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Something to think about for those of you who think that wealthier among us shouldn't be paying more taxes percentage-wise: we're all in this together.
If you think that the wealthy shouldn't have to help those who are in need (after al, your hard-earned money was earned fairly and should only go to support your own needs and wants), or take a bigger burden in proping up the economy (after all you pay sales tax on luxeries) . . . think of how you feel the next time you have to walk through urban squalor or is accosted by a pan-handler or live in fear of being mugged. Think of how much you pay to secure your car, your home, your children, against those who are less fortunate who then choose to prey on you. Think of how long your commute has to be because only in the subburbs will you feel secure enough about your neighbors (the inner city where you work being not a place you would want to raise a family).
The point I'm trying to make is that -far from asking the wealthy to act altruistically- these proportionately higher taxes go to support the structures that the wealthy would like to have - which can not happen if they don't supply a bigger portion.
In the end, the higher taxes on the wealthy is a way for the wealthy to get the comforts and security that they want (and can afford) in the first place. In the end, the wealthy are going to pay for it anyway - whether it be in higher costs in keeping their family secure, in not being able to move around freely through certain parts of the city, through higher costs in education or having to deal with the uneducated, etc. So why not just pay the higher taxes and work to ensure that those taxes go to support the structures that in the end benefit you?
The influential Socialists in America who believe the wealthy and those who would aspire to build wealth, should be eroded to poverty, while they would simultaneously hold the poor in check with false government-paid "benefits" take heart at thoughts like this.
Hope for economic improvement and ambition to build wealth are among the greatest benefits of freedom. Diminishing that freedom, or at least the faith in that freedom, is a powerful tool for Socialism, and is used to eliminate hope and engender dependence on government, which translates into increased power for the Socialists.
I have heard people described as "wealthy" when making over $75,000/year. Such is the influence of the politics of envy.
Personally, I hope your earnings are adequate for your needs. Beyond that, I don't care how much you earn or have. It is not my business, and I do not support the concept that it is the business of government, either.
I like the Biblical commandment against covetousness, or as one acquaintance called it, "counting the other guy's money." No one needs to know how much another earns or has, except to scratch the jealousy itch.
To blindly agree to excessive taxation would be to concede slowly to those who would destroy all wealth, disguising envy and class warfare and elimination of ambition as "fairness," toward the end of grasping power and dominion over free will.
CBO produces regular reports summarizing total federal tax burden by income quintile, plus top 10%, 5%, and 1%. Their 2007 update for 2005 data is here. An overall idea of the implications of these data can be gleaned from this graph.
Comprehensive data including the effects of state and local taxes are much harder to come by on account of there being so many dfferent state and local tax regimes to account for, not just once, but on an ongoing basis. There are some good state and regional analyses that are done, but such national analyses as one is likely to come across are so thoroughly flawed by methodological compromise as to be generally useless.
They are also the class of people that have more money to "play" with in investments..some of which are tax free . Middle income families and lower income families do not have expendable income in which to grow into even more wealth.... They do not have expendable income that helps them purchase things that can be considered tax shelter to shelter their income from being taxed. So while those paying the most money in taxes also legally have more loopholes in which to shelter their income, grow their money into even more wealth etc.
Excellent points. As one moves into the top 10% and then the top 5% and most particularly into the top 1%, one begins to have enough money to be able to use money to make more money instead of having to use more labor to make more money. Second job? I don't think so!
Right-wing excusifiers will wail that such investing somehow amounts to great risk-taking on the part of the well-to-do that grows jobs and without which our economy would soon grind to a halt. But this is poppycock. Societal returns on investment would be realized no matter who did the original investing. No greater returns are earned from the fact that an already rich person first put up the money. There is no greater gain to be had because one guy put up a million instead of a thousand people putting up a thousand.
In any case, once you have some critical mass of money, it becomes a piece of cake to make more money...lots more money. From my experience, the only people who bobble this particular ball are those who want to make absolutely as much more money as is humanly possible. The rest, who seek realistic and reliable gains, can just about do this money-making thing in their sleep while running virtually no risk at all. It's all just a private little club. In order to get in this club, you've got to have that critical mass of money to start out with. If you do, you're on the gravy train. If you don't, you're left standing out in the cold.
To put some numbers to it, a person who is able to earn $200K worth of returns on investments in a year (not an outlandish number, even though it may sound large) is basically making about $23 an hour ALL THE TIME. That's $23 an hour for sleeping, $23 an hour for watching TV, $23 an hour for playing on the internet. How unfair is it to tax the guy on that? Suppose the tax rate were 50%. Would expecting someone to get by in earning only $11.50 an hour for sleeping, watching TV, and playing on the internet be all that unrealistic? Is $100K per year for doing nothing such a bad deal in comparison to $200K per year for doing nothing that people would stop investing and just sit on their money and make $0 per year for doing nothing instead? I kind of doubt it.
