We Can Talk About Income Taxes Or Having A Root Canal

@realjohnboy,

realjohnboy wrote:

Duly noted, B-Net. Pretty naive, eh?
The thing that irks me is how people will make statements without having much data to support
what they are arguing for or against.
Here are some numbers for yall from the IRS in 2007:

The top 1% (1,410,710) of tax return filers earned 23% of the income* and
paid 40% of the federal government's revenue from personal income taxes. Their effective tax rate was 22%.

All human? or including corporations ?

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@OmSigDAVID,

Personal (human) tax returns.

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As the below graph clearly shows, the reforms instituted during the depression and post-depression period created what we refer to as the 'middle class.' The subsuquent rise of Reaganomics, or policies which clearly and intentionally favor the rich, have lead to a reversal of this situation. If this chart went to 2010, you would see an even greater rise at the end.

http://farm5.static.flickr.com/4048/4700060215_0477b289de.jpg

It is baffling to me that anyone could argue that lowering taxes on the wealthy has had any real effect other than to concentrate ever-growing amounts of wealth in that group.

Cycloptichorn

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Here is a link to raw IRS data.

http://www.irs.gov/taxstats/

If nothing else it gives a starting point to check data from other sources if anyone disagrees with it.

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Good afternoon. I had to take a break to see how the World Cup would turn out.
Okay. Spain wins. Back to the stats.
Much has been said about the fact that the very wealthiest (in terms of income) pay the most in personal income taxes and the cost to them has gotten greater. That is probably true.
In 2007. the 1.4 million taxpayers classified as being in the top 1% took in 23% of the income and paid 40% of the personal income tax revenue collected by the federal government. In 1980, they paid 19%; in 1989 it was 25% and in 1998 it was 35%.
Similar numbers show up as we move up to the top 5% of income.
But then things flatten out. People in the top 6-10% of income paid in 2007 about 11% of federal income tax revenue, unchanged from 1980.
Folks in the 11-25% contributed 16% in 2007 vs 24% in 1980. There is a similar trend if we look at the next tier-getting to 50% of taxpayers, dropping from 20% to 10% of tax revenue.
So what can we conclude? Well, the most prosperous of us are paying a greater portion of the federal government's income tax revenues. The less prosperous are paying less. Duh.

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@realjohnboy,

Quote:

Much has been said about the fact that the very wealthiest (in terms of income) pay the most in personal income taxes and the cost to them has gotten greater. That is probably true.

Not quite. The total amount that this group pays in taxes has grown; but the percentage of their personal fortunes paid in taxes has dropped. It's more accurate to say that the cost to them has lessened, not grown.

As an example, let's say that CycloCo. has 100 employees including myself as Big Boss. We each make 50k a year and at that level we pay about 15% in taxes each, or around $7500 per year (all numbers are hypothetical).

Over the course of 3 decades, my salary rises ten-fold while everyone else's stays flat - a situation that is in fact quite common amongst the higher ranks of corporations. I now make 5ook per year and am in a higher tax bracket, so I pay 35% taxes on that - or $175,000 in taxes.

In terms of the total taxes paid in by workers in CycloCo, I now pay around 25% of ALL taxes paid in by the company's workers - even though my salary represents less than 10% of the total salary pay by the company. Some try and use this argument to show that the rich are unfairly burdened by taxes and that they are being punished somehow. The truth is the exact opposite: rising amounts of tax burden on the upper classes are indicative of greater levels of wealth being concentrated amongst this group, a sign that they are in fact getting richer.

Cycloptichorn

1 Reply

@Cycloptichorn,

Sorry, Cyclo, but your story about a hypothetical company went over my head.

The issue that is often raised, I guess, is about the taxes being levied on the highest earners in the country. They, the top 10%, pay 70% of the income tax that the federal government gets. That is up from 50% in 1980 (56% in 1989 and 65% in 1998).
The thought is, amongst some, that if taxes for those folks were cut, they would create jobs.
The counter argument is that, if taxes were to be raised on the richest wage earners and reduced for those on the lower end, the government could still function (revenue neutral) while those folks in the 11% to 50% of income tax payers could earn more and pay more taxes.

