Tax Breaks for the Rich

[Ed]

This idea has taken on the depth and aura of a bumper sticker.

Does anyone have any data that shows, let's say by income quintiles, what people have deen paying in taxes as a percentage of income over 10 or more years?

I would define taxes as all payments to government, national and local.

 

[Rob Lister]

This idea has taken on the depth and aura of a bumper sticker.

Does anyone have any data that shows, let's say by income quintiles, what people have deen paying in taxes as a percentage of income over 10 or more years?

I would define taxes as all payments to government, national and local.

I would like to see that data as well, in graph form. Beside it I would like to see, in graph form, what each candidate would like to see. I'm personally for a flat tax as a function of actual income percentage but I have an open mind.

 

[Drifterman]

Re: Re: Tax Breaks for the Rich

I would like to see that data as well, in graph form. Beside it I would like to see, in graph form, what each candidate would like to see. I'm personally for a flat tax as a function of actual income percentage but I have an open mind.

Flat taxes penalise those whose discretionary income is used primarily for necessities as opposed to luxuries. i.e. the working poor.

You can actually get a lot more money by taxing a small number of the wealthy at a higher rate than by squeezing the less well-off into austerity measures.

Our economy runs best when low- and middle-income families have a good percentage of their income to spend on consumer goods as opposed to rent or food.

 

[Rob Lister]

Re: Re: Re: Tax Breaks for the Rich

Flat taxes penalise those whose discretionary income is used primarily for necessities as opposed to luxuries. i.e. the working poor.

You can actually get a lot more money by taxing a small number of the wealthy at a higher rate than by squeezing the less well-off into austerity measures.

Our economy runs best when low- and middle-income families have a good percentage of their income to spend on consumer goods as opposed to rent or food.

I understand your argument and I am not about to suggest that your last sentence is incorrect. I will suggest that the counter to your argument rests in the questions:

1. What do the rich do with their discretionary income and how does that impact the working poor class?

2. What does the government do with the revenue from tax on that discretionary income and how does that impact the working poor class?


Just because a measure is austere doesn't make it less effective. The answer is in who can more effectively reduce the number of the working poor class.

Your way might be the correct way but it too comes with baggage.

 

[Matabiri]

This idea has taken on the depth and aura of a bumper sticker.

Does anyone have any data that shows, let's say by income quintiles, what people have deen paying in taxes as a percentage of income over 10 or more years?

I can offer the Tax Freedom Day graph:
http://www.taxfoundation.org/taxfreedomday.html

(Scroll down for historical figures).

This is calculated, AFAIK, by dividing the total tax income by the gross national income, and then working out where that ratio lies relative to year end. So to work out the percentage of income (ignoring leap years etc.), divide the figures down the left of the graph by 365.

 

[Drifterman]

Re: Re: Re: Re: Tax Breaks for the Rich

I understand your argument and I am not about to suggest that your last sentence is incorrect. I will suggest that the counter to your argument rests in the questions:

1. What do the rich do with their discretionary income and how does that impact the working poor class?

A1. Well, as you know, they can either spend it or save it. This is true for everyone. However, the speed at which it is spent is also important. The more rapidly money is cycled through the economy, the more work it does. And the lower your income, the faster you spend your money.

2. What does the government do with the revenue from tax on that discretionary income and how does that impact the working poor class?


Just because a measure is austere doesn't make it less effective. The answer is in who can more effectively reduce the number of the working poor class.

A2. Well, the best way for the number of working poor to be reduced is via education - this is how developing countries do it, and how we, the developed world, did it in the past.

Now, if a working person is living a hand-to-mouth existence, with little discretionary income to be set aside to pay for higher education, then there is little prospect for them to better themselves. This problem can be addressed in 2 ways:

i) Redistribute wealth back to the poor so that they can spend it on education. This involves taxing the relatively more wealthy at a relatively higher rate.

Problem here arises because the redistributed wealth *is* discretionary income - it might not be spent on education, but on liquor or cigarettes (to paint a black and white picture). However, the money is still being cycled quicker, and is therefore doing more work - which is no bad thing.

ii) Fund higher education itself, so that it is beyond the reach of no-one. Again, this involves taxing the relatively more wealthy at a relatively higher rate.

