The Facts About Taxes and Spending

Separating economic myths from economic truths

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: Millionaires who favor of an income tax increase are fiscal heroes.

Fact 1: No, they’re not. Many of the rich get the majority of their income in the form of capital gains and dividends rather than ordinary income. They are essentially advocating a tax increase on those making much less money than they do.

On its face, raising the top income tax rate seems like an effective way to make our (already progressive) federal tax system more progressive. Yet the rationale underlying this policy recommendation ignores the complexities of the United States federal tax system. As you can see from the chart above:

• As income increases, the proportion of Americans’ earnings coming from wages and salary decreases (red). Meanwhile, wealthy Americans draw much of their income from dividends, interest payments, and capital gains (blue).

• Federal income tax rates are progressive, but they are not shared equally among high earners. Federal income taxes fall disproportionately on those wealthy enough to face the highest income tax rates, yet not wealthy enough to draw a large proportion of their income from non-wage sources -- those filers making $100,000 to $200,000. 

So when Facebook’s Mark Zuckerberg—following in the footsteps of billionaires like Bill Gates, Warren Buffett, and Ted Turner—declared that he was “cool” with the idea of paying more income tax, it doesn’t really mean he’s personally going to be paying more money.

Indeed, if Zuckerberg really wants to pay more taxes he can simply send a check to the Treasury Department instead of asking for a tax increase on other people’s incomes.

Jakina Debnam of the Mercatus Center calculated the average tax rate on the non-wage and salary earnings of the wealthy using SOI data from the Internal Revenue Service. As she writes: “There is some rounding error incorporated from the SOI data. However, if you assume that all high income earners face the highest tax bracket on their income (that they make more than $373,651 in wage and salary income), then you get the tax rates illustrated below.

As you can see, these rates are all lower than the individual tax rate on income for single earners making more than $34,500 but less than $83,600, which is 25 percent.

Myth 2: Big government means more redistribution to the poor.

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  • Id||

    "Still not the right chart"

    lol

  • Name Nomad||

    Looks like that intern is going back on coffee duty.

  • ||

    Facebook founder Mark Zuckerberg recently declared that he was “cool” with the idea of paying more income taxes.

    So write a fucking check, Mark.

  • ||

    No, he needs the compulsion. He's too weak on his own.

    There isn't a limit on how much you can give the federal government. Not at all. Heck, give it all to the IRS, Mark! Why won't you, you selfish brat?

  • The Other Kevin||

    This. When people like Mark say this, they mean, "I'm cool with making other people pay more taxes, while I find a loophole."

  • jtuf||

    Mark doesn't see any point in giving up the money unless it's done as part of a plan to compel others to do the same.

  • Realist||

    I am all for raising taxes on rich liberals to 100%!

  • Tony||

    This goes for libertarians and their congressional cohorts like Rep. Paul Ryan... say whatever you want, but we really shouldn't be taking advice on how to fix Medicare and Social Security from people who don't believe in a welfare state in the first place. Even a partisan liberal is more trustworthy.

    The cost problem with Medicare is not Medicare itself (whose costs are lower than comparable private sector alternatives), but health care. Obamacare has dozens of programs built in it that are meant to experiment with ways to bring down healthcare costs. So if you want to actually try to fix the problem, support Obamacare and further healthcare reform. But of course you guys won't do that--you don't want to fix Medicare and you don't want to make healthcare cheaper in this country. Insurance industry profits are more sacrosanct than affordable quality healthcare for old people, as a matter of freedom.

    Speaking of misplaced priorities, you know what would pretty much exactly cancel out the Social Security shortfall? Rescinding the Bush tax cuts on upper-income people. I know that money wouldn't go toward SS directly, but it's really not all that difficult a problem to get our fiscal situation in order. It's only difficult when you rule out any and all revenue increases.

  • ||

    I knew this was fake about five words in. Try much harder. Or stop doing it altogether.

  • ||

    ""Obamacare has dozens of programs built in it that are meant to experiment with ways to bring down healthcare costs.""

    Modeled from a program that can't keep costs down.

