America divided by Democrats: "The Non-Paying Class"

Wall Street Journal ^ | Nov 20, 2002 | Editorial

[The Raven]

The stars look to be in perfect alignment for tax relief. With a GOP majority in both houses of Congress, the Bush Administration is making eager and energetic noises, and the economy is in what Fed Chairman Greenspan calls a soft spot.

[The Raven]

We need to fix this by reducing the size of government and then stopping taxation of income.

[ancient_geezer]

All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.

The Crisis of Democracy

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. And at that point, DeMint warns, we have reached a major crisis in our democracy."

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

• "If we're to have an income tax, it's a good thing for everyone to pay at least a nominal amount," he said. "If non-taxpayers become a majority in society, what would restrain them from voting for ever higher taxes on others?"

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

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. 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?

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.

Effective Individual Federal Income Tax Rate (Percent of gross income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
Lowest Quintile	-0.6	-0.8	-0.2	-0.5	-0.2	-1.3	-1.9	-2.9	-3.4	-5.6	-6.8
Second Quintile	3.6	3.9	4.6	3.5	3.9	3.2	3.3	2.7	1.8	1.8	0.9
Middle Quintile	7.1	7.5	8.3	6.8	6.8	6.1	6.5	6.3	5.9	6.1	5.4

Those that readily perceive some of the burden.

Effective Individual Federal Income Tax Rate (Percent of gross income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
Fourth Quintile	9.7	10.4	11.3	9.5	9.3	8.7	8.9	8.7	8.5	8.7	8.4
Highest Quintile	15.8	16.3	17.1	14.5	14.3	15.1	15.1	14.8	15.5	16.2	16.1

While Congress plays both ends against the middle; hiding the real burden in inflation, higher prices on all goods and services, lower takehome pay, lower return on investment, and higher interest rates. All keeping the poor right where they are and pushing for more freebees.

Consider that 15.3% SS/Medicare tax on the 1st $75K of wages/self-employment income, plus the 6% Federal/State Unemployment tax, all of which are but a portion of the effect of federal taxes embedded the price of all products we purchase. Taken together with the Individual tax rates above we all pay more than:

Effective Total Federal Tax Rate (Percent of reported income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
All Families	22.8	23.4	23.5	21.4	21.8	22.6	22.5	22.6	23.5	24.7	24.2

Data from IRS collections statistics and The Bureau of Economic Analysis as compiled in tabular form by the Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0

[ancient_geezer]

Thomas Hobbes from Leviathan

• It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income.

[The Raven]

Yep......take all the essential government functions like judicial and defense and pay for them equally with something like a VAT - then take the functions affecting individuals (schools, health, etc) and privitize - but pay for them with an individual tax

[DB]

This won't be fixed until the country is bankrupt.

When 50%+ of the voters figure out they can vote themselves the benefits of someone else's money there is no going back.

That 50% will never voluntarily go back to paying taxes again. They are not interested in justice or even long term economic consequences, look at France and Germany as good examples of where we're going.

This is why the national sales tax as an alternative to income taxes is dead on arrival.

[Republican Landslide]

At a minimum, the FedGov has to eliminate the payroll tax and tax everybody through a graduated progressive tax. The problem with the payroll tax is that a large number of people have no concern about what the income tax rate is, because they do not pay it. The payroll tax, however, is accepted because of the fiction that people are "putting their money in" to Social Security, and that they will be able to take "their money" out later.

The Democrats would scream bloody blue murder before they eliminate the payroll tax, because it is central to the fiction that Social Security is a savings plan, rather than just another government entitlement. But everything about the payroll tax is deceptive, including the amount actually paid. People have no idea how much their employers are kicking into this Ponzi scheme.

A rational plan would be to eliminate the payroll tax, both the employee and employer share, and start the income tax at 12% on the first dollar earned, going up to about 30% for the top marginal rate. And eliminating withholding, so the citizenry needs to write out a check of exactly how much they have to pay to the FedGov every quarter, wouldn't be a half bad idea.

[DB]

And will never happen.

[Cacique]

This article leaves out one thing, and that is the hidden tax that is called corporate tax. That tax is paid through the back door by consumers via higher prices in consumer goods. Since most people don't see it coming directly from their paycheck they have no idea that they are paying it.

Corporations do not pay taxes, individuals do. It's all a big scam to send money to the central state but it comes off our hides. Politcians figured out that raising incime taxes on individuals would not buy them votes, but they wanted the money anywa, so they inveted corporate taxes and conned the ignorant into believing it a tax on the rich, not realizing that corporate taxes are part of the end price of goods and services.

In reality we all pay higher taxes than the article claims. Only the taxes are backdoor taxes and hidden rather than the obvious income taxes.

Taxes are a scam and eventually stifle economic activity and expansion and that is what is happening everywhere.

[Ben Ficklin]

FedGov gets approx 50% of its income from personal income taxes. Tax relief could be targeted at the the other 50%. Such as:

Cut Capital Gains
Turn a portion of offshore oil production royalties back to the states.
Insert your suggestion here.

[ancient_geezer]

This article leaves out one thing, and that is the hidden tax that is called corporate tax.

Same is true of the VAT. Any time government is able to hide or disguise taxation from the electorate as a whole by burying it in inflation or "taxing the rich.", it place is base card:

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

Until we place the full burden in sight that the cost of largess can be perceived, we will continue to have a Congress more than willing to pander to the basest instincts of the people.

