[The Raven]

We need to fix this by reducing the size of government and then stopping taxation of income.

[ancient_geezer]

All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.

The Crisis of Democracy

The Honorable James DeMint (R-SC)
United States House of Representatives

THURSDAY, APRIL 5, 2001
12:00 noon

"There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government. And at that point, DeMint warns, we have reached a major crisis in our democracy."

Milton Friedman as quoted by Northwest Florida Daily News, 10-16-2000:

• "If we're to have an income tax, it's a good thing for everyone to pay at least a nominal amount," he said. "If non-taxpayers become a majority in society, what would restrain them from voting for ever higher taxes on others?"

Walter Williams, World Net Daily, 10-25-2000

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

Right now the bottom 60% perceive little to no "Individual Income Tax" burden,(in many cases even a handout) and 70% of the voting public clamors for more from government looking for the top 40% of income earners/producers to foot the bill.

Effective Individual Federal Income Tax Rate (Percent of gross income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
Lowest Quintile	-0.6	-0.8	-0.2	-0.5	-0.2	-1.3	-1.9	-2.9	-3.4	-5.6	-6.8
Second Quintile	3.6	3.9	4.6	3.5	3.9	3.2	3.3	2.7	1.8	1.8	0.9
Middle Quintile	7.1	7.5	8.3	6.8	6.8	6.1	6.5	6.3	5.9	6.1	5.4

Those that readily perceive some of the burden.

Effective Individual Federal Income Tax Rate (Percent of gross income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
Fourth Quintile	9.7	10.4	11.3	9.5	9.3	8.7	8.9	8.7	8.5	8.7	8.4
Highest Quintile	15.8	16.3	17.1	14.5	14.3	15.1	15.1	14.8	15.5	16.2	16.1

While Congress plays both ends against the middle; hiding the real burden in inflation, higher prices on all goods and services, lower takehome pay, lower return on investment, and higher interest rates. All keeping the poor right where they are and pushing for more freebees.

Consider that 15.3% SS/Medicare tax on the 1st $75K of wages/self-employment income, plus the 6% Federal/State Unemployment tax, all of which are but a portion of the effect of federal taxes embedded the price of all products we purchase. Taken together with the Individual tax rates above we all pay more than:

Effective Total Federal Tax Rate (Percent of reported income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
All Families	22.8	23.4	23.5	21.4	21.8	22.6	22.5	22.6	23.5	24.7	24.2

Data from IRS collections statistics and The Bureau of Economic Analysis as compiled in tabular form by the Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0

[ancient_geezer]

Thomas Hobbes from Leviathan

• It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income.

[DB]

This won't be fixed until the country is bankrupt.

When 50%+ of the voters figure out they can vote themselves the benefits of someone else's money there is no going back.

That 50% will never voluntarily go back to paying taxes again. They are not interested in justice or even long term economic consequences, look at France and Germany as good examples of where we're going.

This is why the national sales tax as an alternative to income taxes is dead on arrival.

[Republican Landslide]

At a minimum, the FedGov has to eliminate the payroll tax and tax everybody through a graduated progressive tax. The problem with the payroll tax is that a large number of people have no concern about what the income tax rate is, because they do not pay it. The payroll tax, however, is accepted because of the fiction that people are "putting their money in" to Social Security, and that they will be able to take "their money" out later.

The Democrats would scream bloody blue murder before they eliminate the payroll tax, because it is central to the fiction that Social Security is a savings plan, rather than just another government entitlement. But everything about the payroll tax is deceptive, including the amount actually paid. People have no idea how much their employers are kicking into this Ponzi scheme.

A rational plan would be to eliminate the payroll tax, both the employee and employer share, and start the income tax at 12% on the first dollar earned, going up to about 30% for the top marginal rate. And eliminating withholding, so the citizenry needs to write out a check of exactly how much they have to pay to the FedGov every quarter, wouldn't be a half bad idea.