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@realjohnboy,

realjohnboy wrote:

Sorry, Cyclo, but your story about a hypothetical company went over my head.

The issue that is often raised, I guess, is about the taxes being levied on the highest earners in the country. They, the top 10%, pay 70% of the income tax that the federal government gets. That is up from 50% in 1980 (56% in 1989 and 65% in 1998).
The thought is, amongst some, that if taxes for those folks were cut, they would create jobs.
The counter argument is that, if taxes were to be raised on the richest wage earners and reduced for those on the lower end, the government could still function (revenue neutral)
while those folks in the 11% to 50% of income tax payers could earn more and pay more taxes.

How coud thay earn more? More than what?

1 Reply

@OmSigDAVID,

Touche, David. That was very sloppy writing on my part. I will try to redo that tomorrow.

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@realjohnboy,

Quote:

So what can we conclude? Well, the most prosperous of us are paying a greater portion of the federal government's income tax revenues. The less prosperous are paying less. Duh.

That is leaving out some very important parts.
1.) What has happened to the income of those top earners
2.) What has happened to the income tax as the percent of total revenues. Since 1980, the FICA tax has been increased so the lower income earners have had an increase in FICA that didn't really affect the higher earners.

The other thing you have to be careful of in using the IRS information is this is based on returns, not on total tax payers.

With the increase of tax credits, it means many people are now filing returns on the lower end of the scale in order to get credits that may have been exempt from filing in the past.

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@realjohnboy,

The other thing you need to be careful of is notes in the data.

Quote:

Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable

Which means you can't really compare 1980 to any other years after 1986.

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http://www.epi.org/page/-/old/datazone/05/inc_by_fifth.pdf
This is income by quintile through 2003.
From 1980 to 2003, the top 5% had their income increase by 90% while the middle quintile only saw a 20% increase in their income. (Inflation adjusted)

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@realjohnboy,

Quote:

Sorry, Cyclo, but your story about a hypothetical company went over my head.

The point is that increased amounts of the tax burden shifting to the rich is a sign that they are getting richer - much richer, when you include the fact that this burden is increasing at the same time their rates have been cut. Some claim the opposite of this is true. And when you say that the 'cost to the rich has gotten greater,' you were 100% wrong; it has lessened.

Cycloptichorn

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An interesting document from the CBO

www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf

It gives effective tax rates per quintile from 1979 to 2006. The effective tax rate for the rich were higher in 1979 than in 2006.

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Good evening. I couldn't get your links to show up, Parados. I use Mozilla or whatever it is called, and that happens a lot to me.
I am aware of the note about how the calculation of AGI changed in 1986. But that was the data I could find when I started this.
I repeat that AGI seems to exclude things like dividends, capital gains, municipal bond interest, and the value of employer provided health insurance. These, I think, would tend to add to the "income" of higher wage earners.

1 Reply

@realjohnboy,

realjohnboy wrote:

I couldn't get your links to show up, Parados.

Links to PDFs. Maybe viewing them in an online reader would work?

Mean family income by quintile and top 5%, 1966-2003 (2003 dollars)

Effective Federal Tax Rates for All Households, by Comprehensive Household Income Quintile, 1979-2006

1 Reply

@old europe,

Awesome, That works, I think. Bedtime for me, though.

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@realjohnboy,

Harry Truman said it best, John of Virginia:

There's gonna be taxes and you're gonna have to pay them. Smile

1 Reply

@Letty,

Letty wrote:

Harry Truman said it best, John of Virginia:

There's gonna be taxes and you're gonna have to pay them.

Let 's hope that thay will ONLY be SALES taxes,
so we can regulate how much tax we pay, on a voluntary basis.

David

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We Can Talk About Income Taxes Or Having A Root Canal

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