Wealth redistribution is not about *fairness* unless you are a soft-hearted liberal or a socialist class-warrior - it should be about a hard-headed attitude to putting the money where it can do the most work.

Your way might be the correct way but it too comes with baggage.

Ah yes - the inevitability of side effects.

 

[Drifterman]

Re: Re: Tax Breaks for the Rich

I can offer the Tax Freedom Day graph:
http://www.taxfoundation.org/taxfreedomday.html

(Scroll down for historical figures).

This is calculated, AFAIK, by dividing the total tax income by the gross national income, and then working out where that ratio lies relative to year end. So to work out the percentage of income (ignoring leap years etc.), divide the figures down the left of the graph by 365.

Some nice graphs, but unfortunately it is not broken down into income brackets, as far as I could tell - so really all it is telling us is information about the mythical "mean" (in the average not stingy sense) American.

Tax freedom day will come much earlier if you toss a large number of people out of work, because fewer people then pay taxes.

I doubt if many people will argue that a huge rise in unemployment is a good trade-off for bringing tax freedom day sooner.

 

[CBL4]

I cannot vouch for the accuracy of this site but it gives the effective tax rates by quintile of the Individidual, corporate, payroll, excise and estate taxes. http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=221

Three of the taxes are progressive (corporate, income and estate). There have been effort to "reform" three taxes. Can you guess which three?

CBL

 

[Ed]

Re: Re: Re: Tax Breaks for the Rich

Flat taxes penalise those whose discretionary income is used primarily for necessities as opposed to luxuries. i.e. the working poor.

You can actually get a lot more money by taxing a small number of the wealthy at a higher rate than by squeezing the less well-off into austerity measures.

Our economy runs best when low- and middle-income families have a good percentage of their income to spend on consumer goods as opposed to rent or food.

Well, you might have a floor of flat taxation that is above the poverty line.

What do you think wealthy people spend their money on? It seems to me that wealthy folks inject more money into local economies than lower income people do.

 

[Drifterman]

Re: Re: Re: Re: Tax Breaks for the Rich

Well, you might have a floor of flat taxation that is above the poverty line.

What do you think wealthy people spend their money on? It seems to me that wealthy folks inject more money into local economies than lower income people do.

Depends sharply on the ratio of "wealthy" to "lower-income" people.

The wealthy can afford to sit on their money for a short or long period of time, since they are only spending a tiny proportion of their income on necessities.

The lower-income people must by necessity spend a far higher percentage of their income.

Thus, the rate at which the money is cycled through the system, and therefore the work it is able to do, tends towards maximisation as the wealth distribution curve flattens out.

 

[Rob Lister]

Re: Re: Re: Re: Re: Tax Breaks for the Rich

A1. Well, as you know, they can either spend it or save it. This is true for everyone. However, the speed at which it is spent is also important. The more rapidly money is cycled through the economy, the more work it does. And the lower your income, the faster you spend your money.

I'm not sure your answer qualifies as relevant because the same could be said of Q2. Money not payed to the government through taxes makes its way into the economy instantaneously for the most part. The measured impact may take awhile but unless you stick it under your mattress, it's doing work somewhere. At least, that's my understanding. Perhaps you could clarify your answer or correct my understanding.

A2. Well, the best way for the number of working poor to be reduced is via education - this is how developing countries do it, and how we, the developed world, did it in the past.

That's true and there's a lot of merit to subsidizing education but the question was not what the government should do with the money but instead what they actually do with the money. I'm sure that some goes to education but the lion's share does not. Let's agree and call education a mostly productive redistribution. What percentage of the total redistributions are that productive? What percentage is counter-productive in terms of economic growth (Military expenditures might be one example, welfare certainly is. Both make us feel better though.)

Now, if a working person is living a hand-to-mouth existence, with little discretionary income to be set aside to pay for higher education, then there is little prospect for them to better themselves. This problem can be addressed in 2 ways:

i) Redistribute wealth back to the poor so that they can spend it on education. This involves taxing the relatively more wealthy at a relatively higher rate.

