Who pays taxes?

A news story in the Washington Post follows the Democratic party line in complaining that the rich don’t pay their fair share of taxes.  But notice how the facts get in the way of the thesis!

As millions of procrastinators scramble to meet Monday’s tax-filing deadline, ponder this: The super-rich pay a lot less in taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so much less than that in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college and even for paying other taxes.

The top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank. . . .

The sheer number of credits, deductions and exemptions has Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate to 25 percent from 35 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.

President Obama said last week that he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama’s proposal would result in $1 trillion in tax increases over the next 12 years.

The proposals from the GOP and Obama included few details, putting off hard choices about which tax breaks to eliminate.

In all, the tax code is filled with $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the independent national taxpayer advocate within the IRS.

More than half of the nation’s tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.

Obama wants this to change so “the amount of taxes you pay isn’t determined by what kind of accountant you can afford.” . . .

The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.

via For richest, federal taxes have gone down; for some in U.S., they’re nonexistent – The Washington Post.

So it turns out that the rich already pay taxes at a rate nearly twice that of the average, that the top 10% in income already pay half of the nation’s taxes, that the top 5% already pay 44% of those taxes, and the 45% of Americans who pay nothing at all are not the wealthy but poor and middle income people!

Isn’t it a bad thing for so much of the government’s income to come from only 5% of its citizens?  And that nearly half of Americans cannot claim the stakeholder status of “taxpayer”?  Not that I begrudge anyone’s good fortune in getting tax breaks, but if taxes should be raised (not that I think they should be), shouldn’t those who don’t pay any get targeted before people who are already paying half of the government’s income?

As a matter of principle, shouldn’t everyone chip in something, if only a couple of bucks?  When the topic is tax fairness, isn’t it unfair for a few to pay so much, while so many pay nothing?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • LAJ

    That is exactly what my boss said Monday. Everyone should have to pay something since everyone benefits. What do you think of Huckabee’s idea of a flat tax? Probably not his idea but he is promoting it.

  • LAJ

    That is exactly what my boss said Monday. Everyone should have to pay something since everyone benefits. What do you think of Huckabee’s idea of a flat tax? Probably not his idea but he is promoting it.

  • Joe

    I think it is always dangerous to have a situation where almost half of the country is not paying income taxes. Resentment between those who pay and those who receive a net benefit from gov’t programs is pretty much a given.

    Everyone should have some skin in the game.

  • Joe

    I think it is always dangerous to have a situation where almost half of the country is not paying income taxes. Resentment between those who pay and those who receive a net benefit from gov’t programs is pretty much a given.

    Everyone should have some skin in the game.

  • utahrainbow

    The poor pay taxes. Every time they go to the grocery store, or pump gas, or get take out, etc. And as a percentage of income, it takes a bigger bite than from those who are more well to do. I have no problem with the poor paying no income tax. I believe they still have “skin in the game.”

    Joe @ 2, I think resentment can run both ways on that one. After all, corporate welfare is a net benefit for some very wealthy people.

  • utahrainbow

    The poor pay taxes. Every time they go to the grocery store, or pump gas, or get take out, etc. And as a percentage of income, it takes a bigger bite than from those who are more well to do. I have no problem with the poor paying no income tax. I believe they still have “skin in the game.”

    Joe @ 2, I think resentment can run both ways on that one. After all, corporate welfare is a net benefit for some very wealthy people.

  • Tom Hering

    It would be helpful to know what percentage of the poor who don’t pay taxes are just experiencing hard times – a temporary situation. Did they pay taxes in the past when their income was higher? Certainly. Will they pay taxes again when their income improves? Certainly. I know that during the years when I was earning $12,000 or less, I always ended up paying the government money at tax time. So, I’m just a little bit skeptical that there really is a low-to-middle-income “half of the country” that manages to pay nothing. I smell ideologically-driven statistical manipulation in the air.

  • Tom Hering

    It would be helpful to know what percentage of the poor who don’t pay taxes are just experiencing hard times – a temporary situation. Did they pay taxes in the past when their income was higher? Certainly. Will they pay taxes again when their income improves? Certainly. I know that during the years when I was earning $12,000 or less, I always ended up paying the government money at tax time. So, I’m just a little bit skeptical that there really is a low-to-middle-income “half of the country” that manages to pay nothing. I smell ideologically-driven statistical manipulation in the air.

  • Jason

    This blog is my major source of information about Mo. Lutheranism. Looks like Donald Trump has the synod’s vote locked up.

  • Jason

    This blog is my major source of information about Mo. Lutheranism. Looks like Donald Trump has the synod’s vote locked up.

  • Jonathan

    Jason, whom do you prefer in your brand of -ism?

  • Jonathan

    Jason, whom do you prefer in your brand of -ism?