    "" you know what would pretty much exactly cancel out the Social Security shortfall? Rescinding the Bush tax cuts on upper-income people. I know that money wouldn't go toward SS directly, but it's really not all that difficult a problem to get our fiscal situation in order. ""

    Spare me. The reason why it IS a difficult problem to get our fiscal situation in order is the same reason many people with credit cards can't. They want to spend more than they can afford. You can't solve money problems by getting more money. That only allows them to continue their habit of spending beyond their means.

  • Tony||

    So if you can't make ends meet, getting a higher paying job is not a possible solution?

    Government can raise taxes to pay for the things it buys. That is, in fact, how it's supposed to work, unpaid-for Republican wars and healthcare mandates notwithstanding.

    You're making a moral argument in a situation that merely requires arithmetic. The whole conversation is cynical and dishonest. None of your policy guys are interested in a balanced budget in the least.

  • ||

    ""So if you can't make ends meet, getting a higher paying job is not a possible solution?""

    Not to the problem, no. Because you will still spend beyond your means. People with spending issues think if they make more money they can spend MORE money. That's exactly what the government is doing. They want to spend more, so they want more.

    The fact that the feds have a debit ceiling, and everytime we approached the debit ceiling they increased it, they have done it about 100 times and it proves they have a spending habit that requires rehab. If we really wanted a tax increases to help our current situation, the feds would need to freeze spending and use the increase to pay the debt. But the feds are too addicted to spending. Someone with that kind of habit is the last person you want to give more money to.

  • Tony||

    But this schoolmarm-ish approach just disguises the policy goal of ending programs you don't like. True, in all matters having reasonable, sane stewards of government spending is helpful. But as you yourself indicate, not raising revenue has not stopped them from spending in the least.

  • ||

    ""But this schoolmarm-ish approach just disguises the policy goal of ending programs you don't like.""

    Bullshit. Because I'm talking about acutal money management.

    """But as you yourself indicate, not raising revenue has not stopped them from spending in the least.""

    Yet neither will giving them more money. So if both paths get the same result, I would much rather go with the one that costs me less. DUH.

  • Id||

    Bullshit. Read what he said: Freeze all spending (which means keep all programs at current levels) and raise taxes to pay the debt. A strawman to be sure, but the very fact that the "raise taxes to save us" crowd don't say that indicates they are disingenuous.

  • Tony||

    Why freeze all spending? That's not sane fiscal management, that's a retarded monkey playing whack-a-mole badly. I think some programs should be cut, others funded more, particularly programs meant to increase employment and hence government revenues.

  • ||

    ""Why freeze all spending? ""

    Because your out of money dumbass. That's what people with spending addictions never understand.

  • Id||

    I called it a strawman simply because I don't favor it :) perhaps it's merely a personal strawman. I'd like to see cuts to spending, not just spending growth, and tax reform, not higher taxes in the current system.

  • ||

    Why freeze spending?

    Because the federal revenues for 2011 are estimated to be $2.1 trillion, while spending is estimated to be $3.8 trillion.

  • ||

    I wouldn't call it a strawman, it's an example of how money management would work if applied to government. Ok, maybe that is a strawman, lol. The principles of money management apply to governments, adults, and kids with allowances.

    When a kid spends all his money on candy and then cries that he has no more money, and wants more candy, a responsible parent would say no.

  • Tony||

    But the parent promised a lot more candy than the kid can afford with his current allowance. A parenting coach came along and tried to convince the parent that giving the kid less money actually means he makes more money, but that proved to be the bullshit it sounds like. Then the coach tried to tell the parent that there's no other solution but to drastically cut the allowance level because the kid has too much candy, even though the kid was just responding to the requirements of the parent, who is perfectly capable of deciding how much candy the kid needs to have. The only solution left off the table is giving the kid the allowance necessary to buy the amount candy that all parties agreed to in the beginning. Turns out the parenting coach is a kook who just hates children.

  • Id||

    Er, what?

  • sevo||

    Tony|5.27.11 @ 5:47PM|#
    [bullshit squared, followed by]: "Turns out the parenting coach is a kook who just hates children."

    No, stupid shit, you forgot he wants to kill children and old folks.