[Cacique]

This article leaves out one thing, and that is the hidden tax that is called corporate tax. That tax is paid through the back door by consumers via higher prices in consumer goods. Since most people don't see it coming directly from their paycheck they have no idea that they are paying it.

Corporations do not pay taxes, individuals do. It's all a big scam to send money to the central state but it comes off our hides. Politcians figured out that raising incime taxes on individuals would not buy them votes, but they wanted the money anywa, so they inveted corporate taxes and conned the ignorant into believing it a tax on the rich, not realizing that corporate taxes are part of the end price of goods and services.

In reality we all pay higher taxes than the article claims. Only the taxes are backdoor taxes and hidden rather than the obvious income taxes.

Taxes are a scam and eventually stifle economic activity and expansion and that is what is happening everywhere.

[Ben Ficklin]

FedGov gets approx 50% of its income from personal income taxes. Tax relief could be targeted at the the other 50%. Such as:

Cut Capital Gains
Turn a portion of offshore oil production royalties back to the states.
Insert your suggestion here.

[maica]

bttt for later reading

[Blood of Tyrants]

The RAts have created a system where those who pay nothing decide on how much the rest pay. If I had my way, you would get 1 vote fore every $1000 you pay in income and SS taxes.

[zeugma]

These are interesting figures that I've seen before. I have no hope for the ultimate prosperity of this Republic and have not once I discovered (at an early age) the implications of the scam whereby Peter gets to vote to take away Paul's money.

That said, I'd like to see some hard numbers regarding ratios of income/wealth broken out in much the same way as the numbers were in the article.

For instance, if the top 5% of americans make 30% of the income of the nation, yet pay 80% of the taxes, that is truely an evil situation. If, however, the top 5% made 80% of the income and payed 80% of the taxes, the situation would still be evil (as income taxes are by definition IMO), but somewhat less so.

Do any freepers on this thread have or have seen such data?

[Deuce]

Even the barest of glances at tax data reveal a system that is steeply progressive. Tax revenue has been increasingly squeezed out of top earners. According to the most recent data, from 1999, the richest -- with income above half a million dollars -- constituted 0.5% of taxpayers but accounted for 28% of total tax revenue.

This misinterprets the data it presumably relies on (the Joint Committee on Taxation study of 1999 data) and, in any event, presents an incomplete picture. See JCT Study on 1999 Data.

First of all, from a procedural standpoint alone, without knowqing what fraction of the total income the group in question earns, it is impossible to tell whether 28% is progressive, regressive, or flat.

Secondly, page 3 of the above linked report (which is the relevant data since it includes almost all income and almost all taxes, indicates that the top 1% of taxpayers (beginning at $340,000 and averaging $1 million) earn 17.2% of total income and pay 23.2% of the taxes. Therefore, this article, which claims the top 1/2 of 1% pay $877B when the data shows the top 1% paid $391B has done a shoddy job of research---at best. It's calculations leave something to be desisered as well. If the $877B figure were correct, it would represnt closer to 50% of all taxes rather than 28%.

[Republic of Texas]

When the Dims successfully create a country where a voting majority pays NO taxes, and we may already be there, we will never be able to reduce taxes or government because that voting majority will always choose to raise the burden on those who pay for their free lifestyle.

[Republic of Texas]

" All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further. "

The key point. Reduce taxes, AND loopholes so that more people pay a lower percentage of taxes. That way more people have a vested interest in lower taxes.

[dljordan]

This will never happen. Washington DC would have to become a swamp again before they would release their stranglehold on the taxpayer.

[lepton]

bookmark bump

[anymouse]

Something about two wolves and a sheep deciding what's for dinner. :)

[The Old Hoosier]

Athread with a discussion on the corporate income tax.

[guywithnoshoes]

"The most recent data from the IRS, in 2000, show that the top 5% coughed up more than half of total tax revenue. Specifically, we are talking about folks with adjusted gross incomes of $128,336 and higher being responsible for 56% of the tax take."