  • http://www.hempelstudios.com Sarah in Exile

    And small business owners get socked with taxes. When I was working as an artist full time, I was barely making enough to eat and yet I paid four months of income in taxes. It nearly crushed me. My father, who owns a small business and who has employees, is really suffering. He has to pay social security twice over for himself and half for each employee. He pays workman’s comp, unemployment, and payroll taxes. He’s a middle class guy and pays a rich man’s tax.

  • http://www.hempelstudios.com Sarah in Exile

    And small business owners get socked with taxes. When I was working as an artist full time, I was barely making enough to eat and yet I paid four months of income in taxes. It nearly crushed me. My father, who owns a small business and who has employees, is really suffering. He has to pay social security twice over for himself and half for each employee. He pays workman’s comp, unemployment, and payroll taxes. He’s a middle class guy and pays a rich man’s tax.

  • http://gslcnm.com Pastor Spomer

    “This blog is my major source of information about Mo. Lutheranism. Looks like Donald Trump has the synod’s vote locked up.”
    What is your reasoning Jason? Do you think that for someone to affirm that the tax system is flawed means that they would want Donald Trump for president? That strikes me as a non sequitur.

  • http://gslcnm.com Pastor Spomer

    “This blog is my major source of information about Mo. Lutheranism. Looks like Donald Trump has the synod’s vote locked up.”
    What is your reasoning Jason? Do you think that for someone to affirm that the tax system is flawed means that they would want Donald Trump for president? That strikes me as a non sequitur.

  • DonS

    Who pays taxes? The other guy. That philosophy, at least, is the one being driven by President Obama in his increasing assault on “the rich”. Playing to our base, fallen instincts to vote to get something for yourselves at someone else’s expense, whether that be the “rich”, the smokers, the drinkers, or your children, who are picking up the tab for our profligate and selfish debt.

    Of course, the Washington Post article is very misleading and full of half-truths in its reporting. It assails numerous tax breaks for “every income group”, including “… breaks for having children, paying a mortgage, going to college and even for paying other taxes”, but fails to mention that all of those tax breaks phase out for people above about $150,000 AGI, or are eliminated by AMT (Alternative Minimum Tax), which afflicts most people over about the same level of income. Those darn “rich”. It talks about the 400 highest adjusted gross incomes each year (who truly are rich), but doesn’t mention that the “rich” according to tax code are families making as little as $150,000.

    Certainly, as Utah says above, we should eliminate corporate welfare. We should also eliminate tax deductions for individuals. If we are going to retain the income tax at all (which I disfavor because of its intrusion on our constitutional rights), there should be no tax deductions, and your return should fit on a single web page. No favorites. And everyone should have “skin in the game”. No one should be in the position of voting for freebies for themselves at other people’s expense. It’s immoral.

    When a country operates based on voluntary compliance with an impossibly complex tax code, and then succumbs to the human desire for something for nothing, by imposing extraordinary burdens on a few productive people, those people will rightly consider that unfair. Even charitable people don’t like forced “charity”, especially when they know their hard-earned money is funding a lot of greed, waste, and fraud, as well as immorality. When your best taxpayers think the system is unfair, many of them are not as committed to voluntary compliance. Let’s take that out of their hands by overhauling the system to be fair and simple.

  • DonS

    Who pays taxes? The other guy. That philosophy, at least, is the one being driven by President Obama in his increasing assault on “the rich”. Playing to our base, fallen instincts to vote to get something for yourselves at someone else’s expense, whether that be the “rich”, the smokers, the drinkers, or your children, who are picking up the tab for our profligate and selfish debt.

    Of course, the Washington Post article is very misleading and full of half-truths in its reporting. It assails numerous tax breaks for “every income group”, including “… breaks for having children, paying a mortgage, going to college and even for paying other taxes”, but fails to mention that all of those tax breaks phase out for people above about $150,000 AGI, or are eliminated by AMT (Alternative Minimum Tax), which afflicts most people over about the same level of income. Those darn “rich”. It talks about the 400 highest adjusted gross incomes each year (who truly are rich), but doesn’t mention that the “rich” according to tax code are families making as little as $150,000.

    Certainly, as Utah says above, we should eliminate corporate welfare. We should also eliminate tax deductions for individuals. If we are going to retain the income tax at all (which I disfavor because of its intrusion on our constitutional rights), there should be no tax deductions, and your return should fit on a single web page. No favorites. And everyone should have “skin in the game”. No one should be in the position of voting for freebies for themselves at other people’s expense. It’s immoral.

    When a country operates based on voluntary compliance with an impossibly complex tax code, and then succumbs to the human desire for something for nothing, by imposing extraordinary burdens on a few productive people, those people will rightly consider that unfair. Even charitable people don’t like forced “charity”, especially when they know their hard-earned money is funding a lot of greed, waste, and fraud, as well as immorality. When your best taxpayers think the system is unfair, many of them are not as committed to voluntary compliance. Let’s take that out of their hands by overhauling the system to be fair and simple.