  • Corey S.||

    Hey Tony: Antoine Walker.

  • Just an Engineer||

    Why is there no ignore button here?

  • Jerbigge||

    US health care is so expensive because it is a monopoly protected by government from competition by the free market. Without prescription laws, laws that forbid the importation of medicine for personal use, US health care costs would be a lot less. Why is it necessary that all hospitals have the latest and most expensive technology? This makes no sense any more than if the government required that all cars sold in the US were the most expensive cars in the manufacturer's line. A lot of people would do just fine in a hospital with pre-1980 technology. Which would cost a whole lot less! So the high cost of US health care is due mainly to actions of the government! Put the blame where it belongs. Of course doctors will exploit things to their own advantage. Everyone wants to earn more money. And if you can get the government to pass laws in your favor, you will support that...

  • nekoxgirl||

    Well said!

  • ||

    But Tony just told me health care is expensive because we don't have enough Medicare and taxes!

  • Jerbigge||

    US tax rates are at their lowest level since World War 2. The federal income tax rate used to be a lot higher than it is now. Capital gains used to be taxed at 28%, now they are taxed at 15%. So taxes are a lot lower than they used to be.

  • sevo||

    Tony|5.27.11 @ 5:10PM|#
    "So if you can't make ends meet, getting a higher paying job is not a possible solution?"

    You're welcome to 'get a higher paying job'. You're not welcome to steal money from me.

  • JohnD||

    No tony, getting a higher paying job is not a possible (likely) solution.
    If the person can't live on his existing income it is very likely that he / she will spend even more if they make more. I have seen it too many times.

  • ||

    As mentioned, when spendthrifts get more income, they don't use it to pay down their current obligations, they use it for new purchases. The Feds are spendthrifts, but unlike Johnny Middleclass who has his credit cards maxed out, there is apparently no limit for the Federal folks, except the debt ceiling, which they'll just raise until we're all living on the street.

    As for Obamacare - if it is so good, why must it be compulsory?

  • ||

    "Republican wars"? - I think we have had a Democratic President for two years and seen no change in the 'war on terror' and its unlawful policies vice the rule of law promised, and little change in the actions in Iraq, Afghanistan, or Libya NOW!

  • jtuf||

    But of course you guys won't do that--you don't want to fix Medicare and you don't want to make healthcare cheaper in this country.

    Wrong, Tony. I got certified as an EMT when I was young and rode an ambulance as a volunteer for two semesters in grad school. That reduced the healthcare costs of the community I lived in. I also volunteered in a human genetics research lab for a summer as an undergraduate, which lowered the cost of discovering a cure. What have you done to heal the sick besides whining and demand that others do the work?

  • sevo||

    Tony|5.27.11 @ 4:54PM|#
    "say whatever you want, but we really shouldn't be taking advice on how to fix Medicare and Social Security from people who don't believe in a welfare state in the first place"

    Shorter Stupid Shit:
    "Say whatever you want but if I don't agree, you're wrong!"
    Are you capable of making an argument without either poisoning the well or offering some strawman or other?

  • ||

    Speaking of misplaced priorities, you know what would pretty much exactly cancel out the Social Security shortfall? Rescinding the Bush tax cuts on upper-income people.

    Mrs. Suderman does a nice job of pointing out the utter dishonesty of this argument.

  • ||

    Sorry, he's not allowed to have an opinion, because he doesn't believe enough in socialism. That bit did make me laugh a little.

  • Tony||

    You're allowed to have one, but nobody should listen to you. Medicare is a purely socialistic system. Why would you want to fix it? Paul Ryan obviously doesn't, though he lies through his teeth about it. All those old people receiving single-payer government healthcare are parasitic moochers right?

  • ||

    I'm not in Congress, pretending for a moment that you are real. Which you aren't.

  • ||

    All those old people receiving single-payer government healthcare are parasitic moochers right?

    Yes.

  • Jim||

    +1 to Marshall Gill. I have no sympathy for people who desire to tax the less well off (the young) in order to pay for their own healthcare, when they are usually more well off (old fucks). It's like being a vampire.