Problem here arises because the redistributed wealth *is* discretionary income - it might not be spent on education, but on liquor or cigarettes (to paint a black and white picture). However, the money is still being cycled quicker, and is therefore doing more work - which is no bad thing.

ii) Fund higher education itself, so that it is beyond the reach of no-one. Again, this involves taxing the relatively more wealthy at a relatively higher rate.

Wealth redistribution is not about *fairness* unless you are a soft-hearted liberal or a socialist class-warrior - it should be about a hard-headed attitude to putting the money where it can do the most work.

Ah yes - the inevitability of side effects.

We agree for the most part. I might quibble and suggest that anybody that really is a member of the 'working poor' class probably isn't there because they can't afford tuition. There are usually more betterestly reasons. Additionally, sometimes the working poor are very well educated, but in the wrong area. Last week two computer programmers painted the outside trim on my house. Cheap!

 

[Ed]

Re: Re: Re: Re: Re: Tax Breaks for the Rich

Depends sharply on the ratio of "wealthy" to "lower-income" people.

The wealthy can afford to sit on their money for a short or long period of time, since they are only spending a tiny proportion of their income on necessities.

The lower-income people must by necessity spend a far higher percentage of their income.

Thus, the rate at which the money is cycled through the system, and therefore the work it is able to do, tends towards maximisation as the wealth distribution curve flattens out.

But how do you think they "sit on it"? Unless they are Scrooge McDuck the money is somewhere. Local Banks invest in local stuff. The proportion might be tiny but it can be significant when injected into a local economy. Maintaining a pool and gardens can cost easily $10,000 in a season.

 

[Drifterman]

Re: Re: Re: Re: Re: Re: Tax Breaks for the Rich

But how do you think they "sit on it"? Unless they are Scrooge McDuck the money is somewhere. Local Banks invest in local stuff. The proportion might be tiny but it can be significant when injected into a local economy. Maintaining a pool and gardens can cost easily $10,000 in a season.

Well, "sit on it " was a poor choice of words on my part.

Let us re-state it as "use it ways that don't cycle it through the entire economy". The wealthier you are, the less likely that a large perentage of your wealth is going to be held in a local bank. Your money will be trying to find the best return, and that probably won't be in the local area - it will more than likely be investments overseas.

Middle-income families are those most likely to keep their money in a local bank, and they would probably be hit hardest by a flat tax (poor don't pay, and not enough rich to make a difference).

Money tends to flow upwards through the economy and accumulate in the pockets (or rather bank accounts) of the wealthy. The higher up it goes, the less likely it is to move down. If this was not the case, then the rich would get poorer, and not richer.

There are various theories that dispute this (grouped under the banner of "trickle-down"), but the evidence of wealth distribution in the American economy falsifies these.

 

[Drifterman]

Re: Re: Re: Re: Re: Re: Tax Breaks for the Rich

I'm not sure your answer qualifies as relevant because the same could be said of Q2. Money not payed to the government through taxes makes its way into the economy instantaneously for the most part. The measured impact may take awhile but unless you stick it under your mattress, it's doing work somewhere. At least, that's my understanding. Perhaps you could clarify your answer or correct my understanding.

Yeah, it is going somewhere. Since that is probably going to be overseas given the amount of freedom capital has these days, the impact on the local economy may actually be to reduce the money supply.

A government is supposed to work in the national interest, and redistributing it to people who will spend it locally probably fits under that heading.

I've no problem with money flowing overseas, but I also have no problem with the government interfering in that flow if there is a national interest to be served.

Redistribute money to the poor, and the rich will get to use it somewhere along the line anyway.

Let money accumulate with the rich, and you get whole swathes of the population who will never get to use the money.

That's true and there's a lot of merit to subsidizing education but the question was not what the government should do with the money but instead what they actually do with the money. I'm sure that some goes to education but the lion's share does not. Let's agree and call education a mostly productive redistribution. What percentage of the total redistributions are that productive? What percentage is counter-productive in terms of economic growth (Military expenditures might be one example, welfare certainly is. Both make us feel better though.)