  • http://www.bikebubba.blogspot.com Bike Bubba

    My take here is that even more dangerous as 45% of people paying no income tax is…..to have all people paying in. Keep in mind here that the cost of merely collecting the income tax is said by the GAO to be about three to four hundred billion dollars annually..

    Far better to go back to the old Constitutional route of duties, imposts, excises, and indirect taxes, greatly reducing the effort needed to collect it. To put it mildly, we could have a four hundred billion dollar tax cut without a penny less revenue with a national sales tax and revenue tariff of about 10-15%.

    Which could in turn put a LOT of people back to work, greatly reducing the need for welfare programs…..

  • http://www.bikebubba.blogspot.com Bike Bubba

    My take here is that even more dangerous as 45% of people paying no income tax is…..to have all people paying in. Keep in mind here that the cost of merely collecting the income tax is said by the GAO to be about three to four hundred billion dollars annually..

    Far better to go back to the old Constitutional route of duties, imposts, excises, and indirect taxes, greatly reducing the effort needed to collect it. To put it mildly, we could have a four hundred billion dollar tax cut without a penny less revenue with a national sales tax and revenue tariff of about 10-15%.

    Which could in turn put a LOT of people back to work, greatly reducing the need for welfare programs…..

  • Louis
  • Louis
  • Porcell

    Actually, the Ryan House Budget Committee proposes a major overhaul of the tax system that would reduce tax rates for individual and businesses while removing tax loopholes and most deductions. For a fair summary of this see the CSM article, Rep. Paul Ryan’s tax reform is no flimflam
    Despite recent criticism, the GOP’s Paul Ryan is proposing serious tax reform.
    including:

    On the revenue side, Ryan has proposed creating an alternative income tax system that has two marginal tax rates, eliminates most deductions and credits, and exempts all interest, dividends, and capital gains from the individual income tax. Filers would get to choose between the existing income tax and the new system. Ryan would also replace the corporate income tax with a business consumption tax (essentially a value-added tax).

    In my view Ryan understands the reality of a looming, serious debt crisis and has put together a moderate, sensible solution . Obama and most Democrats are demagoguing the Ryan plan, though other than platitudes they have not offred a serious alternative.

    On the revenue side, Ryan has proposed creating an alternative income tax system that has two marginal tax rates, eliminates most deductions and credits, and exempts all interest, dividends, and capital gains from the individual income tax. Filers would get to choose between the existing income tax and the new system. Ryan would also replace the corporate income tax with a business consumption tax (essentially a value-added tax).

    Ryan’s plan essentially involves both reforming government spending and tax revenues, while underneath emphasizing individual responsibility and a strong economy with full employment.

  • Porcell

    Actually, the Ryan House Budget Committee proposes a major overhaul of the tax system that would reduce tax rates for individual and businesses while removing tax loopholes and most deductions. For a fair summary of this see the CSM article, Rep. Paul Ryan’s tax reform is no flimflam
    Despite recent criticism, the GOP’s Paul Ryan is proposing serious tax reform.
    including:

    On the revenue side, Ryan has proposed creating an alternative income tax system that has two marginal tax rates, eliminates most deductions and credits, and exempts all interest, dividends, and capital gains from the individual income tax. Filers would get to choose between the existing income tax and the new system. Ryan would also replace the corporate income tax with a business consumption tax (essentially a value-added tax).

    In my view Ryan understands the reality of a looming, serious debt crisis and has put together a moderate, sensible solution . Obama and most Democrats are demagoguing the Ryan plan, though other than platitudes they have not offred a serious alternative.

    On the revenue side, Ryan has proposed creating an alternative income tax system that has two marginal tax rates, eliminates most deductions and credits, and exempts all interest, dividends, and capital gains from the individual income tax. Filers would get to choose between the existing income tax and the new system. Ryan would also replace the corporate income tax with a business consumption tax (essentially a value-added tax).

    Ryan’s plan essentially involves both reforming government spending and tax revenues, while underneath emphasizing individual responsibility and a strong economy with full employment.

  • Porcell

    Pardon the double quote above.

  • Porcell

    Pardon the double quote above.

  • Bob

    It’s fun to see the Republicans hanging themselves with the Ryan plan. He’ll go down in history as an extremist Randian.

    Ryan was roundly booed by his own constituents yesterday in Milton, Wisconsin. Keep in mind that these meetings are usually hand-picked Repubs.

    He won’t be around much longer…he’ll be booted out in ’12.

    Headline: 84 percent oppose Ryan’s Medicare plan

    “According to a new Washington Post-ABC News poll, 65 percent of Americans oppose the idea — about the same number who dismissed it in 1995. And if they’re told that the cost of private insurance for seniors is projected to outpace the cost of Medicare insurance for seniors — which is exactly what CBO projects — more than 80 percent of Americans oppose the plan.”

