Tax the Rich

[Margarita]

Review & Outlook
Their Fair Share
The Wall Street Journal

July 21, 2008

Washington is teeing up "the rich" for a big tax hike next year, as a way to make them "pay their fair share." Well, the latest IRS data have arrived on who paid what share of income taxes in 2006, and it's going to be hard for the rich to pay any more than they already do. The data show that the 2003 Bush tax cuts caused what may be the biggest increase in tax payments by the rich in American history.
The nearby chart shows that the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he's going to cut taxes for those at the bottom, but that's also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.
Aha, we are told: The rich paid more taxes because they made a greater share of the money. That is true. The top 1% earned 22% of all reported income. But they also paid a share of taxes not far from double their share of income. In other words, the tax code is already steeply progressive.
We also know from income mobility data that a very large percentage in the top 1% are "new rich," not inheritors of fortunes. There is rapid turnover in the ranks of the highest income earners, so much so that people who started in the top 1% of income in the 1980s and 1990s suffered the largest declines in earnings of any income group over the subsequent decade, according to Treasury Department studies of actual tax returns. It's hard to stay king of the hill in America for long.
The most amazing part of this story is the leap in the number of Americans who declared adjusted gross income of more than $1 million from 2003 to 2006. The ranks of U.S. millionaires nearly doubled to 354,000 from 181,000 in a mere three years after the tax cuts.
This is precisely what supply-siders predicted would happen with lower tax rates on capital gains, dividends and income. The economy and earnings would grow faster, which they did; investors would declare more capital gains and companies would pay out more dividends, which they did; the rich would invest less in tax shelters at lower tax rates, so their tax payments would rise, which did happen.
The idea that this has been a giveaway to the rich is a figment of the left's imagination. Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. No President has ever plied more money from the rich than George W. Bush did with his 2003 tax cuts. These tax payments from the rich explain the very rapid reduction in the budget deficit to 1.9% of GDP in 2006 from 3.5% in 2003.
This year, thanks to the credit mess and slower growth, taxes paid by the rich may fall and the deficit will rise. (The nonstimulating tax rebates will also hurt the deficit.) Mr. Obama proposes to close this deficit by raising tax rates on the rich to their highest levels since the late 1970s. The very groups like the Congressional Budget Office and Tax Policy Center that wrongly predicted that the 2003 investment tax cuts would cost about $1 trillion in lost revenue are now saying that repealing those tax cuts would gain similar amounts. We'll wager it'd gain a lot less.
If Mr. Obama does succeed in raising tax rates on the rich, we'd also wager that the rich share of tax payments would fall. The last time tax rates were as high as the Senator wants them -- the Carter years -- the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they either worked less, earned less, or they found ways to shelter income from taxes so it was never reported to the IRS as income.

The way to soak the rich is with low tax rates, and last week's IRS data provide more powerful validation of that proposition.

[MissCritter]

Two words: Fair Tax.

[bent]

Who created the laws which allow all the money and jobs offshore? The same people who want to keep more and more and more and more of their money while America becomes a nation of ultra poor and ultra rich.
The corporations who own our government have almost run out of ways to bilk the American people through favorable tax laws so now they are eliminating the middle man. The corporations ARE the government. What do you think Iraq is all about? War is the easiest way to get rich.
We should tax the rich and rebuild the middle class which was what made America great. Anybody who believes that taxing fat cats and getting corporations to pay their fair share is not right is listening to the people with the money. Where's your heart America? Have you given up on your neighbors?

[Mango]

Here's a chart composed by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution:

http://outtheotherear.files.wordpress.com/2008/07/gr2008061200193.gif

I'll let y'all chew on this for a while.

However, I will say this much. The deficit the current administration has put this country in leaves us indebted to countries like China, Saudi Arabia, etc; which is a huge national security threat. McCain's plan also leaves us with a larger deficit than Obama's plan from purely a tax perspective.

[Miss Kitty]

Thanks, Mango. Can I believe this? :idontno:

Let me say this...I would not be against paying more taxes if I was assured my gov't. was going to do the right thing. However, when I hear stories like the following, my altruistic side becomes cynical.

