Tax Rates

[Illest]

FYI, I yanked the graph from here. You can read about the methodology there. Obviously it's an imprecise estimate, as any estimate of tax incidence is bound to be. I'm not sure what criticisms you read, but the graph is new-ish, so I imagine you're probably confusing it with a different figure. Certainly it should be treated as a rough estimate, which is why there isn't a more detailed resolution on the y-axis. But the estimate is in line with what others have found, and the graphics were pretty, so that's why I used it.

Originally Posted by DaytonIllini

I wasn't confused. What the graph shows is mildly progressive taxation. Liberals generally agree that wealthy people should pay a somewhat higher fraction of their income in taxes. That's reflected in the graph.

The graph also shows that taxes other than the income tax are, in total, regressive (except for sales tax which is excluded from the graph as well), so that the income tax code needs to be unusually progressive to match what Liberals think is an appropriate pattern of overall taxation. If the income tax were only moderately progressive, the tax code as a whole could be regressive (if you ignored all the other taxes like sales tax and state and local income taxes).

You're off on multiple fronts. First, there is broad popular support, and has been for a century, for the wealthy paying a higher fraction of their income in taxes. Note that, for example, only 9% of respondents in this poll felt that the recent tax extension did "not enough" for the wealthy. In fact, a solid majority (62%) opposed the extension that was granted for people earning 250K per year. Even flat tax proponents typically want mild progressive taxation, which they accomplish by having the flat tax rate start at some non-zero income level. So progressive taxation is a broadly-held position.

Sales tax is included in the graph, and omitting it would actually make the tax system look more progressive than the graph shows. The basic intuition here is that the poor have a high marginal propensity to consume.

Once again, the picture includes state and local taxes, which are included under the catch-all grouping of everything other than federal income taxes. Even without seeing the source, a basic inspection of the size of the percentages should tell you as much; remember that federal revenues are under 20% of GDP.

As you suspected, the top decile look like they have lower taxes than you expect because tax rates continue to rise within the top decile. The number of Americans earning what doctors do is tiny.

[ijustkrushalot]

Originally Posted by DaytonIllini

Of course property taxes are higher in areas of squalor. Any derelict ridden areas are always run by Democrats whose first, second and third reflex every morning is to steal someone else's money. They will steal it either with a gun or with a vote (followed by the threat of a gun of course).

Democrats rarely can end a sentence without some appeal to steal some more from their fellow man. Naturally they know how to spend money better than the poor deluded souls that actually worked for the money. Look at any inner city and see how well they do with governing. They have no crime and their children are such high achievers. Of course they don't want to admit their utter failure so they make up crap about discrimination and try to create special classes of people with special rights. That would never be called discrimination though. After all their motives are pure (ROFLMAO).

We must spend more on infrastructure.
We must spend more on education.
We must spend more on research.
We must spend more on police.
We must spend more and more and more. Always the spending must increase. Faster and faster.
Let's promise people money for their retirements we cannot possibly afford without stealing even more money in the future.

LOL.

let's try and lay the stupid strawmen aside and just think through this logically.

my hometown (iirc, in the 2nd or 3rd reddest county in the state in 2008)... has a school district tax of $5.50 per $100EAV (which comes out to about 1.83% of market value.

Urbana, home of elitist liberals and black people, has a tax rate of $4.30 per $100EAV.

Why?

There is $174,003 EAV per pupil in the Urbana school district. .. meaning the school makes $7,482 per pupil from property tax.

My hometown? $112,414 per student in EAV, meaning with a higher tax rate, the school district pulls in $1,300 less per student from local property tax (state aid helps make up the difference)

plenty of conservative areas of this country are falling further and further into welfare status as the global economy focuses more and more on cities.

teh rest of your post was a rambling incoherent mess, at best, so there isn't any discrimination, really?

[DaytonIllini]

Originally Posted by Illest

FYI, I yanked the graph from here. You can read about the methodology there. Obviously it's an imprecise estimate, as any estimate of tax incidence is bound to be. I'm not sure what criticisms you read, but the graph is new-ish, so I imagine you're probably confusing it with a different figure. Certainly it should be treated as a rough estimate, which is why there isn't a more detailed resolution on the y-axis. But the estimate is in line with what others have found, and the graphics were pretty, so that's why I used it.


