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Who pays the taxes?
Townhall ^ | Dec 6, 2005 | Bruce Bartlett

Posted on 12/06/2005 8:33:51 AM PST by Marxbites

Who pays the taxes Dec 6, 2005 by Bruce Bartlett ( bio | archive | contact )

Email to a friend Print this page Text size: A A A few weeks ago, the Internal Revenue Service released data on tax year 2003. They show that the top 1 percent of taxpayers, ranked by adjusted gross income, paid 34.3 percent of all federal income taxes that year. The top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top quarter of taxpayers paid 83.9 percent.

Not only are these data interesting on their own, but looking at them over time shows that the share of total income taxes paid by the wealthy has risen even as statutory tax rates have fallen sharply. A growing body of international data shows the same trend.

On the first point, we see that in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent. After Ronald Reagan's tax cut of 1981, which reduced the top rate to 50 percent -- a massive give-away to the wealthy according to those on the left -- the percentage of income taxes paid by the top 1 percent rose steadily.

By 1986, the top 1 percent's share of all federal income taxes rose to 25.7 percent. That year, the top statutory tax rate was further cut to 28 percent -- another huge-give-away, we were told. Yet the share of income taxes paid by the top 1 percent continued to rise. By 1992, it was up to 27.5 percent.

Of course, it would be a mistake to conclude that tax increases will not raise the wealthy's tax share or that tax rate cuts always will. Nevertheless, it is remarkable that the percentage of federal income taxes paid by the top 1 percent of taxpayers almost doubled during a time when the top income tax rate fell by half.

A common liberal retort to these data is that they exclude payroll taxes, which are assumed to be largely paid by the poor. However, it turns out that when one includes payroll taxes in the calculations, it has far less impact on the distribution of the tax burden than most people would assume, because the wealthy also pay a lot of those taxes, too.

In a 2004 paper presented to the American Statistical Association, IRS economists Michael Strudler and Tom Petska calculated percentiles data that included both income taxes and Social Security taxes. In 1999, the top 1 percent paid 23.3 percent of combined payroll and income taxes, the top 10 percent paid 52.2 percent, and the top 20 percent paid 68.2 percent.

In recent years, a number of foreign countries have also started publishing tax shares data. They show the same trend of higher and higher burdens on the wealthy even when tax rates are cut sharply.

For example, according to Her Majesty's Revenue and Customs, the share of total income taxes paid by the top 1 percent of taxpayers was 11 percent in the United Kingdom in 1979, when the top income tax rate was 83 percent. Prime Minister Margaret Thatcher cut that rate to 60 percent, and by 1987 the share of income taxes paid by the top 1 percent had risen to 14 percent. The top rate was cut again to 40 percent, where it still stands, and the share of income taxes paid by the top 1 percent continued rising to a current level of 21 percent.

Statistics Canada recently released a study looking at tax shares in that country. It shows that the share of federal income taxes paid by the top 10 percent of taxpayers reached 52.6 percent in 2002 -- almost exactly the same as is paid by the top 10 percent in the United Kingdom. However, the top income tax rate in Canada is just 29 percent. (Provincial tax rates in Canada are very substantially higher than among U.S. states.)

Finally, we now have data for Australia from the Australian Taxation Office. In 2003, they show the top 5 percent of taxpayers paying 30.2 percent of all income taxes, the top 10 percent paying 41.8 percent, and the top 25 percent paying 63.8 percent. But the top income tax rate in Australia is 47 percent. Thus we see that the country with the highest top rate also brings in the least amount of total income tax revenue from its richest citizens in percentage terms.

At some point, those on the left must decide what really matters to them -- the appearance of soaking the rich by imposing high statutory tax rates that may cause actual tax payments by the wealthy to fall, or lower rates that may bring in more revenue that can pay for government programs to aid the poor? Sadly, the left nearly always votes for appearances over reality, favoring high rates that bring in little revenue even when lower rates would bring in more.


TOPICS: Business/Economy; Constitution/Conservatism; Government
KEYWORDS: brucebartlett; taxes
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More good news we won't hear in the socialist MSM.
1 posted on 12/06/2005 8:33:51 AM PST by Marxbites
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To: Marxbites

The bad news is that, with so few people really PAYING taxes. "cutting taxes" is a policy tool that appeals to fewer and fewer folks. The tyranny of the majority stands to ensure its grip on ever larger tax revenues, paid by a numeric minority.

The policy of robbing Peter to pay Paul will usually be supported by Paul.


2 posted on 12/06/2005 8:38:01 AM PST by silverleaf (Fasten your seat belts- it's going to be a BUMPY ride.)
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To: silverleaf

Exactly. Where's all that "rights of the minority" rhetoric when you need it? The majority cries, "The government should pay for that." But the government has no money. Why not just cut out the middle man and legalize robbery of the rich.


3 posted on 12/06/2005 8:43:29 AM PST by The Ghost of FReepers Past (Exalt the Lord our God, and worship at His footstool; He is holy. Ps 99:5)
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To: silverleaf

A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.


4 posted on 12/06/2005 8:46:49 AM PST by So Cal Rocket (Proud Member: Internet Pajama Wearers for Truth)
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To: silverleaf

The last figures I saw stated that 47 percent of "filers" pay zero income tax. I wonder how many "zero filers" draw refundable credits and EIC from the system.


5 posted on 12/06/2005 8:47:07 AM PST by Wristpin ( Varitek says to A-Rod: "We don't throw at .260 hitters.....")
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To: Marxbites

Wasn't there something during the last campaign saying that
one of Mother Teresa's tax returns shows that she paid an effective tax rate of something like 10%?