Spoke with a friend who was telling me about his friend who is in charge of the free lunch/breakfast program at his child's school. She told him that she tells many of the kids she knows personally (and that do NOT qualify for free lunch/breakfast) to grab something to eat for free if they arrive early for school. He was stunned when I told him his friend was guilty of fraud and probably something else I am not aware of. I know and so do you that this story is a drop in the bucket. There are many people that need a hand in this country, but when each generation becomes used to the hand out with no questions asked, the gov't. has taught them the same thing as Pavlov's dog.

[Mango]

Thanks, Mango. Can I believe this? :idontno:

The analysis was completed by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. The same link Margarita gave. The Washington Post just used it. I'll make the correction above.

http://www.washingtonpost.com/wp-dyn/content/story/2008/06/09/ST2008060900950.html

Kitty, although yes, technically your friend dispensing free breakfast/lunch is "fraud", I wonder how many kids who don't need it, will actually take advantage of it. When I was in high school, I was entitled to the freebie, my parents were divorced at that time, but I was embarrassed to use it. That person may also see many kids going without breakfast, which is really the most important meal as far as learning is concerned. I'm thinking the rationale is, the more kids that use it, the less of a stigma it has. :idontno:

[wrobert]

Thanks, Mango. Can I believe this? :idontno:

Let me say this...I would not be against paying more taxes if I was assured my gov't. was going to do the right thing. However, when I hear stories like the following, my altruistic side becomes cynical.

Spoke with a friend who was telling me about his friend who is in charge of the free lunch/breakfast program at his child's school. She told him that she tells many of the kids she knows personally (and that do NOT qualify for free lunch/breakfast) to grab something to eat for free if they arrive early for school. He was stunned when I told him his friend was guilty of fraud and probably something else I am not aware of. I know and so do you that this story is a drop in the bucket. There are many people that need a hand in this country, but when each generation becomes used to the hand out with no questions asked, the gov't. has taught them the same thing as Pavlov's dog.


Since you would not mind paying more taxes about taking the additional amount you would not mind paying and give it to a charity that you feel will do the right thing?

[TooFarTampa]

Let me say this...I would not be against paying more taxes if I was assured my gov't. was going to do the right thing. However, when I hear stories like the following, my altruistic side becomes cynical.



I agree with you. I would be interested to see how charitable giving has been affected by the lowering of the tax rate. It seems to me that such private giving has been pretty strong until recently.

I also wonder how the tech and housing bubbles helped with the increase in the federal income tax collected, if they did at all. I don't know if the tech bubble popped too early to affect these numbers, and I don't know if the huge surge in taxes collected on the state level from all those real estate transaction had any affect on the federal income tax collected.

My main concern about Obama's plan (and he hasn't been specific enough yet) is his announcement that he plans to increase the SS payroll tax on those with the highest incomes, which is fine ... as long as those people are guaranteed higher benefits later. To not do so would make SS even more blatantly an entitlement program, which goes against the spirit of why it was created.

[Mango]

My main concern about Obama's plan (and he hasn't been specific enough yet) is his announcement that he plans to increase the SS payroll tax on those with the highest incomes, which is fine ... as long as those people are guaranteed higher benefits later. To not do so would make SS even more blatantly an entitlement program, which goes against the spirit of why it was created.

There's a cap on the amount based on contributions anyway. Then it is adjusted for inflation, yearly. I don't know exactly how much, but everyone is entitled to see their future SS statement. I get mine yearly. I've been working my entire life and had some very fruitful years. I did not see a huge change in my retirement entitlement benefit statement when those years were factored in. :idontno:

[TooFarTampa]

There's a cap on the amount based on contributions anyway. Then it is adjusted for inflation, yearly. I don't know exactly how much, but everyone is entitled to see their future SS statement. I get mine yearly. I've been working my entire life and had some very fruitful years. I did not see a huge change in my retirement entitlement benefit statement when those years were factored in. :idontno:

Right, so if you raise the contributions cap, then you should also find a way to raise the benefits cap. It's just the way I always thought SS was supposed to work. It may not make for much at the end, but there absolutely should be a way to factor it in. It's one of those few things about the entire race that seem black-and-white to me. :roll: Don't know why.

