Who Really Pays Taxes in America?

[Buzzed]

The Socialist Insecurity tax.

Nice to see that you're keeping an open mind and not trying to be argumentative.

Im just telling it like it is. If being open minded means pretending something is o.k. when it's really not, then I would rather be close minded.

[FlakJacket]

Oh I'm not arguing that the system isn't in need of being looked at, it's just that the name calling and things like the Communist thank you not in the News Reader thread don't really make me want to take you all that seriously.

[Bethyaga]

Im just telling it like it is. If being open minded means pretending something is o.k. when it's really not, then I would rather be close minded.

You can be respectful of something without condoning it. People tend to give you more credence then. But that's up to you.

[Buzzed]

Im just telling it like it is. If being open minded means pretending something is o.k. when it's really not, then I would rather be close minded.

You can be respectful of something without condoning it. People tend to give you more credence then. But that's up to you.

I'd perfer to become the guy everyone hates, makes for more interresting threads to read.

[Eliahad]

Bites back a comment.

[Thorn]

Im just telling it like it is. If being open minded means pretending something is o.k. when it's really not, then I would rather be close minded.

You can be respectful of something without condoning it. People tend to give you more credence then. But that's up to you.

I'd perfer to become the guy everyone hates, makes for more interresting threads to read.

Hate to break it to you, dude, but in the pursuit of that role, you're not even the third runner up. You're Miss Congeniality.

[The Eclipse]

Again you are talking only about income taxes. Low and middle income people are hammered by all the other taxes, not the income tax. Removing all those other taxes (sales, social security, etc) and replacing them with a single flat income tax would result in low income people paying less and high income people paying more. Quite likely the middle would stay approximately the same, unless this was extended to corporations.

No I'm not. the bottom ten percent of wage earners pay less than 2% of their wages into income taxes, In a great deal of instances, many of these people, thanks to the (un)Earned Income Credit, pay less than zero percent of their total wages into income tax, they actually get more money back than they paid in.
These are the people that would be beaten down the most by the flat tax.

Keynes' flaw, however, is in discrediting investment and savings. The creation of new capital requires not spending, but investment, and investment requires savings - people putting aside money today in order to get a larger return tomorrow. An economy cannot grow unless capital grows: companies cannot build new plants to meet an increased demand. Even if everyone emptied their checking accounts and spent every dollar they had, it would create an illusory increase in demand - an illusion that would be shattered as soon as companies realized that everyone had, well, just spent every dollar they had. An artificial increase in demand is about as good for the economy as MDMA.

Does Keynesian Economics have flaws? Yes.
That doesn't mean it's entirely wrong, or even mostly wrong. And the reason that Keynes is still in textbooks today is because while he wasn't completely right, he was partly right.
Spending is not the sole influence on the economy, but it IS the biggest one. Every economic benchmark is guaged on spending, not on investing. Now, a drastic cutback on investing is going to be damaging to the economy, of course. But a drastic cutback in spending will be more so.

[The Eclipse]

I'd perfer to become the guy everyone hates, makes for more interresting threads to read.

Would you settle for: "The guy who makes half-assed uncompelling arguements in the vain search to become the guy everyone hates"?

We haven't had anyone filling that post since Evan left, the aforementioned position you are applying for has long since been filled by Crazy Elf, and he does a better job at it, so sorry.

[3278]

I agree with Cain['s statements so far in this particular thread]. I think we should pay out everything people have paid in for, but freeze pay-ins now. Give everyone what they're due, proportionate to their input, but no longer take Social Security from people's checks. Require businesses raise wages to match what had previously been their contribution to SS, and allow people to do whatever they please with what had been their total SS contribution.

Does anyone know how much the average person pays, per year, in Social Security taxes? I'm sure this number is floating around somewhere, but /lord/ I don't want to search for it.

[Johnny the Bull]

Thats good to know seeing as I will be moving to Vancouver within the next three years. The money is lower than what I'd earn in the States, but I figured it'd cost less to live in Canada.