You're off on multiple fronts. First, there is broad popular support, and has been for a century, for the wealthy paying a higher fraction of their income in taxes. Note that, for example, only 9% of respondents in this poll felt that the recent tax extension did "not enough" for the wealthy. In fact, a solid majority (62%) opposed the extension that was granted for people earning 250K per year. Even flat tax proponents typically want mild progressive taxation, which they accomplish by having the flat tax rate start at some non-zero income level. So progressive taxation is a broadly-held position.

Sales tax is included in the graph, and omitting it would actually make the tax system look more progressive than the graph shows. The basic intuition here is that the poor have a high marginal propensity to consume.

Once again, the picture includes state and local taxes, which are included under the catch-all grouping of everything other than federal income taxes. Even without seeing the source, a basic inspection of the size of the percentages should tell you as much; remember that federal revenues are under 20% of GDP.

As you suspected, the top decile look like they have lower taxes than you expect because tax rates continue to rise within the top decile. The number of Americans earning what doctors do is tiny.

Illest. If I was grading that research, I would give it an F.

I mean come on. The rich have said for years (trickle down) that taxing them at higher rates is really a tax on the poor (let's say $100K and less for this example). The claim is that money taxed from the rich is not spent and therefore the guy on the assembly line makes fewer cars and boats. The guy in the construction field makes fewer and smaller homes. The guy in the hotel gets fewer tips and so on.

The Left claims this is utterly discredited as an economic theory. This despite the overwhelming evidence to the contrary - see luxury tax of the 70's and its impact on relatively poor American workers.

Despite that the author puts this crapola in there:

Corporate, estate and other taxes on capital may appear to hit wealthy taxpayers disproportionately, but I explained last week how that appearance is deceiving and inconsistent with the economics of capital taxation, which says that workers bear much of the burden of capital taxes in the former of lower employment and wages.

For this reason, I assume that capital taxes have essentially the same income incidence as sales taxes, although quantitatively results for the total tax burden would be pretty similar if I assumed (contrary to economic reasoning) that capital taxes are borne by who writes the checks to the government, because capital taxes don’t bring in much revenue

Those paragraphs are Trickle Down economics precisely. So this guys thesis is that taxes are only mildly progressive and he backs it up by using the other guy's argument for half the taxes the rich pay? Come on.

Then he goes on with this:

When interpreted as a tax on housing, the property tax is also somewhat regressive, because high-income people spend a lesser fraction of their income on housing, especially on the rental housing that is often subject to higher property tax rates than owner-occupied housing.

Everyone knows (except Krush apparently) that you cannot simply pass along rental taxes to your urban renters. In my rather small real estate empire it is obvious that units with higher real estate tax rates in poorer areas simply CANNOT have those expenses passed along. This is either due to rent controls in some areas OR the law of supply and demand. The people renting in those areas simply do not have the $$ to pay those rates. One accepts a lower margin on inner city homes OR uses cheaper construction to offset those tax rates OR uses your inner city homes to offset profits made in the suburbs. Surely this is common sense. So in essence, wealthier people renting in the suburbs pay taxes which subsidize the poor in the cities. They pay again to subsidize them by paying higher rent rates to offset the losses landlords occur in inner cities.

[Illest]

Originally Posted by DaytonIllini

Those paragraphs are Trickle Down economics precisely. So this guys thesis is that taxes are only mildly progressive and he backs it up by using the other guy's argument for half the taxes the rich pay? Come on.

Nope, he's not using a trickle-down argument. It's an argument about tax incidence which says that the effect on prices and profits is the same if you tax the worker or the employer, the buyer or the seller. This has nothing to do with how people subsequently spend their money.

(By the way, if you're going to use a trickle-down argument in tax incidence, you also have to include a trickle-up argument -- that rich people get richer from the spending of the poor. For some reason, some people seem to have the idea that the expenditures of the wealthy are uniquely helpful to the economy. This is the core of trickle down economics -- and simply isn't believable on its surface, IMO, nor backed by anything remotely resembling "overwhelming evidence".)

(Also, who is the "other guy" you mention? If your implication is that Mulligan is desperate to prove liberal talking points, you're off-base; if anything, he has a reputation for oddball right-wing views.)