[Margarita]

Two words: Fair Tax.

Oh how I wish I could hear one of the two candidates say they support Fair Tax.

http://www.fairtax.org/site/PageServer

[6thGen]

Ditto on lifting the SS payroll tax. Does the list include that? Both UI and BI are credible, but both are pretty left leaning. Not discounting the data, but the method it was presented is classic class warfare.

I'd have liked to have seen Cato involved, or see if they respond. Does this take into account the 13% increase in the capital gains rate?

[rapunzel]

I agree with you. I would be interested to see how charitable giving has been affected by the lowering of the tax rate. It seems to me that such private giving has been pretty strong until recently.

I also wonder how the tech and housing bubbles helped with the increase in the federal income tax collected, if they did at all. I don't know if the tech bubble popped too early to affect these numbers, and I don't know if the huge surge in taxes collected on the state level from all those real estate transaction had any affect on the federal income tax collected.

My main concern about Obama's plan (and he hasn't been specific enough yet) is his announcement that he plans to increase the SS payroll tax on those with the highest incomes, which is fine ... as long as those people are guaranteed higher benefits later. To not do so would make SS even more blatantly an entitlement program, which goes against the spirit of why it was created.

It's always been the case that SS payments are staggered, and the bracket you fall into is generally the one you paid into for the last years you were contributing to the program. That's why many accountants advise self-employed clients to suddenly begin actually reporting their income after years of reporting a low income, so that they get maximum benefits even with minimum input into the system. That's the kind of mindset that results from all this complaining about taxes on the rich, and stoking class envy toward the poor for the handout they are given.

Regarding charitable giving, I'm all for it. I don't, however believe that charities are anymore immune to waste and corruption by a few individuals within the system, Further, I think that charities lack the ability to coordinate and address the big picture. Worse, charitiable giving goes down in times when needs are greatest. Finally, will private charities let children born into poverty go hungry because their parents are pieces of crap content to hold their hand out all their lives? I don't see how they are in any better a position to address the fundamental catch-22 of assisting our fellow human beings. I know that the ranks of the poor have grown drastically over the last 8 years, so I don't think charities are the magic solution. Otherwise, why would we have needed to evolve a welfare system -- alms to the poor a la medieval Europe would have been the solution and poverty would not have been a problem for more than a 100 years. There is a role of both government and private charity.

[Mango]

Right, so if you raise the contributions cap, then you should also find a way to raise the benefits cap. It's just the way I always thought SS was supposed to work. It may not make for much at the end, but there absolutely should be a way to factor it in. It's one of those few things about the entire race that seem black-and-white to me. :roll: Don't know why.

I agree. I do not understand the statistics of it all. Actuaries always confused me. I imagine that is what is used in calculating the figures.

[6thGen]

I know that the ranks of the poor have grown drastically over the last 8 years

Source?

[Margarita]

I've posted this before but I'm going to post it again for those that just don't get it.