    It's regressive Tony, what part of that don't you get? Why do you hate young and poor people so much that you want them to continue to be taxed to pay for relatively better off old people?

  • Jerbigge||

    US health care costs are 18% of GNP. Average for the rest of the developed world is 12%. So why are Americans paying more than anyone else?

  • some guy||

    Because we're extremely wealthy by historical standards and we value our health. Basically, we've already got everything else we need, so we blow the rest of our money on the one thing that can suck down infinity dollars... prolonging vitality.

  • JohnD||

    Hey butt head, I am on medicare and I pay a premiem every month. I also pay for supplimental. In addition, I paid into that program for 45 years, so don't give me your bullshit. You are one ignorant asshole.

  • Tim||

    Good for you, you're paying for part of what you cost. Never mind the fact that the young are getting soaked for the rest of the balance; we're not allowed to complain about that, because, after all, you are willing to pay for at least part of it.

  • some guy||

    You may have paid into the program for 45 years, but you didn't pay enough to cover what you are using now. (If you had paid enough, we wouldn't be having this conversation.) In other words, you are mooching off the young and the unborn. I can't blame you for taking advantage of the system we live under, but you should at least have the decency to admit that you are stealing from your kids, and to thank them for their involuntary contributions.

  • ||

    Some Guy - You make the point that most people seem to miss! Medicare is very expensive and still what people have paid, are paying, and will pay is inadequate.

    Between Medicare deductions from a social security check and a supplemental policy - My guess it costs between $350 to $500 a month per person. Then add to that any co pays, deductibles. On top of that, you have to add what people paid during their working life and whatever their employer matched. All of this for a program that is going bankrupt. This should scare everyone.

  • Red Rocks Rockin||

    Yeah, I'm sure the money you paid into it will be more than enough to cover all the medical procedures you'll have the rest of your lift--correct?

  • Tony||

    "You're free to send the IRS a check" is about as useful an argument as telling you to move to Somalia if you feel your taxes are too high. Obviously the matter at hand is tax policy, not an individual's share.

  • ||

    But if someone wants to pay more, the feds have made it easy to do. I'd have more respect for the guy who leads by example. Give the feds more money and THEN claim we should follow his lead.

  • Tony||

    After you move to Somalia and report back on the glories of small government. Lead by example! Yes, I'm getting started early on the drinking.

  • ||

    There's a big difference: To pay higher tax all he'd have to do is send a check.

    To go to Somalia and have no government I'd have to quit my job, leave all my friends and family, sell, abandon or give away everything I own.

    Further, Somalia is a terrible example of how small government works because Somalia has NO government. Anarchy is not the same as a libertarian republic.

  • sevo||

    Tony|5.27.11 @ 5:24PM|#
    "After you move to Somalia and report back on the glories of small government."

    No, shitbag, after *you* move to North Korea and report back on the glories of large government, you might have some cred.

  • Tim||

    +1

  • Tim||

    +1

  • Walt9||

    I guess Somalia's communist large government didn't work out too well if it was followed by 20 years of anarchy.

  • ||

    This here. Lead from the front, Zuckerberg. Put your money where your mouth is. Talk is cheap.

    All that jazz.

  • Tony||

    Zuckerberg seems to be exemplary as a person who puts his money where his mouth is, so to speak.

  • ||

    That's a threadjack, but I wonder how many vegans and pro-animal rights folk will drop Facebook over their beliefs.

    I'll go with 0 to 3%

  • ||

    Mmmm, tasty fleisch.

  • ||

    lol way to make a sensationalist headline out of it IBTimes. That headline makes it sound like he gleefully slaughters chickens in his kitchen before biting into their necks raw. That is what is wrong with American Journalism.

  • cynical||

    It's terrible, though. I never kill live animals for food, I just take a bite and let them go on their way.

  • some guy||

    Do you know how many bacteria inhabit the human mouth? "Taking a bite" condemns those poor animals to a prolonged, painful death. You monster!

  • cynical||

    It isn't really the same at all. People who say "my taxes aren't high enough" actually mean "other people's taxes aren't high enough", but dishonestly want to sound altruistic.