    ”Despite growing concerns about the country’s long-term fiscal problems and an intensifying debate in Washington about how to deal with them, Americans strongly oppose some of the major remedies under consideration, according to a new Washington Post-ABC News poll. The survey finds that Americans prefer to keep Medicare just the way it is. Most also oppose cuts in Medicaid and the defense budget. More than half say they are against small, across-the-board tax increases combined with modest reductions in Medicare and Social Security benefits. Only President Obama’s call to raise tax rates on the wealthiest Americans enjoys solid support.”

    http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-84-percent-oppose-ryans-medicare-plan/2011/04/15/AFBMJ4AE_blog.html

  • Bob

    It’s fun to see the Republicans hanging themselves with the Ryan plan. He’ll go down in history as an extremist Randian.

    Ryan was roundly booed by his own constituents yesterday in Milton, Wisconsin. Keep in mind that these meetings are usually hand-picked Repubs.

    He won’t be around much longer…he’ll be booted out in ’12.

    Headline: 84 percent oppose Ryan’s Medicare plan

    “According to a new Washington Post-ABC News poll, 65 percent of Americans oppose the idea — about the same number who dismissed it in 1995. And if they’re told that the cost of private insurance for seniors is projected to outpace the cost of Medicare insurance for seniors — which is exactly what CBO projects — more than 80 percent of Americans oppose the plan.”

    ”Despite growing concerns about the country’s long-term fiscal problems and an intensifying debate in Washington about how to deal with them, Americans strongly oppose some of the major remedies under consideration, according to a new Washington Post-ABC News poll. The survey finds that Americans prefer to keep Medicare just the way it is. Most also oppose cuts in Medicaid and the defense budget. More than half say they are against small, across-the-board tax increases combined with modest reductions in Medicare and Social Security benefits. Only President Obama’s call to raise tax rates on the wealthiest Americans enjoys solid support.”

    http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-84-percent-oppose-ryans-medicare-plan/2011/04/15/AFBMJ4AE_blog.html

  • Bob

    “a moderate, sensible solution”

    I shot my java through my nose after reading that one.

    That’s a great one!!!

    Porcell, have you considered taking your act on the road? You have a career as a comedian.

  • Bob

    “a moderate, sensible solution”

    I shot my java through my nose after reading that one.

    That’s a great one!!!

    Porcell, have you considered taking your act on the road? You have a career as a comedian.

  • http://www.toddstadler.com/ tODD

    Dr. Veith said, “the facts get in the way of the thesis” in the article he quotes, but, frankly, I think the facts get more in the way of Dr. Veith’s claims.

    For one thing, one may note that for the people in the rather elite group with the top 400 AGIs, their effective income tax rate dropped 9 percentage points! Meanwhile, for the average taxpayer, it dropped all of 0.6 percentage points. Who got the better deal, I wonder.

    Anyhow, I find it odd that a discussion in which most people decry the idea that “the rich don’t pay their fair share of taxes” has yet to involve any mention of what the rich earn. I see plenty of discussion of tax rates and percentage of tax receipts, but if we don’t take into consideration the income behind that, how exactly are we going to determine what a “fair share” is?

    Dr. Veith notes that “the rich already pay taxes at a rate nearly twice that of the average” — but surely it hasn’t escaped anyone’s notice that the income of the top 400 AGIs is a wee bit more than twice the average person’s! Or are you simply opposed to a progressive tax scale?

    Dr. Veith continues: “the top 10% in income already pay half of the nation’s taxes, that the top 5% already pay 44% of those taxes”. But, again, these amounts are only significant if one also knows what percentage of the total income these represent. I’m sure someone can find a better source than this, but some quick Googling turned up this page which says that (as of 2007), “the top 10% received 49.7%” of all income. So it seems that the statistics Dr. Veith quotes are remarkably proportional! (I also found this article which says that “the top 10 percent of Americans collected 48.5 percent of all reported income in 2005.” Again, quite proportional.

    And, while the article notes that “most of [those who escape federal income taxes] pay other taxes”, still Dr. Veith talks about “the 45% of Americans who pay nothing at all” and “nearly half of Americans cannot claim the stakeholder status of ‘taxpayer’” and “those who don’t pay any” taxes and “so many pay nothing”. Ahem. That’s just straight-up false.

  • http://www.toddstadler.com/ tODD

    Dr. Veith said, “the facts get in the way of the thesis” in the article he quotes, but, frankly, I think the facts get more in the way of Dr. Veith’s claims.

    For one thing, one may note that for the people in the rather elite group with the top 400 AGIs, their effective income tax rate dropped 9 percentage points! Meanwhile, for the average taxpayer, it dropped all of 0.6 percentage points. Who got the better deal, I wonder.

    Anyhow, I find it odd that a discussion in which most people decry the idea that “the rich don’t pay their fair share of taxes” has yet to involve any mention of what the rich earn. I see plenty of discussion of tax rates and percentage of tax receipts, but if we don’t take into consideration the income behind that, how exactly are we going to determine what a “fair share” is?

