Flat tax vs progressive taxation.

What part of "The top 50% of wage earners" didn't you understand?
That means that if you take all the wage earners in the U.S.A that submited a tax form, took the top half (everyone from the median person on up). That half of the wage earners pay 96% of Federal Income Taxes.

Fedral
Sorry I was trying to ask what is the floor of the top 50% in dollars. If for instance the top 50% encompasses all of the wealthy and upper middle class. It would stand to reason that they pay a bulk of the tax. It is pretty difficult to get blood from a stone.

And this part makes absolutely no sense.

If you make 20,000 and pay 20% flat tax you pay $4,000.

If I make $200,000 and pay 20% in a flat tax I pay $40,000.

I pay ten times what you pay because I make 10 times more than you.

Using the 2003 IRS's tax liability calculator at the IRS.gov and using both our incomes above with no deductions shows the following:

Your liability for an income of $20,000 would be $1,484.

My liability for an income of $200,000 would be $51,500.

As above I still make 10 times what you make, but my income tax liability is 34.7 TIMES yours.

There is nothing "fair" nor "progressive" about penalizing success.

Fair means fair, fair doesn't mean 'soaking' the rich because they 'can afford it'.

Thats discrimination, pure and simple.

And you're saying that's a bad thing?

With as many people screaming for the wealthy to 'pay their fair share' I think it is important to show what these people consider 'fair'.

Federal
Maybe this will make my question more clear. The top 50%of wage earners, I assume that means income from all sources, earn in $ what percentage of the overall income. %50%, 60%, 70& ???

AU,
Truly sorry for sounding snappish, I really wanted to answer your question but couldn't understand what it was you had been looking for.
I understand the facts you were looking for and it took me a little bit to sift through the IRS Excel spreadsheets. (all the figures are 2001 tax figs)

% of wage earners / Adj. gross income share / Total tax share
top 1 %...............................17.53%............................33.89%
top 10%..............................43.11%............................64.89%
top 50%..............................86.19%............................96.03%


The Adj. Gross income share is the % of the total wage earned income (adjusted for earned income credit and minimum tax levels).

The Total tax share is the % of the entire collected income taxes that was collected from earners in that bracket.

Hope this answers your question.

And once again AU, I am sorry if I seemed to be a bit snippy, I try to keep a level and reasoned tone in my political/economic discussions.

Thanks, Those statistics throw a very different light than the original ones.

I'm not sure where you got your figures, but according to the Tax Foundation (Acrobat required), a conservative group, the top 1% of income recipients in 2001 paid 33.89% of taxes (not 64.89%). The top 50% of income recipients, it's true, paid 96.03% of all federal income taxes, but then the top 50% earned 86.19% of all income. So there's really not a huge disparity.

But all this number juggling reminds me of the story of the nine men, seated at a table in a bar. In walks Bill Gates, who sits down with the men and announces that the average net worth of each person at the table is now $1 billion.

Bill Gates's net worth, after all, is larger than the combined net worth of the bottom 40% of all people in the nation. If the top 1% of the country owns roughly 40% of the entire wealth of the country, then where is the injustice in making that 1% pay taxes in roughly the same proportion?

My point exactly, that is why I asked for the statistics. To make it even more telling is the fact that in the bottom fifty percent of wage earners are included the lowest paid wage earners who can hardly keep food on the table and a roof over their heads. Asking them to pay taxes would be an obscenity.

IMHO, most government statistics have very little meaning to the "average" joe. I remember reading something years ago that a flat tax of 17 percent would cure all the problems of the current tax codes consisting of some 450,000 pages that no two people can agree upon. Since when do you think our government has done anything that "simplified" our lives? Besides, a flat tax would destroy the jobs of untold accountants, software programmers, and H and R Block.

I haven't read the preceding posts, but, I want to say that I have never seen a flat tax plan that convinces me we ought to abandon the progressive tax. Only thing, it has to be more steeply progressive in my view.

Flat Tax
The government is after a flat tax alright, simply everything you earn!
They are up to about half at the present.They will keep trying for more and more. The number of earners will thus decline from lack of incentive and the public programs will go from the present HUGE---- swiftly to rapid decline. Withiut free spirited workers the economy will fail and so will the socialistic inclined government. When government controls the people and becomes huge (and out of control) , you no longer have a free democracy.