    "You're free to send the IRS a check" simply shows their bullshit for the bullshit it is.

    "You're free to move to Somalia" is basically saying that if you don't like a shitty system, you should personally suffer enormous cost to reap the benefits of living in a geographical strawman. Whereas the person who wants higher taxes can't be said to be personally inconvenienced in any significant way by sending a check to the IRS, since if they got their way they would be paying the same amount anyway.

  • Emperior Wears No Clothes||

    Somalia!

    /drink

  • some guy||

    I don't think it counts if someone mentions Somalia in the process of acknowledging its strawman nature...

  • ||

    Shut up and drink

  • Red Rocks Rockin||

    "You're free to send the IRS a check" is about as useful an argument as telling you to move to Somalia if you feel your taxes are too high.

    Except these rich leftists can actually send the IRS a check, right now, today. Not everyone can move to Somalia.

    Try again you stupid drama queen.

  • The Derider||

    Myth # 1 seems like an excellent argument for raising the capital gains tax, rather than an argument against taxing the rich.

    Myth#2 is just silly. You can't look only at where the taxes come FROM, you also need to look at where the taxes go TO.

    The US spends a comparatively large proportion of its tax revenue on its military. France spends it on better heath care and a stronger welfare state. The latter is redistributive, the former is not.

  • ||

    Our military largely is France's military. Keep that in mind.

  • Tony||

    Aren't we generous.

  • The Derider||

    I wonder if we could rent our destroyers to NATO for some of their sweet, sweet socialist healthcare.

  • ||

    Well, sure. That's what we do. Ask the Libyans.

  • silent v||

    The point of Myth 1 is that the super-rich have all kinds of options as to how they get their money. Today they do it thru CGains and Dividends because that comes with the lowest tax rates. If you raise those rates, they will move their resources to other instruments or even other countries.

    The 19-percent chart that Reason is so fond of is related to this. In order to have a politically viable tax system that gets more than 20 percent of GDP, you have to be able to get money from the super-rich. And the super-rich didn't get to be super-rich because they give up their money without a fight.

  • Tony||

    So what you're saying is we need a globally uniform tax code.

  • horsewithnonick||

    No, he's saying grow the hell up and stop looking at the rich as walking piggy banks.

    We spend too damn much. On everything, not just the stuff you don't like. If we don't stop, the bond market will eventually stop us, like it has done to Greece.

    p.s. - We won't stop. Brace yourself.

  • Tony||

    Maybe we spend too much, maybe we don't tax enough.

  • sevo||

    Tony|5.27.11 @ 9:34PM|#
    "Maybe we spend too much, maybe we don't tax enough."

    No.
    We spend too much and tax too much.

  • ||

    You make it sound like raising an extra $1 trillion is so simple.

  • ||

    $1 trillion per year

  • Tony||

    But there is never going to be a scenario in which you support higher taxes, no matter what their rates are, so you're not worth listening to on the subject, and neither is any other libertarian or Republican. You can't claim the mantle of fiscal responsibility and then refuse to address one side of the ledger.

  • The Ingenious Hidalgo||

    Yet more 'I can't win the argument against you so you're not invited to the debate' stuff from Tony. He rules out the opinions of Republicans and libertarians ab initio which, as far as I can tell, leaves Democrats arguing with a handful of socialists.

  • Tim||

    Fiscal responsibility means spending less. Raising taxes won't help us to spend less.

    The problem isn't that the budget isn't balanced, it's that the budget would be balanced if we were only spending as large a percent of GDP as we were under, say, the Clinton administration. There is a hard cap on how much we can spend without destroying the entire economy, and unless you want to cut spending irrespective of taxation, you're not addressing long term fiscal responsibility.

  • some guy||

    Yes, Tony. We believe that taxes are currently too high. Therefore, we will never support higher taxes. O

    Our current tax revenues could easily support 2000 spending levels. Why not go back to those spending levels? Were things really so bad back then?

  • sevo||

    Tony|5.28.11 @ 12:57PM|#
    "But there is never going to be a scenario in which you support higher taxes, no matter what their rates are, so you're not worth listening to on the subject, and neither is any other libertarian or Republican."