    Dr. Veith notes that “the rich already pay taxes at a rate nearly twice that of the average” — but surely it hasn’t escaped anyone’s notice that the income of the top 400 AGIs is a wee bit more than twice the average person’s! Or are you simply opposed to a progressive tax scale?

    Dr. Veith continues: “the top 10% in income already pay half of the nation’s taxes, that the top 5% already pay 44% of those taxes”. But, again, these amounts are only significant if one also knows what percentage of the total income these represent. I’m sure someone can find a better source than this, but some quick Googling turned up this page which says that (as of 2007), “the top 10% received 49.7%” of all income. So it seems that the statistics Dr. Veith quotes are remarkably proportional! (I also found this article which says that “the top 10 percent of Americans collected 48.5 percent of all reported income in 2005.” Again, quite proportional.

    And, while the article notes that “most of [those who escape federal income taxes] pay other taxes”, still Dr. Veith talks about “the 45% of Americans who pay nothing at all” and “nearly half of Americans cannot claim the stakeholder status of ‘taxpayer’” and “those who don’t pay any” taxes and “so many pay nothing”. Ahem. That’s just straight-up false.

  • http://www.toddstadler.com/ tODD

    DonS (@9) says the article

    fails to mention that all of those tax breaks phase out for people above about $150,000 AGI, or are eliminated by AMT (Alternative Minimum Tax), which afflicts most people over about the same level of income

    But this completely fails to explain how someone — in the top 400 AGIs, mind you — in the 35% tax bracket manages to pay an effective 17% rate.

    Seems to me they have no problem finding tax breaks, Don.

    Don also complains that the article

    doesn’t mention that the “rich” according to tax code are families making as little as $150,000.

    But I’m not sure what you’re referring to, Don. The top tax bracket for 2010 was for those making $373,651 or more. By what definition of “rich” are you going, Don?

    And Don, if I were making $150,000 per year, I’m not sure I’d feel so cocky as to complain if people thought that made me rich. It would seem, to borrow your phrasing, that the answer to the question of “Who is rich?” is “That guy, not me.”

  • http://www.toddstadler.com/ tODD

    DonS (@9) says the article

    fails to mention that all of those tax breaks phase out for people above about $150,000 AGI, or are eliminated by AMT (Alternative Minimum Tax), which afflicts most people over about the same level of income

    But this completely fails to explain how someone — in the top 400 AGIs, mind you — in the 35% tax bracket manages to pay an effective 17% rate.

    Seems to me they have no problem finding tax breaks, Don.

    Don also complains that the article

    doesn’t mention that the “rich” according to tax code are families making as little as $150,000.

    But I’m not sure what you’re referring to, Don. The top tax bracket for 2010 was for those making $373,651 or more. By what definition of “rich” are you going, Don?

    And Don, if I were making $150,000 per year, I’m not sure I’d feel so cocky as to complain if people thought that made me rich. It would seem, to borrow your phrasing, that the answer to the question of “Who is rich?” is “That guy, not me.”

  • Porcell

    Stephen Moore of AEI based on IRS data states the following on which income group pays the highest share of taxes:

    The latest data show that a big portion of the federal income tax burden is shouldered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare..

    Todd’s argument is that, while wealthy people pay large taxes, they are are still too wealthy. Well, of course, though most of their wealth is invested is invested in the stock and bond markets that in the long run provide the investments that power the private economy and provide real jobs that through taxes finds the government at all levels.

    Todd is essentially making the socialist argument that private wealth is unfair and that such wealth needs to be distributed fairly to the people. The problem with this argument is that under such socialism the people end up impoverished. Name any socialist nation in the world such as Cuba, then you find an impoverished people. Ironically free capitalistic countries provide real wealth to the people. In Asia in recent years some two billion people have moved into the middle class through free capitalistic countries.

    Unfortunately, populist demagogues rail against excessive wealth arguing that the rich should pay more taxes; when they succeed with this argument, as they sometimes do, the people end up suffering.

    Probably the worst populist demagogue in American history is the died in the wool socialist, Barack Obama. Should he succeed in his populist effort, we shall end up in a disastrous debt crisis and depression that will destroy the wealth accumulated by hard-working middle-class people, much in the style of Germany in the late twenties and thirties.

  • Porcell

    Stephen Moore of AEI based on IRS data states the following on which income group pays the highest share of taxes:

    The latest data show that a big portion of the federal income tax burden is shouldered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare..

    Todd’s argument is that, while wealthy people pay large taxes, they are are still too wealthy. Well, of course, though most of their wealth is invested is invested in the stock and bond markets that in the long run provide the investments that power the private economy and provide real jobs that through taxes finds the government at all levels.

    Todd is essentially making the socialist argument that private wealth is unfair and that such wealth needs to be distributed fairly to the people. The problem with this argument is that under such socialism the people end up impoverished. Name any socialist nation in the world such as Cuba, then you find an impoverished people. Ironically free capitalistic countries provide real wealth to the people. In Asia in recent years some two billion people have moved into the middle class through free capitalistic countries.

