Interesting insight for taxing millionaires

[stebo0728]

http://www.boortz.com/weblogs/nealz-nuz ... -out-mess/

The tax year of 2008 was the last to date that the IRS has done this kind of analysis. In 2008 the highest marginal tax rate of 35% applied to all AGI above $357,700.00. In that year the total amount of AGI subject to the highest rate was $622.8 Billion. The government collected in taxes $218.0 Billion (35%).

In 2011 the annual budget deficit will be nearly $1.665 trillion and in 2012: $1.1 trillion. If the Liberal Democrats in league with the Socialists, the Unions and the Communists, succeed in raising the highest marginal rate, how much more would Washington D.C. receive, assuming no change in behavior and a general eagerness to pay more?

If the highest rate of 35% were raised by a factor of 20% to 42%, then the additional tax revenue would be $43.5 Billion, not much of a dent in $1.665 trillion. So, let's raise the rate by a factor of 50% to 52.5%; the additional revenue would be $108.9 Billion. Still nowhere near enough, so let's just tax it at a rate of 100%, bringing in an additional $404.8 Billion. Unfortunately the country is still $1.26 trillion in the hole for the year.

Taxing the rich more just wont cut it, all that income you're so green with envy over just, that you'd love to just tax the ever lovin dog squeeze out of, just isnt enough to fill the gaps. Lost revenue to the "evil rich" is NOT the problem. SPENDING IS THE PROBLEM, we just flat out spend too damn much of other peoples money in the country.

[szh]

I know, I know!

I had said that I would not argue this much anymore, but I cannot resist - I will just post this info and then try to bite my tongue later.

This is yet more recent analysis and facts (sorry, I am an engineer ... I believe in the power of facts, not rhetoric ) from a different source:

This information is from a report at http://www.taxfoundation.org/news/show/250.html - please look at the detailed data at that link (particularly this PDF of the full report: http://www.taxfoundation.org/files/ff249.pdf)! It makes for very interesting reading.

• "As the data below show, incomes reported by tax returns at the high end of the income spectrum plummeted from 2007 to 2008, as did their share of the nation's income and income taxes paid. In 2008, the top 1 percent of tax returns paid 38.0 percent of all federal individual income taxes and earned 20.0 percent of adjusted gross income, compared to 2007 when those figures were 40.4 percent and 22.8 percent, respectively."

So, in reality, the gross income of the rich actually went down compared to others (AGI's were a lot lower for the rich, compared to the non-rich). Not surprising - the recession hurt them too ... more than the "non-rich" in terms of percentages and absolutes.

• "Overall, these data on high-income tax returns appear to confirm that the recent recession had the same diminishing effect on income inequality that most recessions have, and that it occurred for the same reason, a sharp decline in income at the high end. This appears to contradict recent reports based upon Census data suggesting the opposite, that this recession had actually increased income inequality."

Hmmm ... income inequality change was actually opposite to what is believed to be the case?!? Interesting!

• "During 2007, the top 1 percent had actually paid more in federal income tax than the bottom 95 percent ... During 2008, the bottom 95 percent ... paid 41.3 percent of the total collected, a larger share than the 38.0 percent paid by the top 1 percent."

Changed a little bit in 2008. Again, effects of the recession. But, the absolute facts are still important. The top 1% paid more than the bottom 95% in 2007 and a few percentage points less in 2008. Thanks for doing more than your share, guys!

• "Although the 2001 and 2003 tax cuts were across the board (even though certain provisions within those cuts were targeted at various income ranges), the federal individual income tax remains highly progressive. The average tax rate in 2008 ranged from around 2.6 percent of income for the bottom half of tax returns to 23.27 percent for the top 1 percent. For the top 1 percent (as well as the top 0.1 percent), their average income tax rate actually increased from 2007 to 2008, despite shrunken income."

Shows the effects of reduced capital gains (which is taxed at lower tax rates than personal income) leading to reduced total gross income in 2008.

Z

[IBCoupe]

From your link:

With the possible exception of the estate tax, the federal income tax is the most progressive tax in the United States, and these numbers show why.

It's like they were reading along with this thread...

Couple other things. First, average effective tax rate is less than 13%. What does that do to our Laffer Curve estimates? Second, I heard an interesting suggestion for legislation: the Ronald Reagan Tax Restoration Act, which would restore the top tax bracket to the level it was under Reagan: 70%.

