Skip to comments.Who pays the taxes?
Posted on 12/06/2005 8:33:51 AM PST by Marxbites
Who pays the taxes Dec 6, 2005 by Bruce Bartlett ( bio | archive | contact )
Email to a friend Print this page Text size: A A 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.
The bad news is that, with so few people really PAYING taxes. "cutting taxes" is a policy tool that appeals to fewer and fewer folks. The tyranny of the majority stands to ensure its grip on ever larger tax revenues, paid by a numeric minority.
The policy of robbing Peter to pay Paul will usually be supported by Paul.
Exactly. Where's all that "rights of the minority" rhetoric when you need it? The majority cries, "The government should pay for that." But the government has no money. Why not just cut out the middle man and legalize robbery of the rich.
A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.
The last figures I saw stated that 47 percent of "filers" pay zero income tax. I wonder how many "zero filers" draw refundable credits and EIC from the system.
Wasn't there something during the last campaign saying that
one of Mother Teresa's tax returns shows that she paid an effective tax rate of something like 10%?
No representation without taxation.
I agree - what stake in America do those that pay zero income tax, but yet get child reverse taxes, have in voting for anybody but redistributtionists - none.
Cutting this elitist enriching pig of a Govt was RWR's job #1.
ALL who derive benfit from Govt should pay at least something for no other reason than to disuade them form thinking they are owed something from the rest of us.
Taxes are the very stuff that allows Govt to have become 3x it's constitutional size and cost, and is mostly enabled through the Fedl Reserves ability to inflate the currency and is the reason for it's existence.
See this - read the article at the link at bottom of the excerpt:
What does the rich "buy" for their taxes? Under our system of government, they certainly can't buy influence, can they? What do the rich get for all this treasure?
Rush has a really great pie chart on his web site about this very thing.
Rules and regulations. That's what they buy. Oh, and a workforce that understands why the rich are bad, why minorities (except fiscal minorities) are oppressed, and why sexual freedom is the most important freedom of all. Of course they may not be able to read, write, or do arithmetic; but priorities are priorities.
It's an interesting theoretical question, though, because one would think the rich would get something in turn for their treasure. Otherwise, they certainly have the means to alter the system.
That's just it. They do not have the means to alter the system because they are a minority -- a hated minority.
Yes, but history has taught us a minority with money often trumps a majority quite handily.
Maybe they should shrug.
A more meaningful statistic (but impossible to obtain, due to deliberate government obfuscation in all its wealth redistribution schemes) would be what percentage of the population are NET taxpayers, i.e. pay in more than they take out. And within that small and shrinking group, how disproportionate the tax burden is.
Limit voting to people who are NET taxpayers, and you'd see a sudden massive change in the country's political landscape.
Then why are they stuck with all the taxes?
That's what I'm trying to figure out. It's a theoretical question . . .
Just as important as who pays is that TOTAL receipts from taxes are soaring.
Not only did we pay down the deficit to zero during Jerkoff's tenure, but we'll do it again as the economy booms.
Lowering taxes makes sense.
Your point genius?
Because the point of the article was in response to the leftmedia etc, who keep the "tax cuts for the rich" mantra front and center.
They are liars. The lowest brackets got the biggest percentage cuts, and millions got off the rolls all together. All the while the percentage of taxes paid by the rich have increased ever since Reagan's cuts.
Wanna argue about that - If you can read.
LOL! We're going in circles. My position is that they do not have the power they are said to have. Money may buy fair weather friends, but it won't keep the taxman away. In fact just the opposite. Because government has no money of its own, it must target the earnings and productivity of the rich.
See, the problem would be lessened if the tax burden percentages were more evenly distributed. A flat tax, say. The rich would still rightly pay more, but the burden would be shared, so no one would have a free ride or a motive to unfairly pressure the government to rob the rich. It would cost everyone the same.
I have been saying that for years, thanks.
Those that disproportionately use the services our taxes pay for, but which we seldom use, shouldn't have the same voting clout.
The elites (Rockefeller/Morgan/Carnegie) have used socialism against us, their wealth is secure in trusts and foundations free of taxation, and what they do spend goes to propaganda machines to perpetuate the deception.
These were the people who pushed for the ICC & the Fedl Reserve for their own protection, with average Americans holding the ever expanding tax bag their profits come from.
Like Kerry and the Kennedys
It's the very reason the Founders limited Govt as such, to protect we the people's rights, especially property rights, without which there is no real freedom, like now.
Famous quote from Rush.
"If you thought no taxation without representation was bad, you should see what it looks like with representation".
the old 80/20 rule applies.......
No, you haven't read the rewrite of history. They wanted to especially protect sexual rights. The more perverse the better.
I agree. If we're a nation of equals under the law, we should be a nation of equals under the taxman as well.
You do not accurately describe the impact of income taxes on pricing. Prices are not determined by figuring in income taxes. Income taxes are not a true cost of production since they are only paid IF a profit is made. This is a common misunderstanding of the Fair Taxers.
This article brainchild has zip to do with the fair tax.
It is solely about the left's claim of "Tax cuts for the rich" which is a blatant lie the leftists and MSM continue crowing.
They weren't disproportionately for the rich and are the very reason for our solid growth and low unemployment since the reals cuts of 2003.
Get a clue Idiot!
Harvard defends their sky-high tuition by claiming that it ensures the super-rich will attend, resulting in massive endowments from those parents and alumni - WHICH ENABLES THEM TO GIVE SCHOLARSHIPS TO UNDERPRIVILEGED MINORITIES...
Sure, it's nothing to do with retaining their 13 billion cash in the bank. They want to help the poor attend Harvard, so they make it unaffordable to the entire middle-class of America.
So there's also that side-benefit of keeping out good average Americans (and their good average values). Only the exploited poor and their wealthy exploiters end up at Harvard.