Hmmm, not really. The cost of most items produced in Canada cost the same as they would in the US. However, imported goods will be more expensive, because of the lower value of the Canadian Dollar. For example, a PC may cost $1000 (USD) in the US, but would cost a Canadian $1500 (CDN).

Also, our salaries are a bit lower (but you already noticed that), and we are taxed much, much more (IIRC you are a lawyer, so that would put you in the upper tax bracket - $60,000+/yr - so you are looking at a total tax burden of 50%+ or so - that should include income tax (federal & provincial), GST, PST, CPP, property and EI though).

On the plus side, we have free health care. If you don't mind waiting 6 to 18 months to get an appointment for surgury.

*Chortle* That is the exact same circumstances I am faced with in Australia almost to the letter. Anyhow, I am not moving to Canada for good, probably 3 years with KPMG or the like while I spend my free time snowboarding. It's mainly an exercise in living in a nice country for a bit before I set off to the drudgery of a 14 hour day and avoiding paying off my degree. That of course means not buying a house or the like.

EDIT: BTW, I am not a lawyer yet for clarification. I am well on the way to becoming one but I am not yet in practice, otherwise I would already be in Canada.

[Johnny the Bull]

I'd perfer to become the guy everyone hates, makes for more interresting threads to read.

No one hates you Buzzed, it's just reading your baseless incomprehensible drivel is worse than running one's fingernails down a blackboard for any and all with a functioning cerebrum.

[Serious Paul]

Who really pays taxes?

I am sure as hell on that list.

[Cipher]

Does Keynesian Economics have flaws? Yes.
That doesn't mean it's entirely wrong, or even mostly wrong. And the reason that Keynes is still in textbooks today is because while he wasn't completely right, he was partly right.
Spending is not the sole influence on the economy, but it IS the biggest one. Every economic benchmark is guaged on spending, not on investing. Now, a drastic cutback on investing is going to be damaging to the economy, of course. But a drastic cutback in spending will be more so.

Talking to the wrong economist, Eclipse.

As far as I'm concerned (and I'll have this argument as long as you like, on any points of finer theory that you like), Keynes is wrong in every respect. The IS/LM model, deficit spending, "sticky" prices, involuntary unemployment - wrong, wrong, wrong.

And, if you want my opinion, the reason Keynes is still taught in textbooks is so that economists can get jobs. Consider this hypothetical dialogue:

Senator Blowhard: "Tell me, what can my committee do to get us out of this recession?"
Austrian Economist: "Absolutely nothing."
Senator: "..."
Austrian: "Well, that's not entirely true. You could slash taxes, cancel all of your state's pork-barrel programs, and threaten to break ranks with the President unless he returns the U.S. to a gold standard."
Senator: "Hmm. And what do you suggest?"
John Maynard Keynes: "Oh, there's tons of things you can do. Government spending in the following areas could significantly boost consumer confidence ..."
Senator: "Mr. Keynes, we have much to discuss."

Who do you think's going to get work - the guy who tells you your job is redundant at best, and more often dangerous, or the guy who tells you that your job is a panacea?

Then again, we're getting tangential.

[The Eclipse]

As far as I'm concerned (and I'll have this argument as long as you like, on any points of finer theory that you like), Keynes is wrong in every respect. The IS/LM model, deficit spending, "sticky" prices, involuntary unemployment - wrong, wrong, wrong.

Ask three economists about the state of the economy and you will get four seperate conflicting opinions.

I think I will accept that we have a difference of opinion and leave it at that.

[Rev]

Austrian: "Well, that's not entirely true. You could slash taxes, cancel all of your state's pork-barrel programs, and threaten to break ranks with the President unless he returns the U.S. to a gold standard."

Tax cut stimuli are keynesian as well, just a slight twist on older keynesian ideas. Notice they do not propose tax cuts and spending cuts, they propose tax cuts and deficit spending in an effort to stimulate demand. Kennedy described his 1963 tax cuts in that way. Bush explained a small slice of his tax cuts in that way as well. In my opinion such interventions are fairly pointless.