    Shorter stupid shit:
    "If you don't agree with me, there's no reason to argue the point!"
    Thanks again, Tony, for proving your ignorance.

  • Esteban||

    Then why are you here griefing everyone with your leftist philosophy if we're not worth listening to? Frankly the whole notion of higher taxes is a political ploy, as the article clearly points out which you didn't read apparently. You aren't going to find many supporters here for taxation and social-welfare programs, and you aren't going to convince us that socialism is the better option. Most of us view taxation as little better than armed robbery. We tolerate it because we don't want a lengthly prison term, not because we find your political views acceptable.

  • ||

    I can't think of any more strawmen, so I'm going to try to exclude you from the debate!

  • sevo||

    Tony|5.27.11 @ 5:49PM|#
    "So what you're saying is we need a globally uniform tax code."

    Sure, stupid shit. We also need unicorns.

  • Jerbigge||

    US spends about 47% of all money spent in the entire world on "defense". Our defense budget is close to $700 billion a year. Going by the number of wars fought since WW2, the US is #1. The Israelis come in second, and they are surrounded by enemies.

  • some guy||

    The Israelis come in second, and they are surrounded by enemies.

    So is the US. The Canadians hate us. The Mexicans are invading, one poor bastard at a time. And our uneasy truce with the Merfolk can't last forever...

  • JohnD||

    And France's "better" healthcare is so good that tens of thousands of Americans are queuing up to get treated in France.

    Loon!

  • ||

    Re. the average tax %, this:

    these rates are all lower than the individual tax rate on income for single earners making more than $34,500 but less than $83,600, which is 25 percent

    doesn't seem to make sense. If they're calculating the avg overall %, taking into account exempions and deductions, as well as getting the benefit of the lower rates (kinda the whole idea behind progressive taxation), then you need to use the same yardstick for the people in the 25% marginal rate. Obviously they aren't paying anything like a flat 25%.

    Not that I don't get the point, it just seems that bit was a little misleading.

  • jtuf||

    So, if one person living below the poverty line says he will gladly stop collecting food stamps, can we end the food stamp program?

  • JohnD||

    Yes.

  • ||

    No, the liberals will throw you in prison for forcing a poor person to commit heresy.

  • ||

    Medicare should be retooled as a medicaid-esque program for the elderly poor, just as Gillespie suggested. Or we could just change nothing and the mostly (and relatively well off) healthy seniors will reap the benefits of entitlments which they're under no obligation to give up.

  • Jerbigge||

    Did you know that you have to get a vet's prescription in order to buy heart worm pills for your dog? Obviously this state of affairs exists only to put money into someone's pocket!

  • ||

    I'm generally in favor of smaller government for unrelated reasons, but Myth 2 seems to be generalizing from one example.

    Can you provide other examples to establish a consistent trend of larger governments taxing less progressively?

  • ||

    The USSR. Or Roman Emperors. Or Mao. Or the Nazis. Or Zimbabwe. Or Venezuela. Or North Korea. Or Libya

  • ||

    The error in this analysis is that people like Zuckerberg, with large stakes in public company stock, pay capital gains rates only if you ignore the 35% corporate tax already paid by the company. Such profits are what create stock's value so he can sell it for a capital gain. Double taxation of corporate profits means that Zuckerberg's actual marginal rate is much, much higher.

    In contrast, people in private businesses largely see their profits as S-corporation or partnership distributions and thus only see one level of tax.

  • sevo||

    Bob Smith|5.27.11 @ 8:07PM|#
    "The error in this analysis is that people like Zuckerberg, with large stakes in public company stock, pay capital gains rates only if you ignore the 35% corporate tax already paid by the company."

    I think you can ignore that.
    That 35% (or whatever the tax guys at Facebook actually whittle it down to) is simply included in the product cost.
    It's paid, but by the customers, not by Zuckerberg or stockholders.

  • Jerbigge||

    What about corporations that don't pay any income tax at all? GE managed to do that, and even got a refund back from the IRS!

  • Emperior Wears No Clothes||

    GE pays no taxes!