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Originally Posted by TristansMommy
Look at it this way.. if the tax burden of those paying more in taxes brought their 'take home" pay to the same number that a middle income person takes home after they pay their taxes, then I could certainly agree with that statement and would call it unjust and unfair.. however, the fact of the matter is that despite the taxes those in the upper bracket pay they still have a lot of expendable income and are still better off financially then their piers in lower tax brackets.
Quite so. If you were in the top 1%, chances are that just your federal income tax bill would be significantly larger than the median household income in this country. At the same time, chances are that you would have everything that you actually need plus everything that you actually want while still having large piles of money sitting around.
What all this goes to is marginal utility theory, which way to many people simply don't take any account of at all. To a middle-income earner, $500 is a significant sum. He'll think twice and maybe three times before shelling out that kind of money for anything. To a top 1% earner, $500 isn't anything at all. He could drop that on dinner tonight without giving it a second thought. What accounts for the difference?
Marginal utility theory is the answer -- the idea that the more you already have of something, the less some unit amount more of that thing will be worth to you. If you have no car, and I come over and offer to give you one -- a nice one too, not some clunker -- you're quite likely to take mne up on that offer. But what if I start showing up every second Thursday to make the same offer all over again. Perhaps you'll take the second car and maybe the third, but how long will it be before you don't really want another car at all and start trying to sell them off as soon as I give them to you? At that point, the marginal utility of a new car will have sunk from very high initial levels to a level below that of other commodities that you could obtain instead using the cash realized from liquidating a car. The same thing happens with money, except that you can't liquidate (i.e., sell) money, you can only exchange it for goods and services. This is why the middle-income guy thinks carefully about spending $500 and the rich guy will do it for sport. If you don't have so much money, the marginal utility of $500 is high. If you've already got tons of money, the marginal utility of $500 is much lower.
So, apply this to taxes. To the government, the marginal utility of a tax dollar is exactly the same no matter where it comes from. It'll be exchanged for exactly the same $1 worth of DOD procurement regardless of the taxpayer who provides it. So you have options via the tax code as to which taxpayer to obtain that $1 from. You can take if from the middle-income earner with his high marginal utility for an extra dollar, or you can take it from the rich guy with his low marginal utility for an extra dollar. Which would make more sense?
Saganista, I know virtually next to nothing about economics and the tax code, but it makes sense to me that the more money you have, the higher percentage of taxes you should pay. Of course, I am not in the top percentage of income-earners!
My question is this: Senator Obama wants to raise the percentage of taxes paid by those in the highest income brackets, which have been lowered during the Bush years. What were tax payers in this bracket saying back in the Clinton years when the tax rate was higher for them?
My question is this: Senator Obama wants to raise the percentage of taxes paid by those in the highest income brackets, which have been lowered during the Bush years. What were tax payers in this bracket saying back in the Clinton years when the tax rate was higher for them?
Quick answer (since I have to go do some income-earning in just a few minutes)...
In 1995, the top 1% paid an average tax rate of 26.6 cents on the dollar. So if they had exactly $1 million in taxable income, their federal tax bill was very close to $266,000.
In 2005, the top 1% paid an average tax rate of 21.4 cents on the dollar. So if they had exactly $1 million in taxable income, their federal tax bill was very close to $214,000.
That's a savings of $52,000 per year, but then again, middle income taxpayers did get those one-time checks for $300.
To be honest about it, middle-class tax rates fell as well. In 1995, the lowest earning taxpayer who was still in the top 25% of income earners would have earned $28,780 in taxable income and paid taxes of $4,920. By 2005, the same taxpayer would have earned $31,260 in taxable income and paid taxes of $4,740.
Hope for economic improvement and ambition to build wealth are among the greatest benefits of freedom. Diminishing that freedom, or at least the faith in that freedom, is a powerful tool for Socialism, and is used to eliminate hope and engender dependence on government, which translates into increased power for the Socialists.
You make it sound as though socialism is unquestionably bad or unquestionably less free. Canada and Germany both have chosen to have higher taxes and progressive tax structures which have resulted in free college education, insurance for all, and lower medical bills.
The idea that the ambition of building wealth being related to freedom has been the argument of capitalists, but are you really free if you live in fear for your possessions and family? Are you really free if you work very long hours to acquire wealth? Germany mandates that all employees (even if they are just starting at their job) have a minimum of a month's worth of vacation time. So I submit to you that acquiring wealth is senseless if you have no time to spend it because you have to spend time to acquire that wealth.
The point I'm trying to make here is that we, in America, need to reconsider how our society has developed. There are many models out there, it need not be the age old dichotomy of capitalism versus socialism. There are nuances and levels. We just have to find what works for us and understand what it is that wealth is for. Surely, money is not a goal in itself - money is just a tool to obtain the things that we truly want or need.