    Unfortunately, populist demagogues rail against excessive wealth arguing that the rich should pay more taxes; when they succeed with this argument, as they sometimes do, the people end up suffering.

    Probably the worst populist demagogue in American history is the died in the wool socialist, Barack Obama. Should he succeed in his populist effort, we shall end up in a disastrous debt crisis and depression that will destroy the wealth accumulated by hard-working middle-class people, much in the style of Germany in the late twenties and thirties.

  • Pete

    Just don’t forget in the conversation, that those with lower income do spend a larger share of their income on housing and spending (less investing and saving). This means that they pay a higher percentage in sales and property tax, in theory. I would like someone on either side of the issue to crunch those numbers to see how much they effect the balance. Maybe a lot, maybe not much, but if we’re talking about taxes, we need to look at more than income tax.

  • Pete

    Just don’t forget in the conversation, that those with lower income do spend a larger share of their income on housing and spending (less investing and saving). This means that they pay a higher percentage in sales and property tax, in theory. I would like someone on either side of the issue to crunch those numbers to see how much they effect the balance. Maybe a lot, maybe not much, but if we’re talking about taxes, we need to look at more than income tax.

  • http://www.toddstadler.com/ tODD

    Wow, Porcell, you’re right (@18)! It is easier to reply to my argument when you twist it into a ridiculous straw man!

    I hadn’t noticed that before.

  • http://www.toddstadler.com/ tODD

    Wow, Porcell, you’re right (@18)! It is easier to reply to my argument when you twist it into a ridiculous straw man!

    I hadn’t noticed that before.

  • Porcell

    Well, Todd, do explain how your argument has been twisted into a straw-man.

  • Porcell

    Well, Todd, do explain how your argument has been twisted into a straw-man.

  • http://www.toddstadler.com/ tODD

    Porcell (@21), don’t be fatuous. Quote to me my own words where I said the “wealthy … are still too wealthy” or that “private wealth is unfair and that such wealth needs to be distributed fairly to the people”.

  • http://www.toddstadler.com/ tODD

    Porcell (@21), don’t be fatuous. Quote to me my own words where I said the “wealthy … are still too wealthy” or that “private wealth is unfair and that such wealth needs to be distributed fairly to the people”.

  • DonS

    tODD @ 17:

    But this completely fails to explain how someone — in the top 400 AGIs, mind you — in the 35% tax bracket manages to pay an effective 17% rate. Seems to me they have no problem finding tax breaks, Don.

    No question, tODD. But not those tax breaks. Or, at least, those tax breaks aren’t the significant ones for the truly wealthy (top 400 AGI category). Home mortgage interest deductions are limited to the interest on $1 million in mortgage debt. State and local tax deductions are not allowed under AMT, which applies to almost everyone in the $200,000 to 500,000 AGI category, until you have been in the 35% tax rate long enough to emerge from AMT. Those under AMT also get no benefit for having children, and families making over about $120,000 – 150,000 are not allowed to deduct college tuition or student loan interest. Shouldn’t a journalist reporting these breaks as significant for lowering the taxes “the wealthy” pay at least report these facts? That’s all I am saying. Of course, if they did report the whole story, it would shoot holes in the article.

    Surely, the very wealthy are able to avoid taxes, but they do so using much more sophisticated schemes involving high-priced tax accountants and lawyers. That’s my point. Let’s get rid of ALL of that. Here are the rates — they apply to all of your income, except for the first X dollars — pay it. No exceptions. Whether you make $10,000, 100,000, 1,000,000, or 10,000,000,000.

    But I’m not sure what you’re referring to, Don. The top tax bracket for 2010 was for those making $373,651 or more. By what definition of “rich” are you going, Don?
    And Don, if I were making $150,000 per year, I’m not sure I’d feel so cocky as to complain if people thought that made me rich. It would seem, to borrow your phrasing, that the answer to the question of “Who is rich?” is “That guy, not me.”

    What I’m talking about is where all of these deductions the article refers to begin to phase out. Typically at about $125,000 to 150,000 AGI for joint filers. Two teachers making $75,000 each. Upper middle class. Comfortable. Shouldn’t be complaining about their lot in life. But hardly rich. Not in America. Heck, in my county that income doesn’t even qualify for the purchase of a median-priced home. Or, at least, it didn’t a couple of years ago.

  • DonS

    tODD @ 17:

    But this completely fails to explain how someone — in the top 400 AGIs, mind you — in the 35% tax bracket manages to pay an effective 17% rate. Seems to me they have no problem finding tax breaks, Don.