[stebo0728]

From your link:

With the possible exception of the estate tax, the federal income tax is the most progressive tax in the United States, and these numbers show why.

It's like they were reading along with this thread...

Any criticism of the numbers?

Couple other things. First, average effective tax rate is less than 13%. What does that do to our Laffer Curve estimates? Second, I heard an interesting suggestion for legislation: the Ronald Reagan Tax Restoration Act, which would restore the top tax bracket to the level it was under Reagan: 70%.

Sure that will make your progressive-erogenous zones tickle, but it wont help the deficit.

[IBCoupe]

I haven't criticized anybody's numbers, yet Stebo. My argument hasn't been that the numbers are wrong, because that's not the point. Numbers are numbers, and while these might be wrong, I have no interest in devoting that much effort.

It takes no effort at all, on the other hand, for me to say that we're still employing the same faulty logic. "Federal income tax structure is progressive, and so the whole economic system must also be progressive."

The sentence I quoted, while propped up as a claim, contains an acknowledgement of the limitations of the presented statistics. If the Federal Income Tax structure is the most progressive structure in the United States, what's that mean for the other tax structures in the United States?

And the proposal is designed mostly to make conservatives squirm, just for the fun of it.

[srellim234]

No reason to argue with the numbers. You selectively disregarded everything except the years that the stock market declined and property values tanked. Of course the top tier income went down those brief periods.

Very much like Bill O'Reilly claiming his viewership went up 300% based on 1 hour in March. Over a wider period of time it didn't happen.

[szh]

No reason to argue with the numbers. You selectively disregarded everything except the years that the stock market declined and property values tanked. Of course the top tier income went down those brief periods.

Very much like Bill O'Reilly claiming his viewership went up 300% based on 1 hour in March. Over a wider period of time it didn't happen.

I didn't disregard anything that was material. What I highlighted were the things that jumped out to me.

Which is also why I explicitly asked people to download the PDF and see for themselves.

Z

[szh]

From your link:

With the possible exception of the estate tax, the federal income tax is the most progressive tax in the United States, and these numbers show why.

Yes ... I highlighted this point in my post too.

Z

[szh]

I haven't criticized anybody's numbers, yet Stebo. My argument hasn't been that the numbers are wrong, because that's not the point. Numbers are numbers, and while these might be wrong, I have no interest in devoting that much effort.

The numbers are not wrong, so devoting any effort to trying to prove them so, is a waste of time, I agree! They are facts, not made up in any way, from IRS records.

It takes no effort at all, on the other hand, for me to say that we're still employing the same faulty logic. "Federal income tax structure is progressive, and so the whole economic system must also be progressive."

Nobody is arguing that our current tax structure is not progressive (so, I not sure how that came up as faulty logic on the "whole economic system" must be made progressive - I am completely missing your connection here).

Z

[IBCoupe]

Z, it's what I've been saying the whole time. The Federal Income tax does not exist in a vacuum. You're trying to say that there's no need to make it more progressive because it already is, but the "need" in question is not defined by what the IRS collects.

[stebo0728]

So ... we speak in generalities, and you ask for numbers. We give you numbers, and they dont define the issue? Sounds a bit dodgy.

Srellim, what say you to the numbers I laid out, regarding how even taxing the rich 100% would still be only a glass of water on a forest fire?

[stebo0728]

Z, to your quote list, let me add, from Frederic Bastiat

• Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone.
• Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.
• Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.
• Often the masses are plundered and do not know it.
• They will come to learn in the end, at their own expense, that it is better to endure competition for rich customers than to be invested with monopoly over impoverished customers.
• When goods do not cross borders, soldiers will.

[IBCoupe]

Stebo, was the first part of your response addressed to me? I can't tell.

[szh]

Z, it's what I've been saying the whole time. The Federal Income tax does not exist in a vacuum. You're trying to say that there's no need to make it more progressive because it already is, but the "need" in question is not defined by what the IRS collects.

It is not a question of "no need" ... it is a question of "unfairness". That is what I have been saying all along.

As I have mentioned many, many times before, I am a big proponent of a flat tax (percentage) system - with a poverty threshold - so I want to make it less progressive, not more!

Z

[IBCoupe]

But that unfairness might not exist in the grand scheme of our economic picture. When State and local taxes come into play, and if we choose to include living expenses, I'm not convinced that the system is unfair.

As I've been implicitly suggesting all along, what if a flat tax at the federal level, even with a poverty threshhold, makes the system regressive?