Tax cuts to stimulate investment are stupid for the same reasons, just a bit more obviously. By the time the government realises there is a recession and institutes such a cut then half a year or more goes by for it to come into effect, then people actually invest the money, then that investment works its way through the usual channels the recession is likely to be long over. The same year or two long time lag occurs with a spending stimulus.

Economists who think keynsian interventions are pointless don't think that you can cut taxes for a short term economic boost either. Not all of them think that the tax rates in the US are too high either. Basically they just say that managing the economy on a short time scale is impossible, that when there is a recession the government should not do much of anything. They say that instead everyone should just focus on long term good policy and that if you do the short term problems will work themseleves out relatively painlessely.

[Rev]

Again you are talking only about income taxes...all the other taxes, not the income tax... those other taxes (sales, social security, etc) ....

No I'm not... into income taxes... less than zero percent of their total wages into income tax

I am talking about TOTAL TAXATION you keep talking about INCOME TAXES ONLY. Total taxation >> income taxes for low income people. total taxation > income taxes for middle income people, total taxation ~= income taxes for wealthy people. Low income people are not paying more because of federal income taxes in the US they are paying more because of social security, sales, property, etc etc. Everything except income taxes.

That is why I carefully specified "Removing all those other taxes (sales, social security, etc) and replacing them with a single flat income tax", rather than allowing anyone to assume I was talking about replacing the current income tax with a flat one and leaving everything else the same, which would obviously end up with low income people paying more.

You may be right, however, that a completely flat income tax only system would end up with a few people at the very very bottom of income paying more. A big standard deduction like the one Bethyaga mentioned would probably take care of that. I suppose it is possible that a flat tax might end up hurting really low income people in california, and the other few most progressively taxing states. Over the whole country, however, they would pay less.

Anyhow I mentioned that a single legged tax system like flat income tax only also has a problem with stability, so I don't think it is a great idea to go that far.

[Serious Paul]

So wait a minute am I understanding you correctly in thinking what you are saying is that the poor pay more taxes because they pay sales tax as well? I am assuming you mean in ratio to their earnings, so the rich still likely pay more total, but less percentage wise of their own income?

Is that even slightly correct?

[Rev]

Yes, as a percentage of income (wealth is an interesting one too, and not quite the same). Most of the statistics one will see are in percentage of income. Unless I specify otherwise I almost certainly mean percentage of (or ratio too, same thing) income.

[The Eclipse]

Rev, dammit, try reading instead of scanning.

I read recently that the total tax load of the lower class is under 15%.

No I'm not. the bottom ten percent of wage earners pay less than 2% of their wages into income taxes, In a great deal of instances, many of these people, thanks to the (un)Earned Income Credit, pay less than zero percent of their total wages into income tax, they actually get more money back than they paid in.

The TOTAL tax load for the bottom 10% averages out to be under 15%, unlike the 35-40% the rest of us pay, and most of those taxes they do pay is in the form of sales tax and misc. usage taxes.

[The Eclipse]

You'd be taxing the same dollars twice, then. You'd be discouraging investment (in the same sense that investment is discouraged now by taxing interest and capital gains). The U.S. is already on track to catch up to where Japan is now; do you want to hasten the race?

Okay, great.

What about the people who live ENTIRELY off the millions of dollars they rake in from their investment income. Under your suggestion, these people would forever be exempt from paying taxes though they are earning huge amounts of money.

On the other hand, I suggest a system where capital gains are not taxed UP TO a certain point, possible 50k/year. Very few investors make more than fifty thousand a year, and the ones who do are not the ones in need of protection from taxes taking away their 401k, etc.

[Cain]

So wait a minute am I understanding you correctly in thinking what you are saying is that the poor pay more taxes because they pay sales tax as well? I am assuming you mean in ratio to their earnings, so the rich still likely pay more total, but less percentage wise of their own income?

Is that even slightly correct?

Basically, yes.

Look, poor people have no money for savings. Every dollar they earn has to be spent on the necessities of survival. Even people who are not in poverty fit this bill-- they have just enough to make the car payment, house payment, food bills, and so on. They can get by, but they cannot save anything. Richer people are capable of saving large amounts of money.

