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A few weeks ago, the Internal Revenue Service released data on tax year 2003. They show that the top 1 percent of taxpayers, ranked by adjusted gross income, paid 34.3 percent of all federal income taxes that year. The top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top quarter of taxpayers paid 83.9 percent.
Not only are these data interesting on their own, but looking at them over time shows that the share of total income taxes paid by the wealthy has risen even as statutory tax rates have fallen sharply. A growing body of international data shows the same trend.
On the first point, we see that in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent. After Ronald Reagan's tax cut of 1981, which reduced the top rate to 50 percent -- a massive give-away to the wealthy according to those on the left -- the percentage of income taxes paid by the top 1 percent rose steadily.
By 1986, the top 1 percent's share of all federal income taxes rose to 25.7 percent. That year, the top statutory tax rate was further cut to 28 percent -- another huge-give-away, we were told. Yet the share of income taxes paid by the top 1 percent continued to rise. By 1992, it was up to 27.5 percent.
Of course, it would be a mistake to conclude that tax increases will not raise the wealthy's tax share or that tax rate cuts always will. Nevertheless, it is remarkable that the percentage of federal income taxes paid by the top 1 percent of taxpayers almost doubled during a time when the top income tax rate fell by half.
A common liberal retort to these data is that they exclude payroll taxes, which are assumed to be largely paid by the poor. However, it turns out that when one includes payroll taxes in the calculations, it has far less impact on the distribution of the tax burden than most people would assume, because the wealthy also pay a lot of those taxes, too.
In a 2004 paper presented to the American Statistical Association, IRS economists Michael Strudler and Tom Petska calculated percentiles data that included both income taxes and Social Security taxes. In 1999, the top 1 percent paid 23.3 percent of combined payroll and income taxes, the top 10 percent paid 52.2 percent, and the top 20 percent paid 68.2 percent.
In recent years, a number of foreign countries have also started publishing tax shares data. They show the same trend of higher and higher burdens on the wealthy even when tax rates are cut sharply.
For example, according to Her Majesty's Revenue and Customs, the share of total income taxes paid by the top 1 percent of taxpayers was 11 percent in the United Kingdom in 1979, when the top income tax rate was 83 percent. Prime Minister Margaret Thatcher cut that rate to 60 percent, and by 1987 the share of income taxes paid by the top 1 percent had risen to 14 percent. The top rate was cut again to 40 percent, where it still stands, and the share of income taxes paid by the top 1 percent continued rising to a current level of 21 percent.
Statistics Canada recently released a study looking at tax shares in that country. It shows that the share of federal income taxes paid by the top 10 percent of taxpayers reached 52.6 percent in 2002 -- almost exactly the same as is paid by the top 10 percent in the United Kingdom. However, the top income tax rate in Canada is just 29 percent. (Provincial tax rates in Canada are very substantially higher than among U.S. states.)
Finally, we now have data for Australia from the Australian Taxation Office. In 2003, they show the top 5 percent of taxpayers paying 30.2 percent of all income taxes, the top 10 percent paying 41.8 percent, and the top 25 percent paying 63.8 percent. But the top income tax rate in Australia is 47 percent. Thus we see that the country with the highest top rate also brings in the least amount of total income tax revenue from its richest citizens in percentage terms.
At some point, those on the left must decide what really matters to them -- the appearance of soaking the rich by imposing high statutory tax rates that may cause actual tax payments by the wealthy to fall, or lower rates that may bring in more revenue that can pay for government programs to aid the poor? Sadly, the left nearly always votes for appearances over reality, favoring high rates that bring in little revenue even when lower rates would bring in more.
Bonnie said:December 6, 2005
Tax Cuts for the Wealthy: Appearances v. Reality
By Bruce Bartlett
http://realclearpolitics.com/Commentary/com-12_6_05_BB.html
Max Power said:Real clear politics my a$$.
It ignores the amount of money that rich people make.
If the top 1% of taxpayers make 20% of the income, and pay 20% of the income taxes, then that's fair, no?
Hobbit said:Exactly, but everyone knows that the higher brackets pay a higher percentage. If you shoot up a tax bracket, a greater percentage of your income goes to the government. Most people pay an average of 20% of their income in income taxes. Those in the upper tax bracket pay more like 50%.
Max Power said:Those in the upper bracket can also afford good accountants, and don't have to pay close to what they are "supposed" to.
But I digress...
Then why is the author of the article afraid to use these statistics? Does the author's argument fall apart if you do?