[srellim234]

IB- If you're talking regressive in the short term, in terms of the overall picture, yes. If a flat rate income tax that includes ALL forms of income equally is implemented, It will then fall upon the states to level out their playing field which IS regressive right now. Otherwise we wouldn't be relying on the federal level to even that playing field. Or not, and risk flight from their state.

Another aspect of a flat rate income tax also cannot really be measured. The working class employee is much more likely to take the extra overtime or work a second job to get ahead when he knows exactly how much he's going to make and retain out of that extra work. Under our current convoluted system I have worked alongside people who have turned down that work because the extra was not reflected in their paycheck. Withholding is based on short term earnings for that pay period and a higher percentage is taken out.

He's also much more likely to have hope if he knows he gets to retain the same percentage of his income as everyone else and therefore has an even opportunity to get ahead, same as the next guy. And that everyone pays on all income, with no one getting a break based on the type of income they have access to that he doesn't.

[stebo0728]

Look the point is, the rich DONT HAVE ENOUGH INCOME to just tax away the defecit, in fact it wont even come close at the levels they are pushing. This is what I have been trying to say literally since I have been posting on this forum. Revenue is not the problem, spending is the problem. You could tax the bush tax cuts away, you could even go back to the 70% upper tier rate, and that still not going to come close to fixing things. Spending IS THE PROBLEM. Everyone whos sat in office is to blame, they all spend like drunken sailors, and its sad that they've spent to the point that people start thinking taxes will fix the problem, but it wont. Increasing revenues will help, but theres not enough revenues out their to pay our bills. Drastic spending cutting is the only way. And its going to be painful. Foreign aid is less than 1% of the budget, thats not gonna shore up the defecit either. Its going to take cuts and policy changes to the 3 bigs, Medicaid, Medicare, and Social Security. But before we cut those, we should be sure anything and everything else that could be cut as non-essential has been cut.

[IBCoupe]

Spending is half of the equation. It's not "Cut government programs or raise taxes on millionaires." The proper solution is, "Slim down government programs and raise taxes on everybody."

You can't take an honest look and think that spending cuts are the single path to a balanced budget. We have these programs for a reason. People like them. We've been over this before. The government doesn't just say: "Hey, you know what we need? We need to throw away some cash. That'll do it."

They say, "People want these services. Okay, let's do it! Funding? Eh, put it on the credit card."

This is a budget imbalance. Spending is higher than revenues. That's the problem. It's logically impossible for spending to be THE problem. Let's be adult about this.

EDIT: Also, Social Security isn't going to get you to a balanced budget. It was $37B in the red last year. That's the first time it's ever had to borrow. And that's less than what we just cut. If you thought these cuts were too small, you're out of your mind to call "Social Security" one if the big TWO. I'm not going to be generous and give you a "three" because you seem to think that Medicare and Medicaid are two giant items separately. You and Ryan are both conveniently leaving one of the actual "BIG THREE" out. Why's that, Stebo?

[stebo0728]

Look even Obama was presented with the question about whether raising taxes increases or decreases revenues, and his response was pure rhetoric "its not about increasing revenues, its about fairness". Taxing the rich gets the poor excited, its pure rhetoric. Increasing tax on EVERYONE may be part of the solution, I've not intentionally said that it isnt, what I am arguing against is the notion that the rich arent paying their fair share, and that making them pay more is the answer.

Perhaps raising taxes in necessary, but if so, why cant we do something about the 50% of Americans that pay NO taxes as it is, shouldnt they carry some of the load? Perhaps the rich would be a bit more inclined to tolerate an increase if it was an "across the board" increase, where some of the freeloaders start to carry some of the weight.

And Social Security, you're right, its maybe not one of the BIG's, but its definitely not helping, but perhaps its more of an aside. The baby boomers are just starting to hit the system, and its only going to get worse, and with unemployement staying high, the contribution pool is still thin, so with thinned contribution and widening withrawl, increasing instability is inevitable. But maybe thats a seperate issue to tackle.

This is a budget imbalance. Spending is higher than revenues. That's the problem. It's logically impossible for spending to be THE problem. Let's be adult about this.

Your right, a tug of war has 2 ends, BUT, which end can you actually do something about? As I've pointed out, you just simply cant get enough revenue to handle the spending defecit. But further, our revenues are not ZERO, so could it be that there is a solution where our spending can be dragged downward to the point that it equals our current revenue? Hey that might be painful, but is it possible? Maybe not, or maybe not feasibly, and maybe revenues do need to increase. Whats the best way to do that. Is taxing more really the best answer, well we've had that battle repeatedly, and you can find statistics to argue either way, but if an increase is on the horizon, it needs to be a fair one, and not a progressive one. Progressive will lead to decreased revenue Im convinced, argue if you like.