Now, what that means is that a poor person is paying sales tax on 100% of his income. A rich person, who's able to save/invest 50% of his income, is only taxed on 50% of his money-- the 50% that he spent.

You may be right, however, that a completely flat income tax only system would end up with a few people at the very very bottom of income paying more.

Not just more cash; it would disproportionally hurt them far more than richer people. When you only earn 10,000 a year, you don't have any disposeable money-- each and every cent is needed to get buy. When you're earning a million, you can blow a hundred thousand on a car, and not even think twice about it.

[Buzzed]

You'd be taxing the same dollars twice, then. You'd be discouraging investment (in the same sense that investment is discouraged now by taxing interest and capital gains). The U.S. is already on track to catch up to where Japan is now; do you want to hasten the race?

Okay, great.

What about the people who live ENTIRELY off the millions of dollars they rake in from their investment income. Under your suggestion, these people would forever be exempt from paying taxes though they are earning huge amounts of money.

On the other hand, I suggest a system where capital gains are not taxed UP TO a certain point, possible 50k/year. Very few investors make more than fifty thousand a year, and the ones who do are not the ones in need of protection from taxes taking away their 401k, etc.

Actually it isn't being taxed twice. Interest is income because it's additional money they get on top of what they already had. So interest should not be exempt from taxation.

Now in a situation when someone takes out money from their investment account might be a different story. In some situations, all the money is taxed when you close an investment account. In that situation, the money was effectively taxed twice, once when the money was earned (before being put into the account), and once when the money was taken out.

[Bethyaga]

Now, what that means is that a poor person is paying sales tax on 100% of his income.

Unless you live in Nebraska, where you don't pay sales tax on housing, food, utilities or education (and maybe a couple other minor things). Therefore, when you consider that a poor person in Nebraska spends maybe 75-90% of their income on those basic things (depending on how poor they are), they really only pay sales tax on a small portion of their income.

And besides sales taxes are only provincial. The federal government relies largely on income tax.

And then, let's consider the EIC, child care credits, and child credits on your federal income tax, all of which allow you to get back more of a rebate on your federal income taxes than you actually paid in. Therefore, many of the poorest Americans with children are actually paying a negative percent in federal taxes, which (I hope) helps offset some of the higher provincial taxes they pay. And for the very poorest Americans, they often qualify for various government monies that are just straight payouts and not even hidden as "tax credits"--things like unemployment and food stamps and TANF and other forms of welfare.

[Someone help me--a working single mom with 2 kids in daycare who makes $18,000 a year--how much tax would she "pay"? I know it depends on her exact situation and how much she pays for daycare, but a rough estimate...?]

[The Eclipse]

Bethy--

She wouldn't.

I wrote up a rough estimate and assuming that she claimed S3 on her W-2's she would have payed in somewhere in the neighborhood of 1100 bucks into the federal income tax fund.

I figure between the EIC, child tax credit, additional child tax credit, and the standard exemption she would get a tax return of somewhere around 1800 dollars, or 700 more than what she payed in.

That's a really rough estimate, it could go a hundred bucks or so in either direction.

[Bethyaga]

I figure between the EIC, child tax credit, additional child tax credit, and the standard exemption she would get a tax return of somewhere around 1800 dollars, or 700 more than what she payed in.

That's a really rough estimate, it could go a hundred bucks or so in either direction.

That sounds reasonable. Supposedly, that $700 is to help defray the cost of Social Security taxes, etc.

[Bethyaga]

Furthermore, if she lived in Nebraska, with an average sales tax of maybe 6 1/2 % on those items which are taxed, I would bet once you include ALL taxes, she pays something like 1-3% of her total income in taxes and may even qualify for food stamps or other assistance to help defray that.

[Cain]

Unless you live in Nebraska...

I was talking in general cases; if you want to get specific, things really get complex.

For example, in my state, there's no tax on store-bought food-- but there is on restaurant food. There's also taxes on pots and pans and cooking utensils, and taxes on our utility bills. There's no rent tax, but there are some substantial property taxes, which said woman would end up paying for in rent, if not in direct taxation. Clothing is taxed as well.