    /drink

  • cynical||

    You don't support all that green bullshit, do you?

  • Arnold Schwarzenegger||

    True advice on how to fix Medicare and Social Security from people who don't believe in a welfare state in the first place

    And True too

    They want to spend more than they can afford. You can't solve money problems by getting more money. That only allows them to continue their habit of spending beyond their means.

    But, I have yet to hear a common sense plan that addresses both issues

  • Fatty Bolger||

    I think we must save Medicare, no matter the cost. And in order to do so, we have to cut a lot of everything else, and quickly. We must cut military spending, we must eliminate entire federal departments, and we must eliminate extraneous funding for states, along with the matching mandates. We also can no longer afford the cost of heavy regulation, so any regulations that are not essential must go. If you don't agree, then you hate old people. And probably children, too. We must cut government across the board, now, to save Medicare! It's the only way!

  • ||

    [I think we must save Medicare, no matter the cost.]

    And I think you're wrong. I'll guess you probably think "we" must "save" public education at any cost as well.

  • Fatty Bolger||

    No, no, no. Federal funding of education must be stopped, immediately. It's the only way to save Medicare!

  • cynical||

    "I think we must save Medicare, no matter the cost. "

    I think most of the socialist bullshit that we've had to put up with for the last several decades is the fault of old people, so if anyone should suffer from the collapse of a corrupt and unsustainable status quo, it's the people the built it or failed to fix it in the past.

    Why should the children pay for the sins of the parents when their parents are still around to pay for it themselves?

  • sevo||

    Fatty Bolger|5.28.11 @ 12:31AM|#
    "I think we must save Medicare, no matter the cost...."

    What an asinine comment.
    Should we, say, save Medicare at the cost of killing every second person on earth?

  • Fatty Bolger||

    By all means! It's that important!

    You guys miss the point, though. See, to save Medicare (which is vital and more important than anything else in the world) then a whole lot of other stuff has to be cut. I mean a lot of it! It's the only way to make it work. And, if in the future it turns out that Medicare is still unsustainable, well, too bad. We'll figure that out then. But for now, CUT CUT CUT the government. It must be done.

  • Loller Skates||

    Your trolling is obvious, but these people fail to realize it. Well played, good sir.

  • chaussures mbt||

    nice!

  • Damien||

    Am I the only one who is bothered by the fact that the rebuttal to Myth 1 only uses data about relative sizes? I don't see how it follows from the fact that the super-rich have other sources of income on top of their wages that they are merely advocating taxing other people. Which is what the article wrongly suggests.

    If those who make $10+ million report that 20% of their income is wages, it means that they are making $2,000,000 a year in wages. Which would be taxed more. Which means that they would be paying more in the way of income taxes.

    Same thing for chart 2. What does it actually show (I can't make sense of the title)? If it shows that about 23% of the income tax is paid by people in the $100,000-$200,000 bracket, and about 20% by those in the $200,000-$500,000 range, This can be explained in part by the fact that there is many of them. It is completely irrelevant to the matter at hand and, once again, does not show that the super-rich are not taxed enough.

    Now, I'm not convinced that the rich should be taxed more. But it'd be better if we could use charts that at least support the point that we're trying to make...

  • Damien||

    Here is a new version of the first chart showing absolute values. Note that I did not go back to the original data series; I just eyeballed the chart and displayed the data for the first value in each bracket (except for under 5K where I assumed that they made $2,500). I would guess that it underestimates the income of people in the top bracket since they would on average make more than $10,000,000.

    http://imageshack.us/photo/my-.....metax.png/

    As you can see, those with high incomes make less of their income in salary, but still have (much) higher salaries than those who make less money.

  • Res Publica Americana||

    Over 200 years after its founding, the great freeman's American republic is plagued by a central government that spends nearly 26% of GDP. Am I the only one disgusted and outraged to the point of utter fury?

  • ||

    Can anyone explain to me why the article discusses Social Security's "unfunded liabilities." Isn't Social Security a pay-as-you-go system, where the current wage-earners contribute the benefits for the recipients?

