil||

    Am I reading the last graph correctly? in the early '50s the tax rate for individuals was 92%? 92% of ones income was paid in taxes? that can't be right...

  • Adam Smith||

    92% is the marginal tax rate, not the average tax rate. It is right.

  • Adam Smith||

    This article suffers from a lack of real talk, not least because its commentary highlights tax allocation on a relative (percentage) basis, instead of a nominal basis. Using the figures provided in the article, a rough (oversimplified) estimate of the egregiously low tax burden on the richest 1% of the population can be derived:

    Size of economy: +/-$15 trillion
    Nominal amount earned by top 1%: 20% * $15 trillion = $3 trillion
    Population of country: +/-300 million
    Population of top 1% of earners: 1% * 300 million = 3 million

    In short, these 3 million people are earning $3 trillion dollars annually, or an average of $1 million per person. So how much are they paying in taxes?

    38% * +/-$2 trillion in federal individual tax receipts = +/- $750 billion.

    To conclude, the top-earning 3 million people in this country are earning $3 trillion a year and paying $750 billion of that to the federal government. To put that in the almighty percentage terms that greedy rich people prefer, the rich are taxed at an effective average rate of 25% on their $3 trillion annual income.

    Some perspective: The average dood in the top 1% of earners in this country is pulling in $1 million per year and paying $250,000 in federal taxes. That is the same rate that somebody making $100,000 a year pays, yet those in the top 1% are making, on average, ten times that amount. Why the discrepancy?

    Rich people can afford expensive tax lawyers and lobbyists to ensure that they benefit from tax loopholes and continue to pay a pathetically low 15% on capital gains.

    That, friends, is regressive taxation.

  • Draco||

    1) Anyone else notice the tendency on the Left in recent years to try to claim Adam Smith as one of their own? Pathetic, really. And patently absurd, of course. But certainly revealing - they can no longer refute him and his Invisible Hand, so they want to somehow ally themselves with him. Not going to work.

    2) Our left-wing commenter thinks a 25% net income tax burden is "egregiously low." I certainly don't. In fact, if I can't have a truly flat system (everyone pays the same amount each year - just like if we'd all formed a bridge club or something), I'd much rather have a "regressive" system in which the most productive members of society pay a lower percentage than the middle classes or the poor. They can deploy their resources more effectively than government can in any case - they've proved it by out producing and out competing others. And the bulk of the citizenry would get a real taste of the cost of big government. A man can dream.

    3) Our left-wing commenter refers to those who complain about paying 25% of their income to the government as "the greedy rich." What does that make "Adam Smith" and those like him? Non-greedy? Presumably, he'd like to get his hands on more of their income, to benefit himself or his favorite subsets of the under- or middle-classes. If that's not greedy, I don't know what is. Reminds me of the Stossel take-down of the union boss who tirelessly campaigned for higher wages for his union members, and yet called the rich "greedy."

  • Adam Smith||

    Thanks for the reply. My response to each of your enumerated points:

    1)I certainly do not identify as being "on the Left" or "left-wing", and, having read the Wealth of Nations and the Theory of Moral Sentiments, I do not believe that the major economic schools of thought (Keynesian, Austrian) adhere very closely to the pronouncements of Adam Smith.

    My preference for a tax system would probably be considered relatively "right-winger" unless you are a greedy rich person. I would like to see the federal corporate income tax eliminated, but for rich individuals to get soaked to compensate for the lost tax revenue.

    2)I appreciate your frustration with the high cost of government, but your conception of overall wealth creation appears limited, and certainly inconsistent with Smith's views.

    My characterization of an effective average tax rate of 25% as "egregiously low" is relative to the similar rates paid by the middle class, and to the amount spent on federal outlays. In Wealth of Nations, Smith discusses market distortions ("enhancements") that derive from the natural consolidation of capital into the hands of fewer and fewer market participants. It creates deadweight loss, which is the reason that monopolies are inefficient.

    In the past thirty years, income inequality has increased to a near all-time high in this country, and part of that is due to natural consolidation, which is ultimately harmful to the country's overall wealth. Smith describes wealth as the aggregate amount of productive labor and assets in an economy, and to the extent that income consolidation decreases productive labor and assets, a flat tax or regressive tax is damaging to overall prosperity.

