Middle class tax burden set to rise

washington post ^ | 6/3/03

[knak]

WASHINGTON, June 4 — Three successive tax cuts pushed by President Bush will leave middle-income taxpayers paying a greater share of all federal taxes by the end of the decade, according to new analyses of the Bush administration’s tax pAS CRITICS of the tax cuts in 2001, 2002 and 2003 have noted, the very wealthiest Americans — those earning $337,000 or more per year — will be the greatest beneficiaries of the changes in the nation’s tax laws. And, as administration officials have argued, low-income taxpayers will also enjoy a disproportionately lighter tax burden. olicies.

[DPB101]

Simple solution. Those in the middle class who are paying more because their taxes were cut should write the government a check for the amount they saved in taxes.

[supercat]

Does this take into account the fact that reductions in tax rates reduce levels of tax avoidance?

[KDD]

Middle class tax burden set to rise

Might as well beat that mule to death...It's dumb as a rock anyway.

[Consort]

I like to think that it's all designed to get tax payers to demand that the present tax code be scrapped — good strategery.

[RJayneJ]

Yep, that is to give a tax cut to the rich.

[NestorMakhno]

I doubt that many users of this board are excessively wealthy. They should be concerned at this licensed thievery, which is what it amounts to.

[bruinbirdman]

Does It Pay to Work?

...the highest marginal net tax rates are not imposed on the highest-income families. They are imposed on those with the lowest earnings. For example:

At two times the minimum wage ($42,800), working couples get to keep less than 30 cents out of each dollar they earn.

At 1.5 times the minimum wage ($32,100), they get to keep less than 20 cents out of each dollar they earn. By contrast, a couple earning $200,000 a year gets to keep 44 cents.

The disincentives to work at the low end of the income scale are even worse if we compare part-time with full-time work:

A minimum-wage couple that moves from half-time to full-time work will lose 97 cents out of every extra dollar they both earn.

At 1.5 times the minimum wage, the couple will lose $1.06 for every extra $1.00 they earn; for this couple, working more literally means having less.

What causes these marginal tax rates to be so high? In general, loss of transfer benefits is more important for lower-income families, while direct taxes on income are more important for higher-income families. Among full-time working couples:

At $32,100 (1.5 times the minimum wage), two-thirds of the marginal net tax rate consists of the loss of transfer benefits, while a little more than one in five dollars is lost to income and payroll taxes.

At $64,300 (triple the minimum wage), half of the marginal net tax rate consists of a loss of benefits, while two in five dollars are lost to income and payroll taxes. At $321,400 (15 times the minimum wage), four in five dollars of the marginal net tax are lost to income and payroll taxes.

Marginal net tax rates for low-income families are so draconian because our system makes a very generous package of welfare benefits available to people who do not work and then begins taking away those benefits at a steep rate as they begin to earn a modest income. In our model, for example:

A couple with two children can expect $489,100 in lifetime benefits if they never work.

However, if both spouses work full-time and each earns about $16,000, the loss of Medicaid and other welfare benefits will cost them two-thirds of their income over the whole of their worklife.

When all taxes and benefits are considered, the American fiscal system is fairly progressive - at least toward the lower half of the income spectrum. That is, the lower your income, the more generously you are treated. But the price of that generosity is lifetime marginal net tax rates that make working for a living very unattractive. - - National Center for Policy Analysis

yitbos

[ancient_geezer]

I doubt that many users of this board are excessively wealthy. They should be concerned at this licensed thievery, which is what it amounts to.

Agreed:

For every $1 we pay to government in taxes, we spend an additional $0.65 in compliance costs.

OUR COSTLY INCOME-TAX SYSTEM

 

Costs of the Federal Tax System to Taxpayers for Every Dollar of Revenues Collected

Compliance costs	24¢
Enforcement costs	2¢
Disincentive to production	33¢
Disincentive cost of tax uncertainty	2¢
Evasion and avoidance cost	3¢
Government cost	1¢
Total	65¢

Source: Costly Returns, by James L. Payne (ICS Press, San Francisco, 1993).

And even that figure doesn't include the cost of import duties, license fees and other government regulations.

For a typical U.S. family, the real cost of taxes and regulations as measured in 2000 is at least:

Federal taxes              22.4% of income
State & local taxes      11.8%
Compliance costs        22.2%
Regulatory costs         12.7%

70.1% of your income is now consumed by government

And getting worse, not better. As long as government is able to play a shell game with hiding taxes from the Voter(i.e. individual) it can rely on the old maxim:

A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw

and keep right on growing without bound.