  • Red Rocks Rockin||

    For one thing, SS is now in the red, and the Treasury will now have to take out more debt to pay off the IOUs, which will go until the IOUs don't exist anymore (in other words, the government is paying off money that it borrowed by using the equivalent of a cash advance on a credit card). In addition, the bulk of the Boomers will be going onto the system over the next 10-15 years, so the costs are going to be going up over that time frame. So the expected costs have to be taken into account when planning for future spending.

  • sevo||

    "Isn't Social Security a pay-as-you-go system, where the current wage-earners contribute the benefits for the recipients?"

    Yep, and at the current rate of taxation, compared to the known amounts owing, we're missing some $17 trillion.
    That's an "unfunded liability".

  • ||

    That actually makes a lot of sense when you think about it.

    www.real-privacy.int.tc

  • ||

    The problem is that Social Security and Medicare are now thought of as "the government retirement plan". What they need to be is the "what if I live to be 95?" plan.

    People don't know how long they're going to live and, depending on occupation, not everyone can work past the age of 67-70, nor can they afford to save enough to live for 20+ years.

    So, what SS/Medicare should provide is insurance to those who live past age, let's say, 73 (and pegged to life expectancy from there). What that means is that people who want to retire at age 65 need to save enough to provide for 8 years of retirement only, then they're eligible for SS. In other words, it exists to take the unknown out of the equation. Medicare would require some means testing. Those above 67 could get it if their wealth/income is below a certain level.

    Getting people to either work longer or save more (to provide for the 8 or so years needed), would solve the SS problem in its entirety.

    (Obviously, this would need to be phased in...you can't spring it on people who don't have time to save)

    What say you, Tony? Is it unreasonable to expect people to save for a small portion of their retirement?

  • John||

    I don't think you can draw he second conclusion just based on comparing the US and France.

  • Neu Mejican||

    Reality on this issue is complex, apparently. See here, for example.

    http://crookedtimber.org/2011/.....the-table/

    In the comments section:

    It will help to take everything down to a more fundamental level, to explain some basics, and to show how things can work better.

    Most people do NOT know: A) that government debt can be rolled over for a long time without harm; B) that government spending doesn’t crowd out private investment in a particular economic environment; C) that money doesn’t have to be backed by gold as long as the growth of it matches the growth in real goods and services; D) that taking all taxes together, the effective U.S. tax rate is nearly flat and the rich are not paying a fair share; E) that government spending on the safety-net has more return to quality of life than the latest technological gadget; F) that the long-term deficit and the short term deficit are different things, with very different causes; G) that healthcare has anomalies in supply and demand that make it unsuitable for a market approach AND it is the total problem with the long-term deficit AND Obamacare takes steps in the right direction (by trying to reduce healthcare costs carefully, and almost curing the long-term deficits).

    I repeat, YOU may know this, but most people do not know this.
  • Thomas Sabo Charms||

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  • ||

    Obviously.

  • ||

    I really thought Reason was a better publication than this, but this article is full of holes, misdirection, and outright falsehoods.

    1) Myth 1 in the article is a strawman, and the reply is a falseho...od. Not just income tax, but capital gains are slated to go up in 2013. Further, many millionaires, including Warren Buffet, have arguing for this increase. And no, telling them to volunteer more taxes on their own contradicts the very purpose of taxation, which is to share the funding of large projects in a predictable and democratically agreed upon way. Financing a freeway and a school system is different than financing a soup kitchen.

    http://en.wikipedia.org/wiki/C.....ted_States

    2) Myth 2 is cherry picking. The French provide a massive welfare state, including comprehensive health care, education, public transportation, pensions, and a high minimum wage. This was all conveniently ignored in the discussion of their "regressive" tax system.

    3) Myth 3 relies on the slight-of-hand of comparing Net Present Value to a single year of cash flow, which is apples and oranges. The fact is, Social Security and Medicare can both be revenue-neutral with very minor tweaks. As an example, if we did nothing with SS, it would be fine until 2037, after which it would pay out benefits of 75% basically forever. If we wanted to fix it permanently, we could up the SS payroll tax by 2%.

    http://en.wikipedia.org/wiki/S.....ty_debate_(United_States)

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