6 posted on 12/06/2005 8:47:47 AM PST by Gay State Conservative
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To: silverleaf
You're exactly right.

For my adult lifetime, the finer "nuances" of tax policy have generally boiled down to creative ways to jigger with the proportion of people who are considered "rich".

I think its part of the political calculus anymore. Politicians can cynically tailor their tax policies with some precision to maximize their appeal to a sufficient number of voters.

And to the extent that they stoke the flames of class warfare, what has resulted is tantamount to mob rule.
7 posted on 12/06/2005 8:48:32 AM PST by Pessimist
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To: So Cal Rocket
A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.

No representation without taxation.

8 posted on 12/06/2005 8:49:05 AM PST by Gay State Conservative
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To: silverleaf

I agree - what stake in America do those that pay zero income tax, but yet get child reverse taxes, have in voting for anybody but redistributtionists - none.

Cutting this elitist enriching pig of a Govt was RWR's job #1.

ALL who derive benfit from Govt should pay at least something for no other reason than to disuade them form thinking they are owed something from the rest of us.

Taxes are the very stuff that allows Govt to have become 3x it's constitutional size and cost, and is mostly enabled through the Fedl Reserves ability to inflate the currency and is the reason for it's existence.

See this - read the article at the link at bottom of the excerpt:

http://www.freerepublic.com/focus/f-news/1534199/posts



9 posted on 12/06/2005 8:49:53 AM PST by Marxbites
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To: The Ghost of FReepers Past
Exactly. Where's all that "rights of the minority" rhetoric when you need it? The majority cries, "The government should pay for that." But the government has no money. Why not just cut out the middle man and legalize robbery of the rich.

What does the rich "buy" for their taxes? Under our system of government, they certainly can't buy influence, can they? What do the rich get for all this treasure?

10 posted on 12/06/2005 8:53:43 AM PST by Hemingway's Ghost (Spirit of '75)
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To: Marxbites

Rush has a really great pie chart on his web site about this very thing.


11 posted on 12/06/2005 8:57:25 AM PST by svcw
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To: Hemingway's Ghost
What does the rich "buy" for their taxes? Under our system of government, they certainly can't buy influence, can they? What do the rich get for all this treasure?

Rules and regulations. That's what they buy. Oh, and a workforce that understands why the rich are bad, why minorities (except fiscal minorities) are oppressed, and why sexual freedom is the most important freedom of all. Of course they may not be able to read, write, or do arithmetic; but priorities are priorities.

12 posted on 12/06/2005 9:05:50 AM PST by The Ghost of FReepers Past (Exalt the Lord our God, and worship at His footstool; He is holy. Ps 99:5)
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To: Marxbites
Didn't read the article because the consumer pay all the taxes. Corporate, business, or otherwise.

Here is how it works. Say Ripper, the corporation sells a pencil for $1.00 which supports Ripper, the corp, with the paying of all fees, taxes and includes profits. (Including lawsuits). Here comes daddy, big government, and raises their tax which would amount to increasing the cost for the $1.00 pencil to $1.05. Now this $1.05 covers the increase in tax. But the rub is, they raise the $1.00 to $1.06 which the .01 allows new cars for the management etc. GET IT! Consumer pays all taxes!!!!!!!!!

If you don't understand this, then try to explain the FairTax!
13 posted on 12/06/2005 9:09:35 AM PST by Logical me (Oh, well!!!)
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To: The Ghost of FReepers Past
Rules and regulations. That's what they buy. Oh, and a workforce that understands why the rich are bad, why minorities (except fiscal minorities) are oppressed, and why sexual freedom is the most important freedom of all. Of course they may not be able to read, write, or do arithmetic; but priorities are priorities.

!!!!!!!

It's an interesting theoretical question, though, because one would think the rich would get something in turn for their treasure. Otherwise, they certainly have the means to alter the system.

14 posted on 12/06/2005 9:10:09 AM PST by Hemingway's Ghost (Spirit of '75)
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To: Hemingway's Ghost

That's just it. They do not have the means to alter the system because they are a minority -- a hated minority.


15 posted on 12/06/2005 9:23:07 AM PST by The Ghost of FReepers Past (Exalt the Lord our God, and worship at His footstool; He is holy. Ps 99:5)
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To: The Ghost of FReepers Past
That's just it. They do not have the means to alter the system because they are a minority -- a hated minority.

Yes, but history has taught us a minority with money often trumps a majority quite handily.

16 posted on 12/06/2005 9:25:55 AM PST by Hemingway's Ghost (Spirit of '75)
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To: The Ghost of FReepers Past

Maybe they should shrug.


17 posted on 12/06/2005 9:26:00 AM PST by Teacher317
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To: silverleaf

A more meaningful statistic (but impossible to obtain, due to deliberate government obfuscation in all its wealth redistribution schemes) would be what percentage of the population are NET taxpayers, i.e. pay in more than they take out. And within that small and shrinking group, how disproportionate the tax burden is.


18 posted on 12/06/2005 9:26:10 AM PST by GovernmentShrinker
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To: Gay State Conservative

Limit voting to people who are NET taxpayers, and you'd see a sudden massive change in the country's political landscape.


19 posted on 12/06/2005 9:28:05 AM PST by GovernmentShrinker
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To: Hemingway's Ghost

Then why are they stuck with all the taxes?


20 posted on 12/06/2005 9:28:45 AM PST by The Ghost of FReepers Past (Exalt the Lord our God, and worship at His footstool; He is holy. Ps 99:5)
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