Originally Posted by DaytonIllini

Everyone knows (except Krush apparently) that you cannot simply pass along rental taxes to your urban renters. In my rather small real estate empire it is obvious that units with higher real estate tax rates in poorer areas simply CANNOT have those expenses passed along. This is either due to rent controls in some areas OR the law of supply and demand. The people renting in those areas simply do not have the $$ to pay those rates. One accepts a lower margin on inner city homes OR uses cheaper construction to offset those tax rates OR uses your inner city homes to offset profits made in the suburbs. Surely this is common sense. So in essence, wealthier people renting in the suburbs pay taxes which subsidize the poor in the cities. They pay again to subsidize them by paying higher rent rates to offset the losses landlords occur in inner cities.

...and this is an example of a good tax incidence argument. When there is highly elastic demand and inelastic supply (as with very price-sensitive renters in an area with limited space), tax incidence falls on the property owner; when there are caps on rent and inelastic supply, the tax falls entirely on the property owner. Mulligan screwed up.

[DaytonIllini]

Originally Posted by Illest

Nope, he's not using a trickle-down argument. It's an argument about tax incidence which says that the effect on prices and profits is the same if you tax the worker or the employer, the buyer or the seller. This has nothing to do with how people subsequently spend their money.

(By the way, if you're going to use a trickle-down argument in tax incidence, you also have to include a trickle-up argument -- that rich people get richer from the spending of the poor. For some reason, some people seem to have the idea that the expenditures of the wealthy are uniquely helpful to the economy. This is the core of trickle down economics -- and simply isn't believable on its surface, IMO, nor backed by anything remotely resembling "overwhelming evidence".)

To say that the Estate tax affects the poor in ANY way makes no sense at all. Any justification of that makes the entire analysis utterly without merit IMO. Likewise for corporate taxes. The poor don't pay ANY corporate tax. Taxes are precisely borne by the man writing the check to the government. Not by anyone else. To say otherwise seems to be obfuscation and an attempt to justify a bogus argument with revisionist thinking.

A quick example: A company that makes $1M profit and pays $400K in corporate taxes has only $600K to reinvest or distribute to owners (shareholders). A company doesn't increase their costs in order to pass that tax along to the 'working' man. It directly diminishes payouts to shareholders who in general are wealthy people. The owners now receive $600K and then get taxed on it at 15% reducing the take home to $510K. If that corporate tax did not exist the owners would receive $1M less $150K or $850K. How on earth can this guy pretend that that tax is a hit to the common man?

And I was not arguing trickle down though it clearly is correct thinking as the poor spend relatively little on value added purchases. Increasing the number of Camel's a poor guy buys or the amount of Scotch he drinks does not apreciably move the economic needle. Buying a new boat creates a lot of jobs. I would never argue that holding taxes flat for the wealthy will quickly boost the economy in the same way that a cut for the poor will. What I argue is that the wealthy reinvesting their money is vastly superior for the long term health of the economy compared to the short term single occurrence boost from consumption.

(Also, who is the "other guy" you mention? If your implication is that Mulligan is desperate to prove liberal talking points, you're off-base; if anything, he has a reputation for oddball right-wing views.)

The 'other guy' was meant to be the conservative viewpoint. I was trying to say that he seems very inconsistent in his alottment of tax treatment.

...and this is an example of a good tax incidence argument. When there is highly elastic demand and inelastic supply (as with very price-sensitive renters in an area with limited space), tax incidence falls on the property owner; when there are caps on rent and inelastic supply, the tax falls entirely on the property owner. Mulligan screwed up.

Are you saying I was right???

[Illest]

Originally Posted by DaytonIllini

Are you saying I was right???

Yes...

Originally Posted by DaytonIllini

Taxes are precisely borne by the man writing the check to the government.

...but I might take it back after this line. :laugh:

[DaytonIllini]

Originally Posted by Illest

Yes...


...but I might take it back after this line. :laugh:

Merry Christmas.

[DaytonIllini]

A 2008 study of 24 leading economies by the Organization of Economic Cooperation and Development (OECD) concludes that, "Taxation is most progressively distributed in the United States, probably reflecting the greater role played there by refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit. . . . Taxes tend to be least progressive in the Nordic countries (notably, Sweden), France and Switzerland."