    A limited example: assume this country implements a flat tax of $5,000 (an easy figure but not nearly enough to balance the federal budget). The net result of the flat tax is to shift the current tax burden from the wealthy to the less wealthy. Assume under the flat tax somebody earning $50,000 per year pays $1,000 more in taxes than before, and is left with $45,000 to be spent, saved, or invested. Somebody earning $1 billion, who previously paid $250 million in taxes, now pays $5,000 and has an additional $249.995 million to be spent, saved, or invested. The first taxpayer is much more likely to have spent the $1,000 than the latter taxpayer is to now spend the $249.995 million simply because the former has a much lower disposable income. The billionaire will not likely spend the majority of the tax windfall, but rather save or invest it.

    Under this example, the 3 million people in the top 1% of earners would stand to pay $15 billion in taxes ($5,000 flat tax * 3 million individuals) instead of the current $750 billion. The rest of the country would have to absorb the $735 billion tax shortfall. The net effect: $735 billion more would likely be invested by a small number of people and $735 billion less would be spent by a broad base of people. The increase in investment would be less efficiently allocated (think mortgage-backed securities) than the decrease in spending, because of the much smaller number of market participants.

    This implicates the law of diminishing marginal returns, which Smith discusses. As more capital flows into capital stock, the returns on the capital decline as the market matures. So as all the millionaires and billionaires squirrel away their money, which they can't spend fast enough, they begin to saturate markets, their returns decrease, and market bubbles form. Under a flat tax system, this problem is exacerbated. Not only does capital begin to return less on investment, but the markets in which it is invested begin to shrink because those actually spending their disposable income to generate demand now have less of it to spend. Ordinarily, increased savings and investment is a good thing, but not if it is limited to a small population and comes at the expense of less spending among the broad population (see also Smith's discussion of "factions", which become more powerful when this happens).

    This imbalance is currently taking place and is a contributing factor to the weakness in the labor market. Remember, "wealth" is only a measurement of the amount of productive labor and assets, and if all of the capital is tied up in investments in shrinking markets with decreasing demands and returns, the purchasing power of that capital decreases, and everybody loses.

    One meaningful way to address the economic damage caused by high income disparity is to decrease taxes on the broad productive labor force (the middle class), which will promote the velocity of capital and support balanced economic growth. However, if the federal government insists upon spending at current rates, it must increase tax revenues, which should come from the wealthiest individuals, whose capital continues to become less productive as markets continue to mature and demand continues to decrease (or increase at an inadequate rate).

    3) As to my characterization of the rich as "greedy", it is a common axiom that power corrupts, and absolute power corrupts absolutely. The more wealthy a person becomes, the more likely it is that they will use their wealth to increase their relative power, and to act in ways appropriately described as "greedy."

    I assume you are a Christian. Bear this in mind: "It is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of God."

  • Red Rocks Rockin||

    I assume you are a Christian. Bear this in mind: "It is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of God."

    Why would you assume that? So you could throw some status-grasping moral cloak on yourself for being "more generous than thou?"

    Christ and the apostles also had a great deal to say about hypocrites too, you know. Plus there's that whole commandment about covetousness.

  • Adam Smith||

    78% of Americans identify as Christians. Over 90% of politically conservative Americans identify as Christians. Why would I not assume that?

  • Red Rocks Rockin||

    78% of Americans identify as Christians. Over 90% of politically conservative Americans identify as Christians. Why would I not assume that?

    Because if he wasn't, your pathetic attempt to grab the moral high ground becomes meaningless?

  • Adam Smith||

    Many non-Christians find value in the teachings of Christ, and I think most people in the world would find the statement that "I'd much rather have a 'regressive' system in which the most productive members of society [read: the wealthy] pay a lower percentage than the middle classes or the poor" abhorrent. If you don't, good for you. Why don't you try critiquing the substance of my arguments?

  • Red Rocks Rockin||

    What's particularly precious about your screeds above is that you never bother to address the multitude of government regulations that actually stifle competition by overburdening small business owners with a bucketful of rules to follow. You cite a symptom but ignore the disease of scale that makes the income concentration possible.

    Your superficial citing of the "eye of the needle" verse is really nothing more than bullshit posturing. As PJ's pointed out, there's no virtue in compulsory government charity and there's no virtue in advocating it--it merely shows that you are willing to do good with your own money when somebody forces you to do so. Jesus was asking the rich man to do so voluntarily, not because he was compelled by Rome or Herod to do so.

