Friday, October 17, 2008

Eat the Rich

The rich need to pay their fair share! OK, what is their fair share? How much of the total income taxes should be paid by the top 1 percent of income earners in the US? Before answering that question, let me give you some stats – in 2006, the top 1 percent comprised 1.357 million tax returns of 135.7 million. The minimum adjusted gross income for people in the top 1 percent was $388 thousand. So what percentage of total income taxes should they have paid? OK, now look at the top 5 percent, where you needed to make $153 thousand or more. So 80 percent of this group makes between $153 and $388 thousand. What share of total income taxes should these people pay?

My guess is that 99 percent of the people who complain about the rich paying their fair share have no idea what the rich actually pay as a share. So here goes for 2006 - the top 1 percent of income earners paid 39.89 percent of total income taxes, the highest percentage ever; the top 5 percent paid 60 percent, and the top ten paid 70 percent, and the top 25 paid 86 percent, all of which are higher totals then during any year of the Clinton administration. You could cut taxes for the middle class, but the problem is they hardly pay any. In 2006, the average tax rate for the middle quintile was 7 percent. For the bottom half, it was 3 percent.

That said, a tax cut is not a tax cut if you run a deficit – it is merely a deferral of taxes. Bottom line is that government spending has gone up, and so too will taxes in the future for somebody. The Bush tax cuts don’t cut taxes so much as they defer the decision as to who will bear the burden when the bill comes due. And here’s betting that it aint the middle class or lower classes. Some may say that certain social programs may get cut in the future, so that the poor will bear the burden of the current deficits. So end of the day – it’s either the rich or the poor or both who will pay, but it won’t be the middle class. And that’s the dirty little secret about politics – there is so much pandering by both parties to the middle class that they are getting screwed that it cannot possibly be true. And it isn’t. Take a government provided service like education – the rich opt out for private alternatives, the poor drop out, but both pay in (albeit the poor only a little bit) to the benefit of the middle class.

And of course we're told to pay our fair share by the likes of Obama and Biden, who are remarkably cheap in their own charitable givings. Biden even says that rich people are being unpatriotic. Unbelievable.


Anonymous the_giant said...

Interesting article that is similar to many things I have read before. A few quick questions: is the data summarized for the complete distibution of income group/taxes paid (rather than just the top 25% to which you referred)?

Also, I have not seen the tax returns nor the charitable donations from any of the candidates this year. In the past I had heard the Al Gore had less than $500 of charitable donations. I would love to know what the current candidates give as a dollar amount and as a percentage of gross income.

I have also heard the argumment that the US does not have a progressive tax system b/c payroll for social security taxes is capped. I have done the math and this assertion is completely not true. The real issue with the people who try to use this argument is that the system is not progressive enough FOR THEM.

I have found, and my sample is not very large, is that the same people pushing to "tax the rich" are themselves middle class people who generally live beyond their means and give very little to charity.

One person (middle class male) that I spoke to literally said the following: Suppose the govt needed to raise $200,000 in taxes and there was only 1 company with a single owner who made $400K each year and 100 workers who each made $40K. This person thought the govt should tax the owner at 50% and the workers at 0% b/c the owner would still have 5x the earnings than each of the workers.

I just had to shake my head at this.

Seems like a lot of these people want something for nothing yet they are unwilling to donate to any charitable cause. They have no problem spending someone else's money, though.

Again, this is not a general statement, just my observation from a small sample.

8:13 AM  
Anonymous Anonymous said...

As Hatcher the economist knows, the real question is, what % of total income does the top 1% earn? The numbers quoted by the Hatcher seem wildly out of place because he's citing the % of the total number of taxpayers, not % of total income. If the top 1% of taxpayers earns a hugely disproportionate share of the the total income, then shouldn't they pay a disporportionate share of the taxes as well?

The middle and lower incomes pay taxes, just at slightly lower rates, which is the basis of the progressive tax system in the U.S. There aren't any magical tax loop holes for middle/lower income taxyapers that aren't available to the upper income taxpayers.

8:58 AM  
Anonymous Jim O said...

Not that I begrudge anyone cause I want to be one of them, but what is the UNadjusted gross income of the top whatever %?

I think loopholes and deductions should be closed for everyone except me and my friends (and relations). In that, I doubt I am alone

BTW, your robot-detector says I need to spell "NJSRAGS" to prove I am not a computer program trying to spam you up. I am not sure what NJ SRAGS means, but it sounds kinda ominous. And rather descriptive as well.

Now that I think about it, I think I agree - NJ does indeed SRAGS. We SRAGS harder than anyone. Don't bother coming here if you can't handle our level of SRAGS, cause we will roll right over you.

11:23 AM  
Anonymous Anonymous said...

Would like to see your thoughts on voting against a Phillies fan (Biden) during a World Series run.

6:33 PM  

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