The Honorable James DeMint (R-SC)
United States House of Representatives
THURSDAY, APRIL 5, 2001
12:00 noon

• "There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.

Milton Friedman as quoted by Northwest Florida Daily News, 10-16-2000:

• "If non-taxpayers become a majority in society, what would restrain them from votingfor ever higher taxes on others?"

Walter Williams, World Net Daily, 10-25-2000

So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

 

Liberty and freedom have a price, responsibility. If that price is avoided there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.

Right now the bottom 60% perceive little to no "Individual Income Tax" burden,(in many cases even a handout) and 70% of the voting public clamors for more from government looking for the top 40% of income earners/producers to foot the bill. That perception continues to grow ever stronger by eliminating even more participants from the Federal Individual Income Tax rolls as proposed in the tax reduction proposals through changes in personal exemption limits and other mechanisms such as targeted tax credits.

---

 

This chart does not look very promising for the future
financial well-being of our offspring, does it?

TAXES

History has shown we can't get there (smaller government) from here (income/payroll tax system).

I think it's time for a change in paradigm, not just another shuffling of the deck.

John Linder (R Georgia) offers a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement:

H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer: http://www.fairtax.org & http://www.salestax.org

Make sure everyone, participates in the tax system, give the entire electorate a stake in reducing taxes and government.

[RJayneJ]

I was being sarcastic. They get it from the middle class because there is more of them and that's where the money is. Of course, the very poor don't pay because they can't, and the wealthy buy loopholes from congress, but in spite of that they pay plenty.

[bruinbirdman]

"Right now the bottom 60% perceive little to no "Individual Income Tax" burden"

"I don't care what my wage or salary is. How much is my takehome?"

yitbos

[Lil'freeper]

bump to index the figures you posted.

[FITZ]

That's why government spending needs to be slashed ----as long as all the government programs are there, someone has to pay for them, if you give wage-earners a tax refund but don't cut spending, then the money has to come from somewhere else. Many of the welfare programs could just be ended.

[Lady Eileen]

bump...thanks for the post.

[ancient_geezer]

I don't care what my wage or salary is. How much is my takehome?

Under the National Retail Sales tax, You receive your full gross pay. It's a retail sales tax, not an income tax. Plus all legal residents will receive a FCA equivalent to the FairTax paid on essential goods and services. The FCA will be paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate.

Every year, the Department of Health and Human Services [HHS] determines the "poverty level" for each family size.

The 2001 "FairTax" Family Consumption Allowance Figures
Family Size	HHS Poverty Level	Annual FCA	Monthly FCA
One	$8,590	$1,976	$165
Two	$17,180	$3,951	$329
Three	$20,200	$4,646	$387
Four	$23,220	$5,341	$445
Five	$26,240	$6,035	$503
Six	$29,260	$6,730	$561
Seven	$32,280	$7,424	$619
Eight	$35,300	$8,119	$677

1) Federal Register: February 16, 2001, Pages 10695-10697).

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $23,220 per year free of tax because they will have received over the course of the year rebates totaling $5,341. $5,341 is the amount of sales tax paid on $23,220 in expenditures. A family spending double the "poverty level" or $46,440 per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

We can examine the tax burden that a family of four will have at various annual spending levels.

Not only does every family receive a FCA based on family size, not income, but they will also receive 100% of their paycheck:

Fedup Smith makes $39K per year...once the FairTax is the law of the land he will receive an instant increase in pay of $200.00 per week. Since he has a family of four, he will receive a FCA of $445 per month, for a total of $1,305.00 additional income per month that he can do with as he sees fit

[ancient_geezer]

bump to mark

[steve-b]

middle-income taxpayers paying a greater share of all federal taxes

One of the basic How To Lie With Statistics techniques is to shift the base of your percentage. The most obvious example is quoting a price cut from $100 to $80 as "25% off" (using the new $80 price as the base) rather than "20% off" (using the original $100 price as the base).

Here, the trick is used in a more subtle form. The "greater share" is the percentage of the total income tax paid. However, this figure has no direct relevance to the individual taxpayer -- he cares about the percentage of his income paid in taxes. Essentially, the lower total income tax (according to static analysis) is used as a new base to inflate the quoted percentage.