  • Red Rocks Rockin||

    Many non-Christians find value in the teachings of Christ,

    Yes, because they can selectively cherry-pick which ones they like and ignore what isn't convenient for them. That's hypocrisy at its finest.

    Why don't you try critiquing the substance of my arguments?

    Because you're using blatant shame tactics to justify your position.

  • Adam Smith||

    You are correct to the extent that I never discussed my views as to the role of government. Indeed I believe that the federal government has gotten much too large, has unduly burdened small businesses, and has committed vastly too many resources to social programs that are experiencing runaway growth.

    However, I also believe that the federal government is captive to large corporations and the interests of the superwealthy in this country, which is contributing to the increased reliance on social programs among the poor. The rich make it easier to consolidate capital among themselves, and this starves the economic beast, so the poor and the elderly continue to rely more heavily on the government's inefficient social programs.

    This is what is so difficult for mindless ideologues to understand: a pro-business, small-government philosophy does not necessarily have to include an anti-poor, pro-rich position.

  • Red Rocks Rockin||

    This is what is so difficult for mindless ideologues to understand: a pro-business, small-government philosophy does not necessarily have to include an anti-poor, pro-rich position.

    Then it seems you should be far more focused on advocating for a reduction in the scale of our society rather than worrying how much "the rich" have and where it's being distributed to.

  • Adam Smith||

    The above comment is so vapid that I am struggling to dignify it with a response. The distribution of income is foundational to the success of any society. The United States has been progressively transitioning to an unbalanced bimodal economic profile common to many developing nations: on one end you have a small but extremely wealthy group of elites, and on the other a large class of the marginal poor. It is no secret that the middle class in this country is shrinking relative to the rich and the poor, and this does not bode well for its future economic success.

    Given the lack of substantive insight in your comments, you do not really seem to be in a position to tell me what I should be focused on.

  • Red Rocks Rockin||

    The above comment is so vapid that I am struggling to dignify it with a response.

    Save your selective moral outrage, it's really quite tedious.

    The distribution of income is foundational to the success of any society.

    Yet you've made no real argument for what exactly is "fair redistribution," using actual figures, and why this is so.

    Given the lack of substantive insight in your comments, you do not really seem to be in a position to tell me what I should be focused on.

    You equate bloviation with substance. If you really can't see how the economies of scale contribute to and exacerbate the very dysfunctions and inequalities you deign to be concerned about, then there's really no point in trying to make your case. You're like a doctor that wants to put gauze on a road rash when the victim has a sucking chest wound.

  • Adam Smith||

    This will be my final response to you, since your comments lack any substantive arguments.

    You misconceive my statement regarding the vapidity of your comments as demonstrating a "selective moral outrage." 'Vapid' means devoid of substance; it is not a moral critique; I used the verb 'dignify' to mean 'lend credibility to', which should be obvious enough from the context.

    Now let's recap your responses to my comments and see if you exhibit any "selective moral outrage":

    You accuse me of throwing a "status-grasping moral cloak" on myself; you associate me with "hypocrites" and "covetousness"; you characterize my reference to a Biblical quotation as a "pathetic attempt to grab the moral high ground" (I didn't write the verse, I just quoted it; it speaks for itself); you refer to it again as "bullshit posturing" and "hypocrisy at its finest."

    What I truly cherish about your responses is not that you never once responded to my actual arguments regarding tax theory or economic theory, not that you misconceive my position to be advocating "government charity", and not even that your major critique of my comments (which you mention three times) is an unfounded (and wrong) assumption that I am discounting the problems associated with economies of scale, simply because the topic was unrelated to the points I was making (although I did mention that the growth of the federal government was a problem).

    No, what I cherish about your responses is that they serve as a model example of the detrimental effects of following a narrow ideology blindly, and that is truly a public service to all.

  • Red Rocks Rockin||

    You misconceive my statement regarding the vapidity of your comments as demonstrating a "selective moral outrage." 'Vapid' means devoid of substance; it is not a moral critique; I used the verb 'dignify' to mean 'lend credibility to', which should be obvious enough from the context.

    You lost whatever appeal to substance when you tried to bolster your position using a tenuous, context-free link to a Biblical scripture in a rather sad attempt to burnish your arguments with a moral cloak. If you're not intellectually robust enough to see how lame that was, it's not really my fault.