Umm, what happened to those people claiming that we are not a very progressive nation from a tax standpoint? I guess being the single MOST progressive nation has them blinded by their own success.

http://www.cato.org/pub_display.php?pub_id=12663

The reason that those Scandinavian countries have so much money to spend on social ills is that they spend next to nothing on defense and they have broad based and high taxes on everyone rather than the US's attempt to make the rich carry an ever increasing share of the burden. The top 1% now pay 41% of all taxes in this country. No other nation has anywhere close to such a dependence on such a narrow strip of its population.

I say again. To balance the budget tax increases should be aimed uniformly (as a percentage of income or better spending) across the entire spectrum of society. Stop playing class warfare and stop accepting nonsense that it is 'widely accepted' that the tax rates should be heavily progressive. That is a progressive idea, not a smart idea.

[Illest]

Here's the summary version of the OECD study cited:

http://www.oecd.org/dataoecd/48/56/41494435.pdf

You might expect that people would build a tax code that distributes wealth and opportunity in a way that people would think of as "fair". So, in countries with greater social equality and equality of opportunity, people might reasonably conclude that the tax code doesn't need to be as progressive.

And, lo and behold, as you can see in the OECD's pretty pictures, the countries you mentioned have low income inequality and high social mobility, whereas the US has high income inequality and low social mobility. Perhaps this has to do with the progressivity of the spending side of government.

By the way, this is the reason why leftists are hugely popular in South America; income inequality there is massive.

[DaytonIllini]

Any analysis of wealth that looks at top decile vs. bottom decile is skewed in America by the superwealthy who make up the vast majority of the top decile's wealth. There is actually relatively flat wealth from 20% to 95%.

Second, there is a large underclass in the United States that has little social mobility and persistent poverty. This is the African American population and it exerts a massive effect on national statistics like the Ginni Coefficient, life expectancies, murder rates, high school graduation rates, infant mortality rates, etc. These factors weigh heavily on any analysis of top vs. bottom because poor blacks make up a much more sizeable component of the US population than any other developed nation. I submit that this is a structural problem rather than simply an economic analysis. A half century of failed liberal ideals like affirmative action, busing, forced integration, welfare, rewards for having children, drug laws and racial quotas have led to a worse plight for this population than they faced in the 1960's. Don't take that to be some advocacy for Jim Crowe laws or any discriminatory nonsense that this nation has endured. I am merely opening the idea that new thought processes are needed to solve this problem. Throwing money at the situation helter skelter fashion has failed utterly.

I would submit that wealth inequality is not necessarily an evil. Dwayne Wade is not materially worse off because he makes many multiples of income less than Warren Buffet. I am not materially worse off because Dwayne Wade makes many multiples of income more than I do. The bus driver is not materially worse off because he makes many multiples of income less than I do. The inner city single mother is not materially worse off because she makes many multiples of income less than the bus driver does. No. Inequality is not the evil. Rather it is lack of access to everyday needs that creates rifts in society. A woman having four times as many carats of diamond on her wedding finger is not the problem. The woman who cannot get 4 carrots to eat is where the problem lies.

Toward that end, societal goals ought to be aimed at wiping out material deprivation across the globe, not at obtaining income fairness or equality. Ideally access to reasonable (even if inferior) food, medicine, and housing ought to be universally available.
Further, education should be a pure meritocracy. It should not be biased in favor of background. This provides true social mobility and furtherance of societal aims by putting the most qualified person in each position. Anything less creates gross inefficiencies, leads to deprivations that ultimately could threaten the social cohesion of the planet.

Rich people tend to get richer by the very nature of their wealth. If you and I make the same income but you start with $1M in savings, you are bound to get richer than I am year after year. You have that $1M working for you. So a separation in wealth is not something to be fought against. On the other hand that can lead to generational stagnation that allows undeserving progeny to perpetuate that wealth (think Paris Hilton). I have consistently advocated for a flatter tax across all income strata (except the poorest). I have said that that level could easily be higher than our current tax levels but would be fairer by being flatter. You must couple that though with my belief that low estate taxes are a corrosive force on society. Estate taxes should approach 90% for levels of great wealth IMO.

[Illini1956]

http://online.wsj.com/article/SB1000...513811886.html

The Midwest Wind Surtax
The latest scheme to socialize the costs of renewable energy..