    No question, tODD. But not those tax breaks. Or, at least, those tax breaks aren’t the significant ones for the truly wealthy (top 400 AGI category). Home mortgage interest deductions are limited to the interest on $1 million in mortgage debt. State and local tax deductions are not allowed under AMT, which applies to almost everyone in the $200,000 to 500,000 AGI category, until you have been in the 35% tax rate long enough to emerge from AMT. Those under AMT also get no benefit for having children, and families making over about $120,000 – 150,000 are not allowed to deduct college tuition or student loan interest. Shouldn’t a journalist reporting these breaks as significant for lowering the taxes “the wealthy” pay at least report these facts? That’s all I am saying. Of course, if they did report the whole story, it would shoot holes in the article.

    Surely, the very wealthy are able to avoid taxes, but they do so using much more sophisticated schemes involving high-priced tax accountants and lawyers. That’s my point. Let’s get rid of ALL of that. Here are the rates — they apply to all of your income, except for the first X dollars — pay it. No exceptions. Whether you make $10,000, 100,000, 1,000,000, or 10,000,000,000.

    But I’m not sure what you’re referring to, Don. The top tax bracket for 2010 was for those making $373,651 or more. By what definition of “rich” are you going, Don?
    And Don, if I were making $150,000 per year, I’m not sure I’d feel so cocky as to complain if people thought that made me rich. It would seem, to borrow your phrasing, that the answer to the question of “Who is rich?” is “That guy, not me.”

    What I’m talking about is where all of these deductions the article refers to begin to phase out. Typically at about $125,000 to 150,000 AGI for joint filers. Two teachers making $75,000 each. Upper middle class. Comfortable. Shouldn’t be complaining about their lot in life. But hardly rich. Not in America. Heck, in my county that income doesn’t even qualify for the purchase of a median-priced home. Or, at least, it didn’t a couple of years ago.

  • DonS

    Pete @ 19: Sales and property taxes are assessed locally and at the state level, not federally. Some states have no sales tax. So, it’s really apples and oranges. Those particularly on the left also like to point to payroll taxes to evidence how much lower income people actually pay. But, remember, strictly speaking those are social insurance programs that guarantee benefits in exchange for the tax payments. To date, except for those not living a full life expectancy or living here illegally, those in lower income brackets receive far more in benefits than they paid in payroll taxes. So, that’s a pretty inapt comparison as well.

  • DonS

    Pete @ 19: Sales and property taxes are assessed locally and at the state level, not federally. Some states have no sales tax. So, it’s really apples and oranges. Those particularly on the left also like to point to payroll taxes to evidence how much lower income people actually pay. But, remember, strictly speaking those are social insurance programs that guarantee benefits in exchange for the tax payments. To date, except for those not living a full life expectancy or living here illegally, those in lower income brackets receive far more in benefits than they paid in payroll taxes. So, that’s a pretty inapt comparison as well.

  • Porcell

    Todd, at 16: Anyhow, I find it odd that a discussion in which most people decry the idea that “the rich don’t pay their fair share of taxes” has yet to involve any mention of what the rich earn. I see plenty of discussion of tax rates and percentage of tax receipts, but if we don’t take into consideration the income behind that, how exactly are we going to determine what a “fair share” is?

    Dr. Veith notes that “the rich already pay taxes at a rate nearly twice that of the average” — but surely it hasn’t escaped anyone’s notice that the income of the top 400 AGIs is a wee bit more than twice the average person’s! Or are you simply opposed to a progressive tax scale?

    This is a clear populist argument against the rich based on an essentially socialist assumption. The very term rich says a lot. Your resentment oozes forth.

  • Porcell

    Todd, at 16: Anyhow, I find it odd that a discussion in which most people decry the idea that “the rich don’t pay their fair share of taxes” has yet to involve any mention of what the rich earn. I see plenty of discussion of tax rates and percentage of tax receipts, but if we don’t take into consideration the income behind that, how exactly are we going to determine what a “fair share” is?

    Dr. Veith notes that “the rich already pay taxes at a rate nearly twice that of the average” — but surely it hasn’t escaped anyone’s notice that the income of the top 400 AGIs is a wee bit more than twice the average person’s! Or are you simply opposed to a progressive tax scale?

    This is a clear populist argument against the rich based on an essentially socialist assumption. The very term rich says a lot. Your resentment oozes forth.

  • http://www.toddstadler.com/ tODD

    Porcell (@25), fatuous it is, then.

    “This is a clear populist argument against the rich based on an essentially socialist assumption.” Do you have a random sentence generator over there that attempts to construct arguments based entirely on the combining of pejoratives?

    “The very term rich says a lot.” Criminy, did you even bother to notice that two of the three times you quote me using the word, I was quoting Dr. Veith? I suppose he, too, “oozes” with resentment?

  • http://www.toddstadler.com/ tODD

    Porcell (@25), fatuous it is, then.

    “This is a clear populist argument against the rich based on an essentially socialist assumption.” Do you have a random sentence generator over there that attempts to construct arguments based entirely on the combining of pejoratives?

    “The very term rich says a lot.” Criminy, did you even bother to notice that two of the three times you quote me using the word, I was quoting Dr. Veith? I suppose he, too, “oozes” with resentment?

