Posted on 01/17/2002 9:19:45 AM PST by Henrietta
Bruce Bartlett (archive) (printer-friendly version) January 17, 2002
The successful pay plenty of taxes
For many years, the Tax Foundation has published figures on shares of federal income taxes paid by percentiles of income. They always showed those at the top of the income distribution paying an overwhelming share of all taxes. This was powerful refutation of the traditional liberal argument that the rich don't pay their fair share. These data went mostly unnoticed until 1978, when Paul Craig Roberts, then working for Sen. Orrin Hatch, R-Utah, published an article about them in the March issue of Harper's Magazine. Back then, Harper's was a highly respected publication -- it has since gone downhill -- and his article got a lot of attention.
Roberts showed that the top 1 percent of taxpayers -- those earning more than $59,338 in 1975 -- paid 18.7 percent of all federal income taxes, up from 17.7 percent 5 years earlier. A similar increase was shown by the top 5 percent, top 10 percent and top 25 percent of taxpayers. The top half of taxpayers paid 92.9 percent of all income taxes in 1975, meaning that the bottom 50 percent paid just 7.1 percent.
Interestingly, the reaction of liberals to the Roberts article was to deny it. They simply refused to believe that the data were correct. House Majority Leader Jim Wright, D-Tex., was especially incredulous. He demanded that the Congressional Research Service give him the correct data.
The CRS response was written by Donald Kiefer, now head of the Treasury's Office of Tax Analysis. Although quibbling with some of Roberts' interpretations, he confirmed that the data were accurate. He had little choice because the original figures came straight from the Internal Revenue Service's statistics of income report.
In the years since, the annual publication of the IRS's tax shares data has been eagerly awaited by those opposed to class envy. The most recent figures became available on Jan. 10 and were released by the Joint Economic Committee of Congress. Amazingly, they show that the share of total federal income taxes paid by the top 1 percent of taxpayers has doubled since 1975. In 1999, they paid 36.2 percent versus 18.7 percent in 1975, the latest available when Roberts wrote his article.
Other upper-income groups have also seen a sharp increases in their share of the tax burden. Between 1975 and 1999, the top 5 percent of taxpayers went from 36.6 percent to 55.5 percent of taxes, the top 10 percent went from 48.7 percent to 66.5 percent, the top 25 percent went from 72 percent to 83.5 percent, and the top half of taxpayers went from 92.9 percent to 96 percent. The bottom 50 percent of taxpayers now pay just 4 percent of federal incomes taxes.
To put these numbers into perspective, it should be noted that the top 1 percent of taxpayers reported just 19.5 percent of adjusted gross income. Thus, their share of the tax burden exceeded their income share by almost 17 percentage points. For the top 5 percent, the spread was even greater -- more than 21 percentage points. By contrast, for those in the bottom 50 percent, the difference between the percentage of total taxes and total income was minus 9.25 percent. That is, their income share greatly exceeded their tax share.
On a chart, these data form a kind of "yield curve." For economists, the yield curve measures the spread between short-term interest rates, which are normally low, and long-term rates, which are normally higher. The slope of this curve is an important indicator of monetary policy and future economic conditions. A tax yield curve would show how steeply progressive federal income taxes are.
Those in the top 1 percent of the income distribution paid a 27.5 percent effective income tax rate in 1999. Polls show that this exceeds the highest percentage of taxation that most Americans believe anyone should pay, no matter how large their income. The latest, a Fox News/Opinion Dynamics poll taken in March 2001, found that a majority of Americans think 20 percent is the most anyone should pay.
However, polls also show most people greatly underestimate how much the rich actually pay. That is why liberals usually get a receptive audience when they say that the rich aren't paying their fair share and should be denied the benefits of any tax cuts. One study found that most people think that the rich don't pay more than 20 percent now.
For these reasons, greater knowledge about how much the wealthy actually pay in taxes is a powerful antidote to class warfare. Most Americans are fair-minded and don't envy those with incomes higher than they have. But if they are misled about the facts, they can make mistakes and vote for demagogues who hate the rich simply because they are rich.
We The People will always pay. If corporations pay no taxes, then we pick up the slack. If heavier taxes are placed on corporations, prices will be raised. If the price cannot increase (for example, I would never pay $7 for a hamburger) then the corporation will downsize. Downsizing most generally affects "we the people" more than "they the CEOs".
Such is life.
Despite being shown to be wrong hundreds - or more probably thousands - of times by many posters, he has never once admitted it. Not even when he was wrong by 400% ... and that on an arithmetic example that he devised. So you see trying to have any reasonable conversation with him is pointless.
He only hopes to disrupt and will say anything to try to do so, no matter how outlandish. He also runs his own tax evasion scam and for that reason wishes the status quo to continue so that you and I can continue to bear some part of his tax burden. He isn't even bright enough to realize that the NRST tax plans are not Republican or Democrat (he thinks they're "Republican" and so attacks them), but bipartisan and benefit taxpayers no matter their political affiliation.
Little Willie was "The Worst President In American History".
There will certainly be no government certification that, yes, the income tax is illegal and we've just been fooling the taxpayers all these years.
Little Willie was "The Worst President In American History".
He just lied on this one when those in favor of the NRST were somehow defending the income tax and the IRS. In fact both of the NRST bills now before Congress eliminate both the income tax and the IRS. For example, read the FairTax bill (HR2525) and see that this is the case ... it's written into the bill very clearly. This individual will lie about almost anything that he perceives to threaten his Democratic, tax evading lifestyle - just as he has about the elimination of the income tax and the IRS. And just as he has about claiming never to lie.