I would quibble over whether welfare is certainly and inevitably counter-productive to economic growth - but it would just be a quibble.

A well funded healthcare system (whether public or private it doesn't matter, so long as coverage is compulsory and universal) should be classed as productive since it removes the expensive item "uncertainty" from the equation.

Unfortunately, the US healthcare system is neither efficient, nor des it remove uncertainty.

A better example would be publicly funded science, since the results are public domain and can provide rather clearer investment/return data than would education (albeit not perfectly clear by any means!)

We agree for the most part. I might quibble and suggest that anybody that really is a member of the 'working poor' class probably isn't there because they can't afford tuition. There are usually more betterestly reasons.

I would like a little clarification here as to what the better reasons are.

(I might be unfairly suspecting a reiteration of the deserving and undeserving poor theory that poisoned 19th century British social policy)

Additionally, sometimes the working poor are very well educated, but in the wrong area. Last week two computer programmers painted the outside trim on my house. Cheap!

I'm sure the trim painters' union would have some sharp words to say to you about that

 

[shanek]

This idea has taken on the depth and aura of a bumper sticker.

Does anyone have any data that shows, let's say by income quintiles, what people have deen paying in taxes as a percentage of income over 10 or more years?

I would define taxes as all payments to government, national and local.

All of that data is available on Census.gov, but only year-by-year. Someone would have to go through each individual year and compile the data into a graph. I'm sure someone somewhere has done that, but I haven't seen it.

 

[Rob Lister]

Re: Re: Re: Re: Re: Re: Re: Tax Breaks for the Rich

Yeah, it is going somewhere. Since that is probably going to be overseas given the amount of freedom capital has these days, the impact on the local economy may actually be to reduce the money supply.

A government is supposed to work in the national interest, and redistributing it to people who will spend it locally probably fits under that heading.

I've no problem with money flowing overseas, but I also have no problem with the government interfering in that flow if there is a national interest to be served.

Redistribute money to the poor, and the rich will get to use it somewhere along the line anyway.

Let money accumulate with the rich, and you get whole swathes of the population who will never get to use the money.

Once again I should point out that you did not answer the question posed in a relevant manner. While a portion of the money flows overseas (undisputable) a portion remains. The same can be said about government-spent money (sorry for the grammar but I'm getting lazy) even if it is redistributed locally. I don't expect you to know the answers (I certainly do not) but this is the basis of my concern.

I would quibble over whether welfare is certainly and inevitably counter-productive to economic growth - but it would just be a quibble.

A well funded healthcare system (whether public or private it doesn't matter, so long as coverage is compulsory and universal) should be classed as productive since it removes the expensive item "uncertainty" from the equation.

Unfortunately, the US healthcare system is neither efficient, nor des it remove uncertainty.

A better example would be publicly funded science, since the results are public domain and can provide rather clearer investment/return data than would education (albeit not perfectly clear by any means!)

Once again you're are giving me an example of what should (maybe....) be done but not what is actually done. I can find much fault in government-provided healthcare and I don't think it would be (or is) very productive in the long run. Still, that's beside the point and is such a deep topic that I think it deserves its own thread. Start one and I'll read, even if I do not respond.

I would like a little clarification here as to what the better reasons are.

(I might be unfairly suspecting a reiteration of the deserving and undeserving poor theory that poisoned 19th century British social policy)

You might be suspecting correctly. I'm not ed-u-ma-cated about that there stuff. To clarify I would suggest that some people, strange as it may seem to some, are destined to be poor. Sometimes it's because of personal choices they have made, sometimes it's because of their history or character, sometimes its because they are stupid (as opposed to ignorant). There are lots of reasons. I'm not suggesting they deserve it (though I'm sure some do), I'm just suggesting that's the way it is.

I'm sure the trim painters' union would have some sharp words to say to you about that

The upstairs window in one of the kid's room turns blue when I try to open it. Go figger.

 

[shanek]

Re: Re: Re: Re: Re: Re: Re: Tax Breaks for the Rich

Well, "sit on it " was a poor choice of words on my part.