That region-wide pricing scheme, according to a study commissioned by utility companies, will force Michigan to pay about 20% of as much as $20 billion in new high-voltage transmission lines—though Michigan businesses and homeowners will get little benefit. Thanks to FERC's new tariff, nearly everything in Michigan—from cars and trucks to Frosted Flakes—will be more expensive to make. Indiana will also absorb new costs, as will industrial users and utility rate payers in Illinois, Minnesota and Wisconsin. This is another discriminatory subsidy for wind energy that will raise electricity prices on everyone, notably on those who don't rely on wind for electric power. FERC's grand vision is to build hundreds of miles of transmission lines across the Midwest, linked to windmills in Iowa and the Dakotas. Mr. Wellinghoff says this new ruling "is the next step in the evolution of its transmission and cost allocation process."

In fact, this is the first step in a FERC scheme to socialize transmission costs nationwide. In June FERC drafted a rule to create a new national transmission pricing policy that would link wind and solar energy projects to the national electricity grid.



obama admin sticking it to the poor and middle class again! Another way like the sharp increase in health insurance caused by obama while he claims to not increase costs to the middle class.

[DaytonIllini]

The CBO published a report. I wish I could embed the graph.

The top 20% of American earners pay a whopping 2/3 of all income taxes. Meanwhile the top 20% make about 1/2 of the money. They are the only quintile that pays more as a percent than they make.

To blow apart a few other left wing talking points in this thread.

The lowest quintile was known to not pay income taxes but we were told that the excise taxes and payroll taxes were supposed to be this regressive burden. When you look at page 6 you can see that with all federal taxes combined, the lowest quintile pays 1% of their income as federal tax. The next quintile pays only 7%. The middle quintile pays 11%. The fourth quintile pays 15% and the top quintile pays 23%. The top 1% pay a 29% rate.

[Sure Shot]

Originally Posted by DaytonIllini

The CBO published a report. I wish I could embed the graph.

The top 20% of American earners pay a whopping 2/3 of all income taxes. Meanwhile the top 20% make about 1/2 of the money. They are the only quintile that pays more as a percent than they make.

To blow apart a few other left wing talking points in this thread.

The lowest quintile was known to not pay income taxes but we were told that the excise taxes and payroll taxes were supposed to be this regressive burden. When you look at page 6 you can see that with all federal taxes combined, the lowest quintile pays 1% of their income as federal tax. The next quintile pays only 7%. The middle quintile pays 11%. The fourth quintile pays 15% and the top quintile pays 23%. The top 1% pay a 29% rate.

It's 56.8%, to be precise.

And the Top 1% pays only a 21% rate on income tax, despite the fact that they make, on average $1.9 million per year. All other groups pay considerably less.

Nothing too shocking in there, really.

[DaytonIllini]

Originally Posted by Sure Shot

It's 56.8%, to be precise.

And the Top 1% pays only a 21% rate on income tax, despite the fact that they make, on average $1.9 million per year. All other groups pay considerably less.

Nothing too shocking in there, really.

Actually the Top 1% pay a 26.2% rate on income tax.

But that report flies in the face of nonsense the Left has spewed for years about the regressive nature of the tax system. It destroys the idea that excise taxes and payroll taxes raise the poor's tax rate above that of the top earners. Krugman was rambling about this just yesterday on CNBC.

[Sure Shot]

Originally Posted by DaytonIllini

But that report flies in the face of nonsense the Left has spewed for years about the regressive nature of the tax system. It destroys the idea that excise taxes and payroll taxes raise the poor's tax rate above that of the top earners. Krugman was rambling about this just yesterday on CNBC.

Wait wait wait. What did he say? Specifically.

That our income tax system, writ large, is progressive in nature is something I very much doubt any reputable person has denied, though I have seen dumber statements.

That payroll and excise taxes are regressive in and of themselves (in a rate sense) is also indisputable. That, however, is compensated for by low-income individuals actually having a negative income tax rate.

We gotta be careful about the terminology we use here.

[Sure Shot]

Originally Posted by DaytonIllini

Actually the Top 1% pay a 26.2% rate on income tax.