The bill may be obtained here (enter "hr2525" in "Bill Number" and in the resulting window click on "Full Display"), and to see the websites, click here, and here here, and here.
Little Willie was "The Worst President In American History".
Remember, Medicare and Social Security "taxes" are really premiums payed to an insurance program. As such they are not supposed to be "progressive", just like any other insurance policy. If you want coverage you pay to get it.
Local and sales taxes affect everyone and is the method the states fund their budgets. Are you suggesting the poorer folks shouldn't be on the hook for services they benefit from at the local and state level?
If you do a little spreadsheet work, you can independently verify that the cascading of hidden taxes that Boortz's article discusses will easily build from 20 to 40% of a non-productive increase into consumer prices ... all because of the cost of "taxing business".
Little Willie was "The Worst President In American History".
Furthermore he does not understand that taxing businesses is merely a way for the politicians to hide the tax burden from taxpayers and boost the prices of consumer goods due to those taxes without the average citizen ever realize it's just another way to tax him. It also allows Congress to use tax favors as a carrot and stick to try to control everything down to the micro level.
Only true Socialists (or fools) could approve of such a plan ... or those gaining from it by tax evasion.
Little Willie was "The Worst President In American History".
Furthermore he does not understand that taxing businesses is merely a way for the politicians to hide the tax burden from taxpayers and boost the prices of consumer goods due to those taxes without the average citizen ever realize it's just another way to tax him. It also allows Congress to use tax favors as a carrot and stick to try to control everything down to the micro level.
Only true Socialists (or fools) could approve of such a plan ... or those gaining from it by tax evasion.
Little Willie was "The Worst President In American History".
Little Willie was "The Worst President In American History".
Then take a look at the IRS information yourself. I have for the last couple of years as I was debating a doubting thomas at my local paper. The figures don't lie.
And, the term "fair" is a loaded term. I am still doubtful that th erich pay their fair share.
I left the Army in 2000 as an E6 and took a job in private sector. My current income is almost twice what it was in the Army, my taxable income went up by 3 times and my total Federal Income tax PAID went up 8 times. What was that you were saying about the rich (which I really am not) not paying their fair share?
Spoken like a true socialist.
I'm already in the "rich" bracket according to the government. So, no, the rich don't need to be taxed more, the government needs to SPEND LESS. This isn't an "I've got mine" rant, this is a get a better job rant. There are very few good reasons my money should be stolen from me to be given to someone who didn't earn it. If I want to give money to someone I feel needs it, that's MY prerogative, and I am certain I can decide that better than a government office.
I paid attention in school, I got a skill via the military and I'm now reaping the benefits of having done both. If I can do it so can others. If you made damaging life choices that prevent you from climbing higher, just remember it was YOU who made the choice, not me or any other taxpayer and we are NOT here to fix your screw ups unless we CHOOSE to. < /rant >
And this whole thing about "fair share" goes back to politics and socialism again. In reality, what business is it of the goverment how much money I make? What determines how "fair" it is if I double my salary and the govermentment takes over half of my gain? Only socialists talk about "fair share" to hide their politics in compasion. What they really believe is that anyone makeing over enough to just get by needs to pay most of their additional income in high tax rates, "to keep it fair".
They want equal outcome, not equal opportunity (but not for them of course, they need to paid highly because they are the smart ones, and they will need to determine who get what and to come up with the next five year plan).
This game can't go on forever, you can take from the rich and give to an increasing number of poor and not expect the poor to share the cost of goverment. At some point you cross the line of diminishing returns and "the rich" will give up as most of their wealth will be spent or taken. Then what?
right, except that if you don't want the coverage, you still have to pay for it, so i would still call it a tax. but if you want to leave those aside my point is still the same.
Local and sales taxes affect everyone and is the method the states fund their budgets. Are you suggesting the poorer folks shouldn't be on the hook for services they benefit from at the local and state level?
i'm not arguing the should or shouldn't of anything. i'm just saying that if you want to evaluate the distribution of the tax burden, FIT doesn't tell the whole story.
i don't think this reasoning is correct. "the rich" are in no danger of losing their wealth because they are not taxed on their wealth, but only on their increase.
someone will say, well what about property tax and estate tax? and i agree, these are unfair.
But going back to taxes, becoming rich and taking care of yourself are things that make people want to work harder. If you take away they benefit of hard work through higher income, less and less people will if fact become "rich", and place that burden on the rest of the "non-rich".
i see what you're saying, i just happen to think it's a myth.
when did a rich person ever stop producing income for themselves so that they wouldn't have to pay income tax? ridiculous. and does a high rate of income tax really "take away the benefit" of higher income? that would certainly be true if the tax rate was so high that someone who made a million dollars didn't get to take home any more than the one who made 30K. but that's just not the case. everyone would rather make a million and pay half than make 30K and pay nothing, so there is no disincentive that i can see.
The success of our economy is predicated on the basis that our most productive individuals and businesses will continue to progress and be innovative. When tax rates are abnormally high, then more time and energy is spent on tax avoidance(a more appropriate term than tax evasion), and less time and energy to the conduct of their business.
There are entire industries based on helping wealthy individuals and prosperous business limit their exposure to income, sales, and estate taxes. IMHO, this is an inherently inefficient use of capital, but that's the way it goes. I'm a CPA who earns his livelihood from this industry, but I do not fear my prospects outside of this industry.
There is plenty of evidence out there that shows the inverse relationship between the level of tax rates, and revenues received by government. When tax rates are perceived to be 'fair', less avoidance and evasion take place. Conversely, when taxes are not perceived as 'fair', more effort is placed on reducing one's burden to a 'fair' level, consistent with ever-changing tax laws. I have seen this firsthand over the past 10 years.
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