007, It seems very few of us really see how the government continues to tax us out of our earnings. Federal income tax, state income tax, capital gains tax, gasoline tax, utility tax, telephone tax, property tax, vehicle tax, sales tax, excise tax, tobacco tax, liquor tax, airport tax, rental car tax, departure tax, security tax, entertainment tax, park entry tax, bridge crossing tax, highway tax, transportation tax, social security tax, and utility tax. They're gonna tax "air" the next chance they get. They'll call it "stay alive tax."

Tax simplification makes sense[/u]
By:Bruce Bartlett
January 5, 2004

On Dec. 23, the Treasury Department issued a new study of tax simplification. It discusses ways in which millions of taxpayers could be relieved of having to file any tax return at all. However, a new report by Congress' Joint Committee on Taxation (JCT) explains why this probably won't happen.

The problem of complexity has plagued the federal income tax from its beginning in 1913. As early as 1928, the JCT issued a report containing many familiar complaints. However, it concluded that there was a severe limit to tax simplification, because the complexity of modern business operations necessitated a high degree of complexity in the tax system.

Not only does tax complexity follow from business complexity, it causes it. As New York Times reporter David Cay Johnston details in his new book, "Perfectly Legal," many businesses are now organized in extraordinarily complex ways for the sole purpose of minimizing their tax burden. But legislative and administrative efforts to plug "loopholes" only create more complexity, which tends to create new tax-saving opportunities for the clever to exploit.

For big companies, tax complexity is a necessary fact of life, and they can afford to hire experts to figure it out. But for small businesses and individuals, complexity imposes a real cost. In 2002, the General Accounting Office found that small businesses overpaid their taxes by $18 billion over the previous two years because of errors on their tax returns. Another GAO report that year found that as many as 2.2 million taxpayers overpaid their taxes by not taking advantage of all the deductions they were legally entitled to.

A new JCT report shows just how hard it is to take advantage of all the tax provisions that might save on taxes. It lists all the so-called tax expenditures, including 5 pages of new ones enacted just last year. The really big ones, however, are not those that benefit big businesses, but the middle class. For example, more than 33 million taxpayers avail themselves of the mortgage interest deduction, saving them $59 billion in taxes. Thirty-eight million taxpayers claim deductions for charitable contributions, for a tax saving of $37 billion.

It is doubtful that many taxpayers claiming such deductions would give them up just to get a simpler tax system. As Brookings Institution economists Bill Gale and Leonard Burman have observed, "Most people don't mind complexity that directly reduces their taxes." Indeed, one of the most complex provisions of the tax code is the Earned Income Tax Credit, which often involves a tax rebate for people with no income tax liability. People don't mind this complexity too much, however, because the payoff is so large.

According to the JCT, the effect of the EITC is to completely wipe out the aggregate tax liability of every American with an income below $30,000. This group actually got a "refund" of $16 billion more than their tax payments. As a consequence, 40 percent of all tax returns now report a zero or negative tax liability.

The Treasury study suggests that many of such people could be relieved from filing any return at all. Moving toward a system in which tax withholding exactly matches one's tax liability could potentially eliminate filing for as many as 50 million people, about a third of all those currently filing returns. But this would require employers, financial institutions and other income providers to do more work and also require them to know much more about the financial affairs of those receiving wages and other payments from them.

In the past, taxpayers have strongly resisted further intrusions into their financial privacy and any expansion of tax withholding. For example, a few years ago Congress enacted legislation requiring banks to withhold taxes on interest income in order to improve tax compliance. People raised such a stink about it that the legislation was quickly repealed. But this sort of thing would be necessary to make a return-free tax system work.

The most important conclusion of the Treasury study is one that has been echoed in all previous studies of tax simplification: The tax law itself is too complicated. Radical simplification of the law would have to precede any effort to greatly simplify taxpaying for more than a small number of people. This doesn't just mean rewriting the law to make it clearer, but fundamentally restructuring the tax law from top to bottom.

Former House Ways and Means Committee Chairman Bill Archer, R-Texas, now believes that income itself is the major barrier to simplification. It is just too hard to define. Therefore, we must move toward taxation of consumption if we are to make real progress toward simplification. People may have to pay more of their tax bill in the prices of the goods and services they buy if they want to rid themselves of filing tax returns.