    You accuse me of throwing a "status-grasping moral cloak" on myself; you associate me with "hypocrites" and "covetousness"; you characterize my reference to a Biblical quotation as a "pathetic attempt to grab the moral high ground" (I didn't write the verse, I just quoted it; it speaks for itself); you refer to it again as "bullshit posturing" and "hypocrisy at its finest."

    And? They were--and furthermore, the quote does not "speak for itself," when you leave out the context of the incident. You're using a very clear example of Jesus advocating private charity as an argument for coercive government taxation. If anyone has provided a "vapid" argument, it's been yourself.

    What I truly cherish about your responses is not that you never once responded to my actual arguments regarding tax theory or economic theory, not that you misconceive my position to be advocating "government charity", and not even that your major critique of my comments (which you mention three times) is an unfounded (and wrong) assumption that I am discounting the problems associated with economies of scale, simply because the topic was unrelated to the points I was making (although I did mention that the growth of the federal government was a problem).

    The economies of scale and the taxation required to maintain it are inextricably linked. They are not separate issues irrelevant to one another, nor do they exist in a vacuum.

    No, what I cherish about your responses is that they serve as a model example of the detrimental effects of following a narrow ideology blindly, and that is truly a public service to all.

    You might want to take a look your own narrow ideology before accusing anyone else of it. Your knee-jerk defenses of a "fair" taxation system are nothing, if not blind allegiance to ossified "progressive" philosophies.

  • The Game||

    Dude, it seems like your missing this guy's point.

    He was not talking about how much the government should spend or how tax revenues should be spent. He was talking about the allocation of the tax burden, as in who should be taxed to fund the government.

    Your main point in your discussions is that the federal government is too large, and that it spends too much on social programs. I don't think Adam Smith disagrees. Maybe I'm misreading something, but it does not seem like he was arguing in favor of big government or big deficits.

    Also, in fairness, you seem to be doing a fair amount of sermonizing in your responses.

  • Red Rocks Rockin||

    He was not talking about how much the government should spend or how tax revenues should be spent. He was talking about the allocation of the tax burden, as in who should be taxed to fund the government.

    As I've argued, those issues are linked. The most common refrain of progressives is, "Well, if we just taxed the rich more, we could pay for these programs!" Adam Smith is arguing the same--that income inequality is so egregious now, that we can't pay for these programs anymore. It begs the question that placing greater taxes on the wealthy will result in greater investment in their businesses or wealth-creating ventures, so Uncle Sugar doesn't get his cut. It never considers the possibility that the wealthy may simply spend less, produce less, and thus the measure would be self-defeating. He never considers that the government has actually enabled this wealth concentration by increasing the scale of complexity in our society to such a degree, that any real competition the wealthy would receive is crushed under a burden of meeting a multitude of contradictory laws and regulations that only the wealthy can afford to navigate. the tacit assumption in his argument is that scale is a symptom instead of the disease.

    Also, in fairness, you seem to be doing a fair amount of sermonizing in your responses.

    I didn't have a problem doing that, since he was using a quote about personal charity to argue that higher government taxes on the wealthy was justified. Apparently, his argument is that the government will help rich Christians to save their souls by redistributing their wealth for them. It was an point of the most intellecually lazy kind.

    I'm not even religious, but apparently I'm far more familiar with biblical scripture than he is.

    He probably also forgot that when Jesus is shown paying his taxes, he does it by getting his apostles to find money in the mouth of a fish. So apparently, if going by the rather narrow interpretations of the Bible according to Adam Smith, we shouldn't pay taxes without divine intervention.

  • Draco||

    Adam Smith,

    First, although your guess has a sound statistical basis, and although I was at one time a Christian, I no longer identify as such (unless it's convenient, for example to avoid being burned at the stake - hey, I'm principled, but not that principled!) And speaking of statistics, I estimate that the chance of Christianity being true - even given that the idea of the existence of a deity or deities is a sound one - is less than a billion-to-one. YMMV.

    Second, recapping a large part of Smith's thought on taxation isn't really apropos in a forum like this. However, let me defend my position on going over to a head tax: my motivation, far from an attempt to soak the poor or produce a deadweight loss, is to reduce the cost of government to that which the average family could easily bear. If everyone had to pay the same tax, government would shrink to a manageable size faster than you can say "the greedy rich." Instead, the progressive income tax has been an engine of unbridled growth in government size and power - and the concomitant violation of individual rights on a massive scale.