There's other "pseudo-taxes" as well-- car tabs, for one; and mandatory new license plates ever few years. Those are flat fees, and they definitely hurt the poor much more than the rich-- a senior citizen on a fixed income may have trouble coming up with a hundred dollars for new plates and tabs, but a wealthy person wouldn't even notice.

Total them up, and you end up with a substantial tax bill.

[3278]

There's other "pseudo-taxes" as well-- car tabs, for one; and mandatory new license plates ever few years. Those are flat fees, and they definitely hurt the poor much more than the rich-- a senior citizen on a fixed income may have trouble coming up with a hundred dollars for new plates and tabs, but a wealthy person wouldn't even notice.

Ineteresting. It's too bad Washington doesn't base the plate and tab cost on the title-listed cost of the vehicle, the same figure used to determine the direct taxations of the vehicle. We /are/ the motor state, though.

[Cain]

Ineteresting. It's too bad Washington doesn't base the plate and tab cost on the title-listed cost of the vehicle, the same figure used to determine the direct taxations of the vehicle. We /are/ the motor state, though.

We *used* to, but then Tim Eyeman came along with his massive-tax-cut initiative. That changed the tab price to a flat $30. The state made that up by adding additional relicenscing fees, increasing the cost for the smog tests, and mandatory new plate purchases.

[Bishop]

(Sorry to break it up guys, I'm not trying to.)

32, check your box again. (Your pm box, that is). You'll probably laugh.

[Rev]

The TOTAL tax load for the bottom 10% averages out to be under 15%.

I was reading, but I missed that "bottom 10%". Not sure if that would be true in my state either as the bottom 20% pay 17% in state and local taxes alone, but my state is an outlier. Do you happen to know what the bootm 10% income number is in dollars? Must be under 20k. Under the flat tax thing bethyaga posted somone making 20k would be paying about 5%, somone making 10k would be paying 1%.

Also this comes back to the thing about many low income people paying more in taxes than the law requires because the system is so complicated and many of them are so bad at dealing with complicated systems.

[Rev]

I figure between the EIC, child tax credit, additional child tax credit, and the standard exemption she would get a tax return of somewhere around 1800 dollars, or 700 more than what she payed in.

That's a really rough estimate, it could go a hundred bucks or so in either direction.

That sounds reasonable. Supposedly, that $700 is to help defray the cost of Social Security taxes, etc.

Social security taxes are 12.4% (6.2% of which shows up on your pay stubs, 6.2% does not), so she would have paid (approximately, I dont think you pay that on quite all of your gross pay, but most of it) $2232 in those.

So thats net $1500 paid... or 8% of income, though thats even rougher could easly be $500 off..

Now in my (unusually evil) state you would tack 17% on top of that for state and local taxes bringing the total up around 25%. Also that woman is only going to have the child tax credit and earned income credits while she is raising childeren. It is quite possible that she will be making something close to 18k for her entire life.

[Bethyaga]

So thats net $1500 paid... or 8% of income, though thats even rougher could easly be $500 off..

Nice. And assuming an approximation of accuracy, that would make me quite wrong.

[Rev]

This study contains information on nebraska tax burdens by income, on page 11 (pdf pages used by me, not thier numbers which differ by one or two) is a table of agi income and % of income paid into sales & use tax. It slants downward as income increases. Sales taxes pretty much always do. Somone making 18k would pay 1.7% or so in this local tax alone, and people making more money than them would pay less. Toward the end of the pdf is table 1 which goes into this number in much more detail breaking out what this sales tax comes from.

I wonder if that <5k number might be less meaningfull because it could include a lot of part time working teenagers who spend pretty much all thier income on luxuries.

http://www.revenue.state.ne.us/research ... nStudy.pdf

Unfortuantely there is no table for total tax burden, and the income tax table lumps everyone from the bottom 70% together.

[Paul]

Dayyyyam! You've been stung Bethy!!!!