Sir Alex Fraser Tytler (1742-1813). Scottish jurist and historian:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

That is why we desparately need to establish the National Retail Sales Tax and dump the current tax system into the bit bucket.

[RWG]

Simply put, a tiny group of people (553,380) were responsible for more than one-quarter of the income tax take of $877 billion.

Before numbers get thrown around too much, how much wealth is owned and/or generated by this tiny group of people? Then I would like to know how much wealth is owned and/or generated by the rest of the people. If I could see the two proportions then I would be better able to judge if and how the ratios are out of whack.

[monocle]

Any tax scheme should be based solely on collecting revenue for legitimate government functions and issues of "fairness" and the like should play no role. These other issues should be dealt with in separate and distinct legislation.

Opponents of progressive taxation would be well advised to focus their arguments on job creation noting that higher income people save more and that an economic truism is that "savings equal investment". I don't have any current statistics but I would not be surprised if it takes about $100,000 to create a single new job. That $100,000 doesn't come from the government but must come from those with savings,i.e. capital formation.

[wita]

Oh how I do agree that issue of fairness not coming into play. Everyone should taxed at the same rate. And speaking of taxes, and fairness, the subject of sin taxes has not yet been brought up. The government is getting rich on our excesses. Tobacco and liquor taxes for one. We don't want to bring up gas taxes either.

The list goes on and on and on. The public has no clue, even those who think they have a clue are clueless as to how much the individual actually pays in tax versus the value of the object he thinks he is purchasing. My contention is this, We would be absolutely astounded at the wealth available in this country if we were to live without taxes for just one year, and we think we are wealthy now.

Can you think of anything the various governments do not tax? If those who came to this country in the beginning, could see what we have allowed government to do and become at our expense, they would a. Fall over laughing. b. die weeping. c. Call us fools. d. All of the above.

[maica]

bttt for later reading

[logos]

Every word you say is true, plus...

The corporate income tax is the most progressive of taxes since the finished product, in most cases, must pass through a pipeline of packagers, transporters and retailers before it even gets to where the consumer may decide to buy it. Each of these entities, essential to our modern economy, adds its tax burden to the final cost of the product.

The best example of this I can think of off the top of my head is the common loaf of bread. The last figures I saw revealed that a single loaf of bread contains roughly four to five cents worth of wheat, which goes to the farmer who grows the wheat. The rest of the cost is added, in turn, by the wholesale purchaser at the grain elevator, the corporate purchaser of the product, the transporter of the wheat, both from the elevator and then again from the corporation to the retail chain and from the chain to its individual sales outlets, and further from the retail outlet itself. Costs of transportation and manufacture are, of course legitimate costs, and should be expected. What is generally forgotten is that each of these private sector business entities must also pay taxes, all of which are added to the product before the consumer even has a chance to pay his overt sales tax on the item.

Just think how a partial cent increase in tax on each gallon of oil percolates through the economy; then think of each and every product one buys in order to live a decent life.

Then, of course, all that you've managed to save in your lifetime, paying taxes all the way, is again taxed when you die. As far as I'm concerned, even the much publicized "tax freedom day" is laughable.

[Blood of Tyrants]

The RAts have created a system where those who pay nothing decide on how much the rest pay. If I had my way, you would get 1 vote fore every $1000 you pay in income and SS taxes.

[zeugma]

These are interesting figures that I've seen before. I have no hope for the ultimate prosperity of this Republic and have not once I discovered (at an early age) the implications of the scam whereby Peter gets to vote to take away Paul's money.

That said, I'd like to see some hard numbers regarding ratios of income/wealth broken out in much the same way as the numbers were in the article.

For instance, if the top 5% of americans make 30% of the income of the nation, yet pay 80% of the taxes, that is truely an evil situation. If, however, the top 5% made 80% of the income and payed 80% of the taxes, the situation would still be evil (as income taxes are by definition IMO), but somewhat less so.

Do any freepers on this thread have or have seen such data?

[taxed2death]

Your ideas make entirely too much sense. They will never come to pass.

[pray4liberty]

I think the National Taxpayers Union figured our total tax outlay to be more like 44% of our income (taking into account property, sales, school taxes, etc.). It may be even higher now.

The Republicans have got to come up with a brand-new and fair tax system that gives an immediate, tangible result to the taxpaying citizen. They have got to quit dilly-dallying around. They don't have much time. People are getting angry.

[Deuce]

Even the barest of glances at tax data reveal a system that is steeply progressive. Tax revenue has been increasingly squeezed out of top earners. According to the most recent data, from 1999, the richest -- with income above half a million dollars -- constituted 0.5% of taxpayers but accounted for 28% of total tax revenue.

This misinterprets the data it presumably relies on (the Joint Committee on Taxation study of 1999 data) and, in any event, presents an incomplete picture. See JCT Study on 1999 Data.

First of all, from a procedural standpoint alone, without knowqing what fraction of the total income the group in question earns, it is impossible to tell whether 28% is progressive, regressive, or flat.

Secondly, page 3 of the above linked report (which is the relevant data since it includes almost all income and almost all taxes, indicates that the top 1% of taxpayers (beginning at $340,000 and averaging $1 million) earn 17.2% of total income and pay 23.2% of the taxes. Therefore, this article, which claims the top 1/2 of 1% pay $877B when the data shows the top 1% paid $391B has done a shoddy job of research---at best. It's calculations leave something to be desisered as well. If the $877B figure were correct, it would represnt closer to 50% of all taxes rather than 28%.