The tax codes are similarly structured: large revenues (from the very wealthy) ensure an influx of "public sector-ism" into the economy through subsequent govenment spending. Public sector-ism is the figurative noose around the neck of middle-class Americans - financially, morally, and politically. In short, it harms and kills conservatives.
The calls for the Fed Reserve did not originate with the rich elites but with the Populists and Progressives thirty years BEFORE the meeting at Jeckyl Island. It was not a conspiracy against the common man so stop spreading that crap.
Taxpayers benefit from the Fed since ALL its profits are turned over to the US Treasury. Plus it has an incentive to prevent inflation since doing so protects even the bankers. So even if it were a bankers plot it would not act against the value of the dollar.
Some "services" cannot be properly charged to individual users but benefit all. If my neighbor had to pay for the firemen to put out his house and he couldn't do so do you really believe my house should burn down as a result?
Have you ever taken an economics course?
Thanks for that! Few understand how the super-elites, not hard working self made millionaires, but the Rockefellers etc who have used the Govt as their defenders that usurps middle American.
The socialist ruse of the caste system they created.
That is one of the problems with the way the fed is set up, they have no incentives to make a profit. The Fed takes in trillions of dollars and usually shows a profit of maybe $20 Billion or so, which is pocket change for them. The federal reserve really has an unlimited expense account with no incentive to keep their spending in check.
I don't believe you can say that the fed takes in "trillions of dollars" it isn't anything close to that.
But if set up as a profit making institution the Leftists and conspiratorialists would have a field day attacking it.
This is another myth that is widespread. The Constitution greatly EXPANDED federal power; it only limited the power of states. That expansion rightly came about because the prior government was powerless and contemptible incapable of resisting the negative actions of the states. It had ceased to exist for all practical purposes.
Have you, and which Keynsian statist was it?
Yup, Dr Dave Denslow, UofF 1979 - he taught us the Laffer curve - and I then voted for Reagan.
Everything you say is in conflict with Reagan/Hayek/Rothbard
Just how young and green are you know-it-all?
he who robs Peter to pay Paul Wellstone ends up with a sore
Well, the maybe not trillions, but the fed does take in hundreds of billions. And what do they produce? Paper with numbers on them.
There was NO Govt prior, just the Crown, unless you mean the period after the Declaration.
And that took so long because the states were reticent to give too much of their own power to a central Govt, for they well understood mans weaknesses.
Do you understand limited and enumerated?
That's what we no longer have, and capitalism has nothing to do with it's loss, just business & politicians.
But hey if you can do nothing but criticize, while ignoring the truly explanatory links I post, then I won't bother continuing a dialog with you - who seem about as thick as Parsy
I am Chicago school but have actually read Keynes which is more than I can say of those who believe they are attacking Keynesianism. My teachers were from several schools of economic thought but primarily Chicago.
You have not heard "everything" I say and I also doubt you have read von Hayek, Friedman, Keynes, Schumpeter, Marshall, Samuelson, Leoniteff, Marx, Smith or Ricardo since you appear to buy into the most cracked of the crackpot theories around. Read them sometime and it will help your understanding of economics.
I am old enough to be your father probably. And my posts are not the ones dripping with immaturity.
We had a government that existed since the signing of the Articles of Confederation. It was changed by the Constitution since it could neither obtain sufficient funds, carry out its intentions, or control state attacks on private property.
I understand that the Constitution did not limit federal power but vastly increased it. Its powers were not all enumerated but included implicit powers which were provided by sovereignty itself. Hamilton set out the clearest and best argument on constitutional actions in the Essay on the National Bank. Read it sometime.
Your "explanatory" links are anything but as I pointed out on the last one. The others on another thread had howlingly hilarious falsehoods in them. Try something from non-crackpot sources if you want to be taken seriously.
Sources such as?
All monetarists, I see
Let's see, I have at hand "Road to Serfdom" intro'd by Milty, and his "Fatal Conceit..."
Hazlitt - EIOEL
"Essays on Hayek" by Machlup, foreward by Friedman, and includes entries by Buckley, Dietze, Hartwell, Letwin....
Ya know this reminds me of the bar scene confrontation in "Good Will Hunting", neither character of which I am like, except I feel like Will before his rebuttal.
So, you are a Hamiltonion monetarist who believes in statism, in favor of a Govt who takes it orders from Industrialists who sought and got business subsidy and wealth protection, who were willing to go along with socialism because it empowered them, all at the expense of middle Americans, who see their incomes go the the dependents Govt incentivised?
BTW, I am 53 and self employed, and have stayed glued to politics and economics since receiving a graduation (UofF '82) gift of a small oddlot of IBM shares that inspired me to pay attention, read IBD & WSJ, Kudlow on CNBC, and all else I could since the advent of the internet. That was after serving four years in the military from 1972-76.
What about yourself?
Such as the post outlining the creation of the Fed on a recent gold is god thread.
All monetarists? Hardly. Ricardo, Smith, Leontieff, Marshall, Samuelson, Keynes, von Mises are not monetarists.
I have been a financial analyst for over quarter of a century after receiving my Masters in Economics. My minor was in History which is my true love.
Your description of my beliefs is no more accurate than the contention I only read monetarists. I do believe a strong national government in necessary in the real world as did Hamilton and Washington (and Madison at the CC). It is just foolishness to believe that the government is controlled by industrialists which is something a deep study of politics shows clearly not to be the case and never was.
Middle Americans do not pay the bulk of the taxes either rather the upper classes do. New IRS statistics just released clearly show that to be the case.
My military career never got off the ground since the Army decided I was not suitable in 1966 for physical reasons. But several of my brothers served including an Air Forces lifer. My elder son is currently a nuke in the Navy stationed on the Ohio out of Seattle.