Are you meaning the same top 5% that owns 90% of the wealth in this country? 56%/90%=62.22%. That means that the top 5% are only paying 62% of what the average American pays as a fraction of income; the rich are 38% undertaxed *by your own figures*. The American system is regressive, not progressive. The top 5% vote for lower taxes for themselves, for the exact same reasons as you claim that the lower income brackets would vote for higher taxes for other people-- to make the middle class pay for the rich, as they already do.

[Mr. Jeeves]

Steve Forbes was onto something with the flat tax. It's far from perfect, but it's understandable, hard to demagogue against, and a lot of people who otherwise pay little attention to politics would have supported it. It would be a big step in the right direction.

I used to love NRST, but I've come to the conclusion that it can never be implemented without repeal of the Sixteenth Amendment.

[Godel]

This is the flaw with progressive tax system. I'm sorry but it's just not right to divide the nation into taxpayers and non-taxpayers. It essentially creates two different classes of citizens, and the non-taxpaying class will always vote to increase the tax burden on others. If we had a fair media, they would constantly be harping on this, because this is the real fairness issue with taxes and it constitutes a real threat to our system of government.

[remember]

The figures of the distribution of income taxes were recently released
by the IRS and are referenced by an article at www.rushlimbaugh.com
titled "Only The Rich Pay Taxes - Top 50% of Wage Earners Pay 96.09%
of Income Taxes". The complete article can be found at:

http://www.rushlimbaugh.com/home/menu/top_50__of_wage_earners_pay_96_09__of_income_taxes.guest.html

Following are some excerpts from the Rush article and my response:

> The top 1%, who earn 20.81% of all income covered under the income
> tax, are paying 37.42% of the federal tax bite.
:
> Here are the wage earners in each category and the percentages they
> pay:
>
> Top 5% - 56.47% of all income taxes; Top 10% - 67.33% of all income
> taxes; Top 25% - 84.01% of all income taxes. Top 50% - 96.09% of all
> income taxes. The bottom 50%? They pay a paltry 3.91% of all income
> taxes. The top 1% is paying more than ten times the federal income
> taxes than the bottom 1%! And who earns what? The top 1% earns
> 20.81% of all income. The top 5% earns 35.30% of the pie. The top
> 10% earns 46.01%; the top 25% earns 67.15%, and the top 50% earns
> 87.01% of all the income.

The above excerpt is from the article as it appeared on October 23rd.
On about November 6th, the last percentage in the sentence "The top 1%
is paying more than ten times the federal income taxes than the bottom
1%!" was changed from 1% to 50%. Apparently, someone figured out that
the statement was nonsensical or, at least, an understatement. You
see, due to the earned income credit, the bottom 1% paid negative
income taxes. Hence, I could correctly say that I personally paid
over a billion times the income taxes than the bottom 1%! In any
case, this percentage was changed to 50% in the article on the site.
The problem is that the statement then became untrue. As can be seen
from the excerpt above, the top 1% paid 37.42% of all income taxes
and the bottom 50% paid 3.91% (100 - 96.09). 37.42% is about 9.57,
not "more than ten", times 3.91%. The initial mistake was arguably
understandable. However, then changing it to an error seems a bit
disturbing. At present, the initial 1% version can still be seen at:

http://www.rushlimbaugh.com/home/daily/site_102502/content/top_50__of_wage_earners_pay_96_09__of_income_taxes.guest.html

I have posted several graphs and tables that compare the distribution
of income and taxes at http://pweb.netcom.com/~rdavis2/distax.html .
The first graph and table show the distribution of income and federal
taxes for quintiles of wage earners (the top quintile is split into
two deciles). As can be seen, the distribution of income taxes paid
is heavily skewed toward the upper quintiles. However, income can
be seen to be similarly (though somewhat less) skewed.