  • SKPeterson

    Tax policy debates should start with some fundamental questions:

    What is the absolute maximum the state should take of anyone’s income? Why?

    Is it fair for some to be taxed, while others are not? Who, then, should be taxed and who should be exempted?

    Is fairness a desirable goal in tax policy, or is funding the government paramount?

    Should the tax code be used to advance various social policy provisions, or should it simply be designed to collect revenue?

    On what moral right does the government assume the privilege to appropriate funds from individual incomes?

    If taxation without representation is unfair and immoral, is representation without taxation also unfair and immoral?

    Finally, why does the government not pay interest on the revenues it confiscates from the poor who pay payroll income tax when it sends them a refund? Is this not theft?

  • SKPeterson

    Tax policy debates should start with some fundamental questions:

    What is the absolute maximum the state should take of anyone’s income? Why?

    Is it fair for some to be taxed, while others are not? Who, then, should be taxed and who should be exempted?

    Is fairness a desirable goal in tax policy, or is funding the government paramount?

    Should the tax code be used to advance various social policy provisions, or should it simply be designed to collect revenue?

    On what moral right does the government assume the privilege to appropriate funds from individual incomes?

    If taxation without representation is unfair and immoral, is representation without taxation also unfair and immoral?

    Finally, why does the government not pay interest on the revenues it confiscates from the poor who pay payroll income tax when it sends them a refund? Is this not theft?

  • John

    Sure, the top 10 pay just over half the taxes, but they own over 70% of the wealth. Talking about tax distribution means nothing without comparing it to wealth distribution, and it’s pretty simple math to realize that for those who own 70% to only pay 50% in taxes means they’re not paying their fair share.

    You ask, is it a bad thing for so much of the government’s income to come from only 5% of its citizens? Yes, it certainly is, but only because it’s a bad thing that the top 5% own more than the bottom 80%.

  • John

    Sure, the top 10 pay just over half the taxes, but they own over 70% of the wealth. Talking about tax distribution means nothing without comparing it to wealth distribution, and it’s pretty simple math to realize that for those who own 70% to only pay 50% in taxes means they’re not paying their fair share.

    You ask, is it a bad thing for so much of the government’s income to come from only 5% of its citizens? Yes, it certainly is, but only because it’s a bad thing that the top 5% own more than the bottom 80%.

  • DonS

    John @ 28: Wow! So you want to tax wealth, not just income or consumption? So, in your view, if someone chooses to save the income they have left over after the tax man gets his share, and another person chooses to spend it lavishly on trips, food, clothes, etc., the saver should pay more in taxes, because they have more “wealth”?

  • DonS

    John @ 28: Wow! So you want to tax wealth, not just income or consumption? So, in your view, if someone chooses to save the income they have left over after the tax man gets his share, and another person chooses to spend it lavishly on trips, food, clothes, etc., the saver should pay more in taxes, because they have more “wealth”?

  • http://upphouse.com Mark

    Most people do not have income. Income is traditionally understood as “earnings for which you did not work, something separable from a source.” This is exemplified by interest, dividend, stocks, bonds, corporate profit, etc. Contrary to what most assume, your labor is not income. That is your time and sweat you traded which you will not get back. (Maybe I’m alright on the sweat) Therefore you have no income or profit, just a trade.

    http://www.truthattack.org

  • http://upphouse.com Mark

    Most people do not have income. Income is traditionally understood as “earnings for which you did not work, something separable from a source.” This is exemplified by interest, dividend, stocks, bonds, corporate profit, etc. Contrary to what most assume, your labor is not income. That is your time and sweat you traded which you will not get back. (Maybe I’m alright on the sweat) Therefore you have no income or profit, just a trade.

    http://www.truthattack.org

  • John

    DonS, no, I’m not suggesting any kind of tax plan,and by wealth, I simply mean marketable assets. The point is that saying “the top 10% paid x% of taxes” means nothing until we look at the degree of disparity between that top 10% and the other 90%.

  • John

    DonS, no, I’m not suggesting any kind of tax plan,and by wealth, I simply mean marketable assets. The point is that saying “the top 10% paid x% of taxes” means nothing until we look at the degree of disparity between that top 10% and the other 90%.

  • http://Www.Toddstadler.com tODD

    But John (@31), the disparity that needs to be examined with respect to the income tax is with respect to income, not wealth.

  • http://Www.Toddstadler.com tODD

    But John (@31), the disparity that needs to be examined with respect to the income tax is with respect to income, not wealth.

  • DonS

    John @ 31: As tODD indicated @ 32, you are still referencing assets, not income. Assets are irrelevant in an income tax system — once you’ve paid the taxes on your income, you are free to spend or save it without further penalty.

  • DonS

    John @ 31: As tODD indicated @ 32, you are still referencing assets, not income. Assets are irrelevant in an income tax system — once you’ve paid the taxes on your income, you are free to spend or save it without further penalty.


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