  • Adam Smith||

    Draco,

    I share your concern with the unwieldiness of the federal government, and I agree that a flat tax would force it to shrink drastically. However, in addition to my former arguments in opposition to a flat tax, I would be concerned that the rapid decrease in growth would be a disorderly one, and that the private markets would not be able to react to the the increase in available labor and capital fast enough to avoid serious crises.

    My position is that, in order for this country to realistically address its systemic deficits, an increase in taxes is necessary. We can make deep cuts, but that still will not be enough, and, frankly, the rich are in the best position to afford it (note: I'm not necessarily referring to people making six figures, but those making seven, eight, nine, and ten figures per year).

    I hold to the belief that wealthy individuals are not nearly as smart or efficient at allocating resources than many people give them credit for. I have much more faith in the allocational abilities of corporations, which is why I would like to see the corporate income tax eliminated, and for the commensurate tax shortfall to be paid for by higher taxes on wealthy individuals.

  • ricketson||

    I think you just turned me into a supporter of the Federal income tax. That story was total BS. A few quick points:

    1) Millionaires are not people with >$1,000,000 in income -- they are people with $1,000,000 in assets.

    2) Who thinks that all Americans pay income tax? Probably not those people who pay no income tax. In my experience, people tend to err in the opposite direction (e.g. thinking that a childless couple with $40,000 income pays no income tax). If people do "mistakenly" think that everyone pays income tax, their mistake is probably just a technicality (e.g. treating payroll tax as income tax).

    3) No sane person cares about how the top income-tax rate relates to % of GDP collected as taxes. What we care about is where each tax dollar comes from -- does it come from one guy who won't miss it, or does come from a large number of people who can barely make ends meet, thereby forcing each of them to forgo some basic good.

    Libertarians should focus on reducing spending, rather than making arguments for soaking the poor.

  • Red Rocks Rockin||

    Libertarians should focus on reducing spending, rather than making arguments for soaking the poor.

    1) Looks like someone's been ignoring a whole bushelful of articles AND comments on this site which have been calling for spending reductions for years.

    2) What is your income definition of "poor," and what is the methodology that you used to arrive at this demarcation line?

    3) What makes you think that "reducing spending" won't hit those "safety net" programs to get the budget back in line? Social Security, Medicare, Medicaid, and unemployment make up four of the top five spending programs, and EVERY CENT of current government revenue goes to pay for them. Everything else is deficit spending--meaning that you could cut the DoD to $0 and you STILL won't get halfway there.

    It's not a question of if, it's a question of when these programs go under. The real issue is whether they are reduced voluntarily or involuntarily through collapse.

  • ricketson||

    Re 1) I was only commenting on this article. Libertarians discredit themselves and distract from the real issue when they argue about whether taxes should be more or less progressive. It is not a libertarian issue.

    Re 2) Do you really think the world can be split into clean categories? Throw the word "relatively" in there if you like.

    If you want a demarcation line, try the Basic Economic Security Tables:
    http://www.wowonline.org/usbest/

    Re 3)Once you factor out recession-related losses in the federal budget, the military budget (>$600 billion) would be more than sufficient to eliminate the deficit.

    http://en.wikipedia.org/wiki/F.....9-2012.png

    Social Security and Medicare are not targeted at the poor. Unemployment payments are cyclical. As for the programs that are targeted the non-recession poor, I'd be willing to let half of them go in a heartbeat.

  • Red Rocks Rockin||

    1) I was only commenting on this article. Libertarians discredit themselves and distract from the real issue when they argue about whether taxes should be more or less progressive. It is not a libertarian issue.

    No, you weren't commenting on just this article. Your exact words were, "Libertarians should focus on reducing spending, rather than making arguments for soaking the poor."

    Not only was your comment a gross generalization, but an appeal to authority. Nowhere are libertarians calling for more taxes to soak the poor; quite the opposite, in fact.

    Do you really think the world can be split into clean categories? Throw the word "relatively" in there if you like.

    You're the one trying to divide up society between the "rich" and the "poor." And when it comes to the math and our deficit, sorry, clean categories are the norm. Save your faux outrage for the college coffee house where you picked up these silly ideas.

    Re 3)Once you factor out recession-related losses in the federal budget, the military budget (>$600 billion) would be more than sufficient to eliminate the deficit.