Subject: Bar Stool Economics
>
> Bar Stool Economics
>
> Suppose that every day, ten men go out for beer and the bill for
> all ten comes to $100. If they paid their bill the way we pay our
> taxes, it would go something like this:
>
> The first four men (the poorest) would pay nothing.
> The fifth would pay $1.
> The sixth would pay $3.
> The seventh would pay $7.
> The eighth would pay $12.
> The ninth would pay $18.
> The tenth man (the richest) would pay $59.
>
> So, that's what they decided to do. The ten men drank in the bar
> every day and seemed quite happy with the arrangement, until one day,
> the owner threw them a curve. 'Since you are all such good customers,
> he said, 'I'm going to reduce the cost of your daily beer by $20.
> Drinks for the ten now cost just $80.
>
> The group still wanted to pay their bill the way we pay our taxes
> so the first four men were unaffected. They would still drink for
> free. What happens to the other six men - the paying customers? How
> could they divide the $20 windfall so that everyone would get his 'fair
> share?' They realized that $20 divided by six is $3.33. But if they
> subtracted that from everybody's share, then the fifth man and the
> sixth man would each end up being paid to drink his beer. So, the bar
> owner suggested that it would be fair to reduce each man's bill by
> roughly the same amount, and he proceeded to work out the amounts each
> should pay.
>
> And so:
>
> The fifth man, like the first four, now paid nothing (100%
> savings).
> The sixth now paid $2 instead of $3 (33%savings).
> The seventh now pay $5 instead of $7 (28%savings).
> The eighth now paid $9 instead of $12 (25% savings).
> The ninth now paid $14 instead of $18 (22% savings).
> T he tenth now paid $49 instead of $59 (16% savings).
>
> Each of the six was better off than before . And the first four
> continued to drink for free. But once outside the restaurant, the men
> began to compare their savings.
>
> 'I only got a dollar out of the $20,'declared the sixth man. He
> pointed to the tenth man,' but he got $10!'
>
> 'Yeah, that's right,' exclaimed the fifth man. 'I only saved a
> dollar, too. It's unfair that he got ten times more than I!'
>
> 'That's true!!' shouted the seventh man. 'Why should he get $10
> back when I got only two? The wealthy get all the breaks!'
>
> 'Wait a minute,' yelled the first four men in unison. 'We didn't
> get anything at all. The system exploits the poor!'
>
> The nine men surrounded the tenth and beat him up.
>
> The next night the tenth man didn't show up for drinks, so the nine
> sat down and had beers without him. But when it came time to pay the
> bill, they discovered something important.
> They didn't have enough money between all of them for even half of
> the bill!
>
> And that, boys and girls, journalists and college professors, is
> how our tax system works. The people who pay the highest taxes get the
> most benefit from a tax reduction. Tax them too much, attack them for
> being wealthy, and they just may not show up anymore. In fact, they
> might start drinking overseas where the atmosphere is somewhat
> friendlier.
>
> David R. Kamerschen, Ph.D.
> Professor of Economics, University of Georgia
>
> For those who understand, no explanation is needed.
> For those who do not understand, no explanation is possible.


Warren Brookes, now deceased, once noted that envy "is the single most impoverishing attitude of thought." While the Obama tax plan in no way heralds future bread lines, it misses the point for needlessly furthering the politics of envy. Increased taxes on the rich will serve no helpful policy objective, but those taxes will weigh on the incomes of those who would one day like to be rich.


>
>
>

[scooterbug44]

I think that instead of increasing taxes across the board, we should close some loopholes and curb spending - starting w/ turning off the welfare/earmarks/pork spigot!

I don't buy the notion that increasing taxes on the rich does anything but give them incentives to find more ways to avoid paying taxes and lobby for more loopholes. If you think they don't know how/hire people who know how to work the system, you're not living in America, you're living in denial.

People don't become rich (and stay that way) by being lazy or stupid w/ their money. These are the people we should be rewarding, especially since some of the wealthiest people in America are also the most charitable.

[Mango]

People don't become rich (and stay that way) by being lazy or stupid w/ their money. These are the people we should be rewarding, especially since some of the wealthiest people in America are also the most charitable.

Well, actually the statistics show that 75%- 83% of American families donate to charity. 90% of retirees donate and over 50% of Americans over the age of 18 do volunteer work. By looking at the statistics, if only 1% of Americans earn 600K plus, then it's the lower to middle class making the majority of donations to charity.
http://www.afpnet.org/ka/ka-3.cfm?folder_id=2545&content_item_id=23919

I've also been to these $500-1000 a plate dinners, (paid for by former employers) and they were mainly networking functions while people clapped about what a great thing they were doing for a cause. I am not saying there are ultra-wealthy, well meaning charitable people out there, but lets' not say that by increasing taxes to them, charitable contributions will lessen.

[greenroomsurfer]

Remember this country was founded by Rich White Men that didn't want to pay their taxes and not wanting to answer to big brother.:idontno:

[scooterbug44]

Yes, 90% of Americans donate to charity - averaging just over 3% of their income or $1875 per household or $900 per person.

My point was that it takes a lot of $900 donations to match what the "rich" people we are ragging on donate.

Here's a list for the top 60 for the last several years:

http://specials.slate.com/slate60/2007/

Some are huge donations due to a death (like Leana Helmsley's 4 BILLION), but many rich folks are putting massive amounts into charities. Oprah gave $50 million and barely made the top 50 (she's #43).