Let us re-state it as "use it ways that don't cycle it through the entire economy".

Except that it is being cycled through the economy. It is being loaned out to people building houses, companies expanding or buying new equipment, etc. And there is enough of a return to pay the investor back with interest.

Your money will be trying to find the best return, and that probably won't be in the local area - it will more than likely be investments overseas.

Well, the problem there is that dollars can only be spent or invested in the American economy. To do overseas investments, one of two things must happen: 1) The person must convert his dollars into the currency of whichever country he's investing in. In order to do that, there has to be someone else with that currency wanting dollars to spend or invest in the American economy. 2) The person or company he's investing in wants the dollars so that they can spend or invest them in the American economy, or exchange them for someone who does, with the same effect. This is why Net Exports and Net Foreign Investments are always equal.

 

[Ed]

Re: Re: Re: Re: Re: Re: Re: Tax Breaks for the Rich

Originally posted by Drifterman
Well, "sit on it " was a poor choice of words on my part.

Let us re-state it as "use it ways that don't cycle it through the entire economy". The wealthier you are, the less likely that a large perentage of your wealth is going to be held in a local bank. Your money will be trying to find the best return, and that probably won't be in the local area - it will more than likely be investments overseas.

I thought we were talking about the money from the tax cut. No matter. We are talking about three kinds of "money". First is real property. Unless you are in the 99.9999 percentile of wealth, this is your home, where you live (and perhaps a summer place). The second is investment stuff, the third is liquid assetts that include your pay and what you need to conduct your life. Liquid assets might be in a money market or a local bank. Investment money could be anywhere but I take issue with your "overseas" conjecture. I know a number of fairly wealthy people. Their money is invested in muni's and a stock portfolio or, as is quite common, their own business. What oversea investments are you thinking of? Why in the world would this represent a good investment option? There are plenty of high return opportunities here is you have the stomach for risk. Now, the really wealthy might start up a company overseas for a hoot, no doubt but I am thinking folks with a net worth of > 5mm <100mm and they are not in that league, and if they did it, it would not be with their own money, obviously.



Middle-income families are those most likely to keep their money in a local bank, and they would probably be hit hardest by a flat tax (poor don't pay, and not enough rich to make a difference).

I think that what you are saying is correct, as far as it goes. A higher percentage of a middle income's wealth might be local, more dollars in total of a wealthy person's would though.

Money tends to flow upwards through the economy and accumulate in the pockets (or rather bank accounts) of the wealthy. The higher up it goes, the less likely it is to move down. If this was not the case, then the rich would get poorer, and not richer.

Money does not accumulate.

There are various theories that dispute this (grouped under the banner of "trickle-down"), but the evidence of wealth distribution in the American economy falsifies these.

You would have to look at the wealth distribution over time to make this case. [/QUOTE]

 

[Solitaire]

This idea has taken on the depth and aura of a bumper sticker.

Does anyone have any data that shows, let's say by income quintiles, what people have deen paying in taxes as a percentage of income over 10 or more years?

I would define taxes as all payments to government, national and local.

Alas, no. But I can quote the Burns, Scott article:

The 4th Quintile. Those in the bottom 20 to 40 percent of all households had an average income of $25,955 and paid income taxes of $1,273 compared to combined (employer/employee) employment taxes of $3,972. That brought their total taxes to $5,245 or 18.8 percent of income.

The Middle Quintile. Those in the middle 40 to 60 percent of all households had an average income of $40,637 and paid income taxes of $3,611. Their combined employment tax payments, $6,218, were still nearly twice as much as their income tax. Their total tax payment, $9,829, absorbed 22.6 percent of their income.

The Near-Affluent Quintile. In the 60th to 80th percentile, the average income was $59,457. In that bracket the average income tax payment was $5,636 and the combined employment tax was $9,096. The total tax burden was 23.0 percent. In other words, the tax burden hardly changes even though income rises by about 50 percent.

The Affluent Quintile. Those in the top 20 percent of all earners have an average income of $119,453. They paid income taxes of $18,927 and combined employment taxes of $11,052. Their total tax burden, $29,979, takes 24.0 percent of their income.