    Sorry, but you need to work with real numbers, not hypotheticals. DoD spending totaled $663.7 billion last year. Throw in the Departments of Energy and Homeland Security, and that becomes $749.1 Billion. The deficit for CY10 was $1.7 trillion. You don't even get halfway there.

    http://en.wikipedia.org/wiki/2.....ral_budget

    Furthermore, you seem to forget the reality that if you completely eliminated ALL those programs TODAY, thousands of people would subsequently be thrown out of work. So for at least 1-2 years, maybe more, a substantial portion of that money would simply be shifting from those departments over to unemployment payments and other social programs. Suddenly, your savings don't become as great as you thought they were because you're shifting money from one pocket to another.

    If you want a demarcation line, try the Basic Economic Security Tables

    The report is flawed, as their sample size assumes families who are not the recipients of government redistributive payments such as the EITC, and ignoring the collection of various social welfare payments. It also does not take discretionary spending by families into account.

    Social Security and Medicare are not targeted at the poor. Unemployment payments are cyclical.

    Social Security and Medicare payments are going to keep going up as the Baby Boomers retire. Our employment to population ratio is at 58%, nearly 4 percentage points below the troughs of the dotbomb bust, with no clear industry that will bring those people back to work at salaries that the left believes is sufficient for a "living wage." In fact, the trend is looking like our current unemployment situation is the new normal, and if those payments start o drop, it's because people are dropping off the rolls, not because they are getting jobs. The fact that food stamp payments keep going up should be evidence enough of that.

    http://www.market-ticker.org/a.....st=2492124

    The bottom line is that government spending is a fully ingrained part of our GDP. The greater the spending, the more likely there is that a country will overleverage itself to the point that any pullbacks will result in massive pain when the bills finally come due and that nation can no longer afford to run up the credit card.

    As I've demonstrated with the numbers above, we are running structural deficits of approximately $1.5 trillion a year, and that cutting defense spending to $0 will not balance the budget. You have to take ALL of the Big 5--SS, Medicare, defense, unemployment programs, and Medicaid--if you want to have a shot. The fact that everything outside of SS, Medicare, Medicaid, and unemployment is now pure deficit spending also demonstrates this fact.

  • ricketson||

    Regarding the first point ("Libertarians should..."):

    If I said that cops should not beat-up people who videotape them, would you interpret that to mean that I think that cops do nothing other than beat-up people who videotape them?

    As for an "appear to authority", I only stated my opinion and I did not claim to be an authority.

    BTW, I don't think that I've ever had a political discussion in a college coffee shop. Since you seem insistent on diverging from a discussion of substance, forget you,

  • Red Rocks Rockin||

    Since you seem insistent on diverging from a discussion of substance, forget you,

    Who's diverging? I addressed your arguments point by point, using actual government figures and basic math. That you focused like a laser on that superficial little dig shows you to be far more invested in preserving your narrative than in arguing the facts.

  • ricketson||

    I think you just turned me into a supporter of the Federal income tax. That story was total BS. A few quick points:

    1) Millionaires are not people with >$1,000,000 in income -- they are people with $1,000,000 in assets.

    2) Who thinks that all Americans pay income tax? Probably not those people who pay no income tax. In my experience, people tend to err in the opposite direction (e.g. thinking that a childless couple with $40,000 income pays no income tax). If people do "mistakenly" think that everyone pays income tax, their mistake is probably just a technicality (e.g. treating payroll tax as income tax).

    3) No sane person cares about how the top income-tax rate relates to % of GDP collected as taxes. What we care about is where each tax dollar comes from -- does it come from one guy who won't miss it, or does come from a large number of people who can barely make ends meet, thereby forcing each of them to forgo some basic good.

    Libertarians should focus on reducing spending, rather than making arguments for soaking the poor.

  • ||

    The one question that is NEVER asked or answered is,"WHAT PERCENTAGE OF THEIR GROSS INCOME DO THE "RICH" PAY IN TAXES? I know the top 5% of income earners pay 90% of the taxes ...but,I've wondered this for years and have never found an answer?

  • tadcf||

    You can argue about this matter all you want, but when Eisenhower (a Republican) was President, the higher tax rate was responsible for building the super highway infrastructure--now, with the current tax rates, we can barely support it.

  • Dee||

    Obama is leading a scam. America is in trouble. Things must change.
    Listen to me speak on it in my video.
    "The analogy of War in The Heavens & War in America"
    http://www.youtube.com/watch?v=28fM9DQ0cuA

  • Ricky||

    Thanks ForSharing

  • comwenj||

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