The second table shows the relative skewing of federal taxes paid
compared to income. It shows how much more or less each group pays
than it would if its share of taxes were identical to its share of
income. Estate and gift taxes are the most heavily skewed toward
high-wage earners with the top 1% paying 334% more than would be
determined by its income. Individual and corporate taxes are the
next most heavily skewed with the top 1% paying about double what
would be determined by its income. The top 10% pays about 50% more.
The payroll tax is actually skewed toward the middle-wage earners
because Social Security taxes do not apply above a certain earnings
level and no payroll taxes apply to "unearned" income such as capital
gains. For total federal taxes, the top 1% pays about 36% more than
would be determined by its income. The top 10% pays about 24% more.

The second graph and last table show the percent of income in federal
taxes paid by each group. As can be seen, the first four quintiles
pay more in payroll taxes than in income taxes.

Getting back to the article, the author states that the IRS numbers
"nukes the liberal lie that the rich don't pay taxes". I have never
heard anyone seriously argue that the top 1% (or 10% or 20%) of wage
earners pay no taxes. In any case, the article seems to go beyond
this conclusion. It states that the IRS numbers "illustrate a truth
that will startle you: that half of Americans with the highest
incomes pays 96.09% of all income tax". In fact, there is nothing
truly startling about this since this group earns 87.01% of the
income. They are paying just about 10.4% more than they would under
a flat tax based strictly on income. Considering that we have a
progressive tax system and that everyone gets at least a standard
deduction, this is hardly surprising.

The Rush article later states: 'Remember this the next time you hear
the "tax cuts for the rich" business. Understand that the so-called
rich are about the only ones paying taxes anymore.' The fact is,
there is a valid argument that the Bush tax cuts were somewhat tilted
toward the rich. I've posted a graph and tables showing the percent
cut in the effective tax rate provided by the fully-implemented Bush
tax cut at http://pweb.netcom.com/~rdavis2/bushplan.html . The very
largest tax cut of 33% goes to the lowest-wage workers in the newly
created 10% tax bracket. However, the smallest tax cut of 7.4% goes
to single-filers with a taxable income of $27,050. For couples filing
jointly, the smallest tax cut is 8.8% for taxable incomes of $45,200.
The tax cut then rises gradually to 15.5% for single-filers at
$136,750 and 14.0% for joint-filers at $166,500. It's just as valid
for Republicans to target their tax cuts as it is for Democrats.
However, such targeting should be accompanied by an open, persuasive
argument. The Bush tax cut was not. It was sold as an equitable,
across-the-board tax cut.

Toward the end of the article, the author states:

> Misty tried the old line that all wealth is inherited. Not true.
> John Weicher, as a senior fellow at the Hudson Institute and a
> visiting scholar at the Federal Reserve Bank, wrote in his February
> 13, 1997 Washington Post Op-Ed, "Most of the rich have earned their
> wealth... Looking at the Fortune 400, quite a few even of the very
> richest people came from a standing start, while others inherited
> a small business and turned it into a giant corporation." What's
> happening here is not that "the rich are getting richer and the
> poor are getting poorer." The numbers prove it.

Which numbers prove it? The paragraph above only states that "quite
a few even of the very richest people came from a standing start,
while others inherited a small business and turned it into a giant
corporation." If the author has numbers, he should state the numbers
and/or provide a source.

On the topic of inheritance, the first graph and table mentioned above
do provide evidence of a related item. There does seem to be a very
strong correlation between high-income wage earners and people who pay
estate and gift taxes. Over 99 percent of estate and gift taxes were
paid by the top quintile of wage earners. Hence, while these numbers
do not indicate how much of any group's wealth is inherited, they do
indicate that the great majority of wealth that is inherited goes to
those who already have high incomes.

The author concludes:

> This story, along with a link to the IRS chart, will stay somewhere
> on the RushLimbaugh.com homepage so everyone can see and find these
> numbers at any time. It's crucial that people get this, so please,
> share it with a friend now!

I would likewise like to post this response on that site but I don't
see anywhere that such responses are allowed. Hence, I'll just post
this on forums that reprint the story. Likewise, feel free to post
this response and/or share it with a friend!