It is terribly important to differentiate between federal income tax rate and and the overall tax rate. The rich do pay a higher rate of tax for income, but enjoy terribly regressive social security tax rates, along with pretty much all other forms of taxation from property tax to municipal fees, etc. Think of Social Security: 6.2% on the first $96,200 earned.(as of 2005 - this may have changed) The guy who earns $100,000 and the guy who earns $10m pay the same amount. You figure the rate on $10m. Hint: it's way to the right of the decimal point. Add up the overall rate and the rich enjoy a lower overall tax rate than the middle class or the poor. So, to answer the question, is it fair that the top 5-10% pay the majority of taxes? First off, they don't, they pay the majority of INCOME tax, and, if it were true that they paid the majority of taxes, it would be fair.
With respect to Sangista's data, the most important figures were ignored. If you read the report, you will note that for the lowest two quintiles, the personal income tax rate is actually negative. This is due to the refundable nature of the child tax credit and the earned income credit. Likewise, for the next quintile (middle quintile) which includes average pre-tax income up to $58,000, the effective tax rate is only 3% after tax credits.
To clarify, out of 113.3 million tax filers, 45.5 million paid NOTHING, and actually got something back, and an additional 22.0 million paid an effective 3% of their wages in taxes. This means that almost 70% of the tax payers have a combined effective rate of zero!
In a general context, this cannot be construed as fair.
A flat tax is regressive. The current system is progressive. Yet each of us as citizens should shoulder some burden of the PIT assessment. Currently, 70% do not. A good start would be to end refundable tax credits. This includes the child tax credit and the earned income credit. Additionally, every taxpayer needs to at least pay something, regardless of income. A modest $500 per taxpayer would ensure that everyone at least has a little skin in the game. It is always easier to spend somebody elses money.
With respect to Sangista's data, the most important figures were ignored. If you read the report, you will note that for the lowest two quintiles, the personal income tax rate is actually negative. This is due to the refundable nature of the child tax credit and the earned income credit. Likewise, for the next quintile (middle quintile) which includes average pre-tax income up to $58,000, the effective tax rate is only 3% after tax credits.
To clarify, out of 113.3 million tax filers, 45.5 million paid NOTHING, and actually got something back, and an additional 22.0 million paid an effective 3% of their wages in taxes. This means that almost 70% of the tax payers have a combined effective rate of zero!
In a general context, this cannot be construed as fair.
A flat tax is regressive. The current system is progressive. Yet each of us as citizens should shoulder some burden of the PIT assessment. Currently, 70% do not. A good start would be to end refundable tax credits. This includes the child tax credit and the earned income credit. Additionally, every taxpayer needs to at least pay something, regardless of income. A modest $500 per taxpayer would ensure that everyone at least has a little skin in the game. It is always easier to spend somebody elses money.
While you're point is understood I still must go back to the point I made and that Sanginista so eloquently elaborated on.
Those in that lower bracket who get money back for child tax credits that may actually get them money rather than have them pay into the system. You have to remember something.. how that bottom percentile live..
They work hard, not doubt. Most often than not they are in jobs that you yourself would never want to do and hire people to do for you. Society needs all types of people, and needs these people in order to function and make society what it is. They will never truly be able to climb out of their econonic status quo.. ..not becaus they do not have the will, but they are so bogged down by the financial struggles of the day that there isn't enough time or resources for them to forge their will for a better way. The only way they can climb out of that is by offering their children a better chance at doing so through education. And even with public school money , education takes money.
So .. does a person considered in the upper bracket of taxes REALLY sit there and begrudge someone of lower income status the abillity to pay less in taxes or no taxes? Really..
Juts think about what someone inthat tax bracket lives with every day. Constantly facing financial INSECURITY. Probably a missed day of work could mean being thrown out on the street and becoming homeless.. they will never own a home, never really have any type of retirement fund. They will probably NEVER get to travel the world.. heck they will probably never even get to travel beyond their state. They will be dependent on gov't programs when their at retirment age, which nowadays can not really sustain and by the time they will retire will be well .. gone!
I say again.. those paying taxes and those paying more taxes do not have their lifestyles or their financial security significantly impacted by that tax. That tax does not make a big difference to a person in those upper brackets, but is a world of difference to those who do not. I'm sure anyone in those lower tax brackets would gladly trade the fact that they are paying little to no income tax to be able to enjoy what those inthe upper brackets do any day of the week!
Again.. society needs all types of people in order to function. Those that can do pick up where those that can't can not and so is the case of income taxes. Remember contributions to society are well beyond how much $$ you contribute to it.
I'm middle class..right smack dab in teh middle. I would gladly trade up to the higher income bracket to pay more in income taxes to break into the next level and to break into the financial security that those at the upper levels enjoy. I wouldn't complain not one iota about paying more in taxes.... knowing thatdepsite those taxes I was still enjoying a nice lifestyle that not only meets my needs but also my wants.
And just to add.. that $500 to some of those families could me an that they don't eat for a week, they don't pay their rent for a month..etc. You have to understand that those at that level do not have enough money at the end of the month for their basics and to then say everyone needs to pay a minimum of $500 is not as simple as a solution that you make it out to be.
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