No, not at all fair. Ive never heard any valid reasons for this line of thinking, maybe youll be the first.Max Power said:Real clear politics my a$$.
It ignores the amount of money that rich people make.
If the top 1% of taxpayers make 20% of the income, and pay 20% of the income taxes, then that's fair, no?
Mr. P said:No, not at all fair. Ive never heard any valid reasons for this line of thinking, maybe youll be the first.
Please explain why you think its fair.
Hobbit said:Despite what is typically accepted as "common knowledge," rich people don't cheat on their taxes. The staff of accountants is needed because of how complicated the return gets when you make a lot of money. Most rich people actually pay over what they're supposed to on purpose, because they know the IRS will come after them, place the burden of proof on them, and charge them a fortune in fees and possibly seize all of their assets. For the average person, you have less than a 1% chance of getting caught cheating on your taxes, but rich people are a huge source of tax income, so they can't get away with it because they get audited all the time.
Buffett posed a hypothetical situation in which Berkshire Hathaway, which does not currently pay a dividend, paid $1 billion in dividends next year.
Through his 31 percent ownership of the company, Buffett said he would receive an additional $310 million in income that would reduce his tax rate from about 30 percent to 3 percent, while his office secretary would still have a tax rate of about 30 percent.
Flat tax isn't fair either..but back to your stand on the higher income folks paying more, please explain how that's "fair".Max Power said:It's referred to as a flat tax, and there's a wealth of knowledge on the internet about it.
http://en.wikipedia.org/wiki/Flat_tax
Max Power said:I didn't say they cheat.
Do you have a link to back up what you're saying?
The highest tax bracket in the U.S. is 35% I believe, do you have any evidence that people pay more than that?
And, I'd like to point out that it was George Bush who said
"the really rich people figure out how to dodge taxes anyway."
And, of course, there's this:
http://money.cnn.com/2003/05/20/news/buffett_tax/
Mr. P said:Flat tax isn't fair either..but back to your stand on the higher income folks paying more, please explain how that's "fair".
LuvRPgrl said:NO taxation will ever be fair.
The only MORAL taxation, is taxation for govt purposes that are absolutely essential.
All others should be voluntary.
essentials
roads
military
police
fire dept
legal system
Hobbit said:Read "The Fair Tax Book." I can't remember the exact number, but less than half of all taxpayers claim any deductions. I also know that celebrities always overpay, since the IRS would lick their chops at making an example of somebody high profile, and they don't want the headache of proving the validity of deductions. I've heard numberous celebrities from radio, TV, and Hollywood say this. As far as "dodging taxes," if you look it up, nearly all of these tax shelters are perfectly legal and are also the only way some of these people can keep an appreciable amount of their income.
Income tax is one of the biggest travesties of our modern system, and a documented item on the list of steps to a communist society. The way taxes work is that you're supposed to tax something you want less of, and right now, income is taxed, meaning the government is essentially saying it doesn't want people to make money. This punishes success and stagnates the economy, not to mention that until a constitutional ammendment that was advertised as a weapon of class warfare, income tax was unconstitutional, and was ruled a such before.
Same percent, but more money. They pay more now, so what's the difference? Yer not doin so good convincing me the "Rich", whom ever they are should pay more tax and why.Max Power said:Higher income folks would pay the same percentage as everyone else.
NO,no,no Consumption IS a necessity, one that YOU have total control over.Max Power said:It doesn't really matter where the tax is, they all have the same effect. A consumption tax would punish consumption, which would also hurt the economy.
Mr. P said:Same percent, but more money. They pay more now, so what's the difference? Yer not doin so good convincing me the "Rich", whom ever they are should pay more tax and why.
Mr. P said:NO,no,no Consumption IS a necessity, one that YOU have total control over.
Theres no punishment, just an effective way to Fairly collect tax. That includes everyone who doesnt pay tax now. Why continue to burden a small percentage of the population with the majority of the taxes? Now that IS Punishment for everything we want to promote, drive, education, achievement and success.
No sale. I could only live in one house and drive one car at a time..Ya get an F for that one. :teeth:Max Power said:Well, there is a correlation between what the government "gives" you ,and how much money you make. If a person owns 2 or more houses, then it should make sense that that person should contribute more to national defense (you need defense for more land), stuff like that. If you have more cars, you use the roads more, etc.
LuvRPgrl said:Think of this. If Bill Gates gets a tax cut of 10 billion this year, via MSFT, do you think he is gonna go out and buy a bigger house? car? boat?