[Mango]

Yes, 90% of Americans donate to charity - averaging just over 3% of their income or $1875 per household or $900 per person.

My point was that it takes a lot of $900 donations to match what the "rich" people we are ragging on donate.

Here's a list for the top 60 for the last several years:

http://specials.slate.com/slate60/2007/

Some are huge donations due to a death (like Leana Helmsley's 4 BILLION), but many rich folks are putting massive amounts into charities. Oprah gave $50 million and barely made the top 50 (she's #43).

Scooter, your list is a drop in the bucket compared to what private individuals contributed in 2007.

"Americans increased their charitable donations significantly in 2006 to more (http://www.america.gov/st/washfile-english/2007/June/200706261522251CJsamohT0.8012354.html) than $295 billion -- a record, according to a study released June 25 by the Giving USA Foundation, which reports on charitable contributions. The overwhelming majority of this money was donated by individuals, not corporations or foundations, according to the chairman of Giving USA, Richard Jolly. Donations from individuals, including bequests, accounted for 83.3 percent of total giving last year, or $245.8 billion, he told USINFO."

[Cheering472]

Scooter, your list is a drop in the bucket compared to what private individuals contributed in 2007.

"Americans increased their charitable donations significantly in 2006 to more (http://www.america.gov/st/washfile-english/2007/June/200706261522251CJsamohT0.8012354.html) than $295 billion -- a record, according to a study released June 25 by the Giving USA Foundation, which reports on charitable contributions. The overwhelming majority of this money was donated by individuals, not corporations or foundations, according to the chairman of Giving USA, Richard Jolly. Donations from individuals, including bequests, accounted for 83.3 percent of total giving last year, or $245.8 billion, he told USINFO."

I hope they got a receipt so they can claim it on their taxes.

[Mango]

I hope they got a receipt so they can claim it on their taxes.

:lol: All kidding aside, I found it interesting that many Americans earning $75k and over do not claim the deduction. (from the link above) Only 25% or so do....... Interesting.

[scooterbug44]

That list IS individuals - in many cases their foundations and pet causes were the recipient, but it was rich individuals writing the checks. If you read all the notes, only Micheal Bloomberg's total also included contributions from his foundation as well as himself. :wave:

[Mango]

That list IS individuals - in many cases their foundations and pet causes were the recipient, but it was rich individuals writing the checks. If you read all the notes, only Micheal Bloomberg's total also included contributions from his foundation as well as himself. :wave:

DO THE MATH!!!!:wave: It's still a drop in the bucket compared to what average Americans collectively contributed. if I take your list, of about 50 people X 50 million each (high average) that's 25 billion. Even if I add another 20 billion to that from 1% of the population, that's 45 billion. (being generous)
If I take a low year of contributions- $265 billion, thats still $220 billion contributed by low- middle income Americans.

[30ashopper]

Here's a chart composed by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution:

http://outtheotherear.files.wordpress.com/2008/07/gr2008061200193.gif

I'll let y'all chew on this for a while.

However, I will say this much. The deficit the current administration has put this country in leaves us indebted to countries like China, Saudi Arabia, etc; which is a huge national security threat. McCain's plan also leaves us with a larger deficit than Obama's plan from purely a tax perspective.


I'd definitely choose McCain. "Starve the beast."

Also, do people who make "up to 18K" a year really pay taxes? Married filing jointly up to 16K pay 10%, that's $160.00, so under Obama's plan, how are these people being taxed $600.00 less??

[Bdarg]

I'd definitely choose McCain. "Starve the beast."

Also, do people who make "up to 18K" a year really pay taxes? Married filing jointly up to 16K pay 10%, that's $160.00, so under Obama's plan, how are these people being taxed $600.00 less??


Check you math. 10% of $16,000 is $1,600 ;-), not $160.

I would be careful around the IRS with those calculation capabilities.

[30ashopper]

Check you math. 10% of $16,000 is $1,600 ;-), not $160.

I would be careful around the IRS with those calculation capabilities.

Doh! Bad calculator, bad bad bad.

I'd like to see both these cuts combined together. Drop the tax increases of course.