The table on page 6, under "Individual Income Taxes" says 21.0%

[DaytonIllini]

Originally Posted by Sure Shot

The table on page 6, under "Individual Income Taxes" says 21.0%

You forgot their corporate income taxes which account to around 5% rate. Therefore their income taxes are around 26%.

[Sure Shot]

Originally Posted by DaytonIllini

You forgot their corporate income taxes which account to around 5% rate. Therefore their income taxes are around 26%.

That confused me. How are individual people paying corporate income taxes? Is that people who have incorporated as themselves, or what?

[DaytonIllini]

Originally Posted by Sure Shot

That confused me. How are individual people paying corporate income taxes? Is that people who have incorporated as themselves, or what?

If I own a restaurant or dental office, I pay taxes on the net income of the restaurant, then I pay myself the post-tax profit as bonus which gets taxed again as income.

So a rich person's income tax is his company's tax and then his own. In honesty, it's a little less than the sum because it works (a little) like this.

Gross Income: $4M
Expenses less owners salary: $3M
Owners Salary: $500K taxed for payroll taxes and income taxes

Profit: $500K
Corporate taxes: $100K (maybe - depends on depreciation schedules and a whole host of stuff I don't fully understand like inventory, accounts receivable, etc. You need a CPA to calculate this step for anyone running something more complex than a garage sale).

Net profit: $400K (disbursed as a bonus) and then taxed at individual income rate (after personal deductions).

[Sure Shot]

Originally Posted by DaytonIllini

If I own a restaurant or dental office, I pay taxes on the net income of the restaurant, then I pay myself the post-tax profit as bonus which gets taxed again as income.

So a rich person's income tax is his company's tax and then his own. In honesty, it's a little less than the sum because it works (a little) like this.

Gross Income: $4M
Expenses less owners salary: $3M
Owners Salary: $500K taxed for payroll taxes and income taxes

Profit: $500K
Corporate taxes: $100K (maybe - depends on depreciation schedules and a whole host of stuff I don't fully understand like inventory, accounts receivable, etc. You need a CPA to calculate this step for anyone running something more complex than a garage sale).

Net profit: $400K (disbursed as a bonus) and then taxed at individual income rate (after personal deductions).

But you would hypothetically have the option of reinvesting that money in the name of the company and not being taxed on it, yeah?

Also, isn't a post-corporate-tax bonus payout just ordinary income that would be taxed in your personal income tax?

[DaytonIllini]

Originally Posted by Sure Shot

But you would hypothetically have the option of reinvesting that money in the name of the company and not being taxed on it, yeah?

To a point. Of course you can avoid taxes by donating all your money to charity too. But it isn't that simple. If I buy a $3M building with profits from the company I can only write off so much of the building each year. Ditto with equipment I buy. There are bizarre rules on how inventory (unsold) and accounts receivable (that you may never receive) are treated. It is terribly complex. It is not uncommon to pay taxes on money that you reinvested into the company (as phantom income). In theory there may be an offsetting time in the future when you'll pay no taxes on that income. I have a cadre of accountants and an almost full time attorney to handle this so I don't claim to have a deep understanding of corporate tax law. I do know that you get taxed at the corporate level and at the personal level and the sum of those is your income tax.

Also, isn't a post-corporate-tax bonus payout just ordinary income that would be taxed in your personal income tax?

Yes. But it has already been taxed at the corporate level also. $500K profit becomes a $400K bonus which becomes a $300K take home pay (as an example).

Don't forget that many states have progressive state income taxes that can run more than 10%. Ohio and some other states have city income taxes. Dayton's is 3%.

My wife and I paid 43% of our gross in taxes last year.

[illinirazorback]

Originally Posted by DaytonIllini

My wife and I paid 43% of our gross in taxes last year.

PAY YOUR FAIR SHARE!

[DaytonIllini]

Originally Posted by illinirazorback

PAY YOUR FAIR SHARE!

You know us greedy bastards.

[illinirazorback]

I don't have the source, but I read somewhere today that Obama's proposed higher taxes on the "wealthy" will bring in less over 10 years than one year of Obama's spending increases. Something like $900 billion vs. $1.3 trillion.

[DaytonIllini]

Well if the argument is that we did fine during Clinton, we should just let ALL the Bush and Obama tax cuts expire. I can live with that.