[IBCoupe]

You can do something about both ends, Stebo. Acting like you can't doesn't make it so.

And if you're really concerned about the half of Americans who pay no taxes, maybe you should go about getting them more income.

And I don't care how we implement tax increases as much as I want us to stop lying about the necessity of doing so.

[szh]

And I don't care how we implement tax increases as much as I want us to stop lying about the necessity of doing so.

And, as long as it is done along with rational and clear spending cuts as well (including cutting pay for government employees - such as Senators and Congressfolk ), then I am okay with tax increases ... however reluctantly.

My reasoning: Along with other taxpayers, I am a source of the revenue for the government. So just like when I have a strong say in where and when I spend money on other purchases, I want a say (indeed, a far better say than what I have today) in how I spend my money on "government services" purchases.

Z

[IBCoupe]

Absolutely. One of my comments at the NPR website was quoted on air. I was paraphrasing Justice Oliver Wendell Holmes and I summed up my position at the end by writing:
"We have a lot of civilization that needs to be paid for. Congress, raise my taxes, please!"

You and I have as much a say as anybody else on how revenues are spent: go vote.

[szh]

You and I have as much a say as anybody else on how revenues are spent: go vote.

Yup!! I always do!

If you go look at some of my way old posts, you will see that I also propose one other idealistic thing. Whenever I talk with a person who criticizes government actions, I also ask if they voted. If not, then I tell them that I will ignore their arguments.

Our government takes actions that people can agree or disagree with, but if the person in question did not exercise their right to vote, he/she also gave up their right to whine/praise afterwards - regardless of whether they agree or disagree with the action.

Z

[stebo0728]

You can do something about both ends, Stebo. Acting like you can't doesn't make it so.

I never said cant, I questioned whether we should, and pointed out that even if you did, it wont help much.

And if you're really concerned about the half of Americans who pay no taxes, maybe you should go about getting them more income.

More private income or more public income. They dont seem to have a problem getting more public income, thats why we have such a spending problem. Getting more private income is their responsibility not mine. Im not gonna hand them a paycheck they wont work for.

And I don't care how we implement tax increases as much as I want us to stop lying about the necessity of doing so.

Lying? First of all a lie is only a lie if you know it to be untrue at the time you speak it. Or rather I should say, the act of lying is only such in that event. Secondly, your attributing absolute truth to one side of an argument when you use the word lie. Neither side of the argument has earned the title of absolute truth, at least, if you wont attribute it to my side, Im sure not willing to do so for yours.

[IBCoupe]

Whatever. I'm done with this.

[stebo0728]

So thats it? What if we were congressmen? Where do we go now?

[IBCoupe]

Well, you'd probably take my comment as a sign of partisanship, and promptly say that you're going to stop negotiating with me.

(It's a good thing they announced it, too, or it might have looked like they were acting exactly the same way as before the President spoke)

[stebo0728]

Well that speech was complete partisan classism rhetoric, in fact it was more of a campaign speech than a policy speech.

But failing to negotiate is unacceptable, for either side. How about no paycheck until the budget's balanced? But then they never negotiate that bill either so maybe we might as well just give up eh?

[IBCoupe]

Good luck getting them to give themselves a pay cut.

[stebo0728]

http://online.wsj.com/article/SB1000142 ... on_LEADTop

Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.

Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That’s five times Mr. Obama’s 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.

http://cnsnews.com/news/article/100-per ... 500k-or-mo

If the federal government had increased the income-tax rate on Americans earning more than $500,000 to 100 percent in 2009--and seized the remaining $773 billion in income it had not initially taken away from these Americans--that would have closed the federal deficit for the year to $839 billion ($838,988,236,899.90).

After taxing away 100 percent of the income of those earning $500,000 or more in 2009, the Obama administration would still have needed to increase taxes on Americans earning less than $500,000 by a total of $839 billion--just to balance federal accounts for the year.

Just another couple examples of how the "millionaires and billionaires" just dont have enough money, even if we take it all, to close this defecit. Taxing may be part of the solution to this problem, Im not convinced of it, but even if it is, its only a small part. Spending reform IS the major ticket.