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Fairfax Underground
Welcome to Fairfax Underground, a project site designed to improve communication among residents of Fairfax County, VA. Feel free to post anything Northern Virginia residents would find interesting.
Welcome to Fairfax Underground, a project site designed to improve communication among residents of Fairfax County, VA. Feel free to post anything Northern Virginia residents would find interesting.
taxes who pays what and how much and who's your mommy?
Posted by:
ferfux
()
Date: July 18, 2008 12:45PM
From the Washington Post. So Thank you very Hard and your welcome very Tricks.
Posted at 12:00 AM ET, 07/18/2008
Tax the Rich? We Already Do
[Can't tell the difference between politics and policy? Need personal advice of a political nature -- or vice versa? Send your question to Stumped. Questions may be edited.]
Dear Stumped,
We are constantly told the rich don't pay any taxes, but my father-in-law claims that the top 5 percent pay 50 percent of the income tax, while the bottom 45 percent pay none. How is this possible? It contradicts everything I've been told since I was 12 years old.
-- Larry Anderson
Dear Larry,
Well, clearly you haven't been reading the Wall Street Journal editorial page since you were 12 years old. If so, you might believe that only the rich pay taxes in this country. It's silly, really, how polarized we can get not just about differences of opinion, but also about underlying facts.
Your father-in-law is in the ballpark. According to the Congressional Budget Office, in 2005 the top-earning 5 percent of U.S. households paid 60.7 percent of all income taxes. You can find all the charts and graphs you'd ever want about this issue at the CBO's page on the distribution of taxes and income. (But don't all click at once. Wouldn't want to crash the site.)
That's a fact. What spin you put on it depends on your political leanings. Of course these households pay the lion's share of income taxes because they make a large share of income in this country -- 29 percent of all pre-tax income, to be precise. If you lean left, you could bemoan this income inequality. Or, if you lean right, you could bemoan the fact that this entrepreneurial minority is taxed well beyond its proportional share of income. To which those of you on the left can strike back with the observation that the effective income tax rates paid by these top 5 percent of earners is a relatively modest 17.6 percent, down from 20.3 percent in 1995.
The bottom line, which is a good term to use when we're talking about this stuff, is that the rich are still getting richer -- even as they pay an increasing share of the Treasury's tax revenues.
Some historic perspective is in order. In 1980, the top 5 percent of wage earners contributed 36.9 percent of all income tax revenue, a considerably smaller percentage than they do today, even though they faced higher individual rates. In 1995, the richest 5 percent of taxpayers contributed 45 percent of all income tax revenue. So as the rich have gotten richer, their collective contribution to the Treasury has gone up, even as their individual burdens, as measured by marginal tax rates, have declined. So any individual rich person may be paying less in taxes than he did a few decades ago, but as a group, rich people are paying more taxes than ever before.
Got that? Dizzy yet?
My own view is that the rich in this country are not undertaxed, and that they may have once been overtaxed. (Call me a reactionary, but once the government starts taking more than half of any additional dollar earned, that strikes me as confiscatory). There are plenty of oddities and injustices about our tax code, including the regressive nature of the politically sacrosant mortgage interest deduction, but the rich do pay their fare share of income taxes in this country.
Edited 1 time(s). Last edit at 07/18/2008 12:46PM by ferfux.
Posted at 12:00 AM ET, 07/18/2008
Tax the Rich? We Already Do
[Can't tell the difference between politics and policy? Need personal advice of a political nature -- or vice versa? Send your question to Stumped. Questions may be edited.]
Dear Stumped,
We are constantly told the rich don't pay any taxes, but my father-in-law claims that the top 5 percent pay 50 percent of the income tax, while the bottom 45 percent pay none. How is this possible? It contradicts everything I've been told since I was 12 years old.
-- Larry Anderson
Dear Larry,
Well, clearly you haven't been reading the Wall Street Journal editorial page since you were 12 years old. If so, you might believe that only the rich pay taxes in this country. It's silly, really, how polarized we can get not just about differences of opinion, but also about underlying facts.
Your father-in-law is in the ballpark. According to the Congressional Budget Office, in 2005 the top-earning 5 percent of U.S. households paid 60.7 percent of all income taxes. You can find all the charts and graphs you'd ever want about this issue at the CBO's page on the distribution of taxes and income. (But don't all click at once. Wouldn't want to crash the site.)
That's a fact. What spin you put on it depends on your political leanings. Of course these households pay the lion's share of income taxes because they make a large share of income in this country -- 29 percent of all pre-tax income, to be precise. If you lean left, you could bemoan this income inequality. Or, if you lean right, you could bemoan the fact that this entrepreneurial minority is taxed well beyond its proportional share of income. To which those of you on the left can strike back with the observation that the effective income tax rates paid by these top 5 percent of earners is a relatively modest 17.6 percent, down from 20.3 percent in 1995.
The bottom line, which is a good term to use when we're talking about this stuff, is that the rich are still getting richer -- even as they pay an increasing share of the Treasury's tax revenues.
Some historic perspective is in order. In 1980, the top 5 percent of wage earners contributed 36.9 percent of all income tax revenue, a considerably smaller percentage than they do today, even though they faced higher individual rates. In 1995, the richest 5 percent of taxpayers contributed 45 percent of all income tax revenue. So as the rich have gotten richer, their collective contribution to the Treasury has gone up, even as their individual burdens, as measured by marginal tax rates, have declined. So any individual rich person may be paying less in taxes than he did a few decades ago, but as a group, rich people are paying more taxes than ever before.
Got that? Dizzy yet?
My own view is that the rich in this country are not undertaxed, and that they may have once been overtaxed. (Call me a reactionary, but once the government starts taking more than half of any additional dollar earned, that strikes me as confiscatory). There are plenty of oddities and injustices about our tax code, including the regressive nature of the politically sacrosant mortgage interest deduction, but the rich do pay their fare share of income taxes in this country.
Edited 1 time(s). Last edit at 07/18/2008 12:46PM by ferfux.