Who pays for government?

[bilby]

The figures presented in the OP might or might not indicate that taxation, adjusted for 'transfers', in the US is (highly) progressive; let's accept, for the sake of argument that it does show this.

The real question, that these figures cannot answer, because they only tell half the story, is 'is this a good or a bad thing?' or to put it another way 'how progressive should taxation be in the US, and is the progressiveness right now too high, too low, or about right?'

It seems to me that the ideal level of progressiveness in taxes and transfers would be just sufficient to offset the tendency inherent in the economy towards wealth concentration.

We can see that wealth is becoming increasingly concentrated in the US; from this, I conclude that regardless of how progressive the current tax structure might be, it needs to be more progressive, in order to achieve the best outcomes for the majority of the people.

The absolute numbers, and even the ratios of tax paid by percentile, are irrelevant; I am sure nobody is surprised to discover that taxation after transfers is progressive. But if wealth concentration is still occurring fairly rapidly, that fact in itself is sufficient to indicate that the regime is not sufficiently progressive to achieve the optimum result for all Americans.

Who cares about quintiles. We all know that the upper quintile or the upper part of the upper quintile controls the wealth. Therefore they should be paying the taxes in proportion that support that wealth, which they do not. If I control 90% of the wealth I should be paying 90% of the taxes. That is certainly not the case in the U.S.

Quite.

 

[jonatha]

I am curious how someone with an average "market income" of $15K can only pay $500 in "Federal taxes" (which according to the link include, among other things, income and payroll taxes) when FICA on $15K of wages is $1147.50.

Maybe the lowest quintile is living off their dividend stream?

ETA - Note that "market income" does *not* include Social Security, so it's not lots of poor old folks not paying any taxes on their SSA check...

EATA - The only thing I can think of that makes any sense is that EITC gets counted as a (negative) Federal tax, and not as a Government Transfer.... Yep - see footnote 14 on page 14....

 

[ronburgundy]

Are they? Or are they just even more secret than before?? /tinfoilhat

If there really wasn't a way to hide accounts would Congress be going nuts with this FATCA garbage?

I fixed your statement, assuming you must have meant the opposite, since legislation to coerce foreign banks to disclose accounts by Americans makes no sense unless undisclosed foreign accounts by Americans to evade taxation is a known pervasive problem costing the Fed billions.

In addition, the Swiss government had to pass their own law in 2013 allowing banks to cooperate with FATCA, because for more than a half century it has been explicitly illegal for banks to divulge information about their customers accounts to anyone, including governments. Below is what was true up until the new law went into effect less than a year ago:

[P]Swiss law forbids bankers to disclose the existence of your account or any other information about it without your consent (except for certain circumstances, which we'll discuss later). Where the similarity ends is when that privacy is violated. Whereas in the United States, if your doctor or attorney violates your confidence you must begin legal action; in Switzerland, if a banker divulges information about a bank account without permission, immediate prosecution is begun by the Swiss public attorney. Bankers face up to six months in prison and a fine of up to 50,000 Swiss francs. And, you have the option of suing the bank for damages. Needless to say, Swiss banks are very careful about protecting your privacy.[/P]

Even known criminal activity related to the money in accounts couldn't be divulged up until 2009, and even then the foreign state had to provide evidence of the criminal activity prior to the bank releasing any account information. In the 10 months leading up to that law change, 30% of the assets in Swiss banks was withdrawn by the tax evaders who put it there to hide it. In is not a conspiracy theory, but a well established fact that the Switzerland has made tons of money over the last half century by requiring its banks to be places were criminals and tax evaders (also criminals) would want to hide massive sums of money. The only reason they had such a policy is because there has been a large demand for such secrecy services, meaning many wealthy people wanting to hide massive sums from their government. FATCA and other changes to Swiss banking laws will have little effect in reducing the countless billions in untaxed income that America's wealthy hide, because plenty of foreign government could give a shit about FATCA or the US governments wishes and will gladly hide that money because of the millions they can make from this service.

The tinfoilhat wearers are the only ones insane and irrational enough to believe that America's wealthy don't hid billions in foreign accounts and won't continue to do so.

 

[barbos]

I have said it many times before.
I think most people should be able to pay taxes.
What we have is a system where people on the top are allowed to rob people on the bottom as long as they pay taxes from these ill gotten gains. I think the system where criminals (I am talking about banksters and like) are sent to prison instead of taxing would be preferable.

 

[T.G.G. Moogly]

The tinfoilhat wearers are the only ones insane and irrational enough to believe that America's wealthy don't hid billions in foreign accounts and won't continue to do so.

There's got to be an explanation for why so many US citizens don't get it, whether it's taxes or healthcare or whatever. Maybe there's some kind of frontier egalitarian utopian mentality operating where everyone is a struggling pioneer swinging a pick or raising cattle. How else can you explain that a man can be convinced he does not need healthcare by a politician who gets his healthcare from taxes? Or maybe most voters are just ignoramuses when it comes to these issues, which would explain their seeing a chart that though perhaps factual, does not contain the information they need to make an informed decision.

 

[SimpleDon]

As for your main hypothesis that the wealthy pay too much in taxes compared to everyone else, I will agree with you.

But I think that they do because they earn too much of the nation's income. And everyone else earns too little of the nation's income. The bottom 50% of the earners in the US earned a total of one trillion dollars of AGI in 2009, the last year that the IRS has released data for. The top 10% of earners made more than 2.5 trillion dollars in AGI, which is computed deducting 401k’s for example. A decrease of 10% in the incomes of the top 10% of earners redistributed the lower 50% of earners would raise their incomes by about 20,000 dollars a household. Remarkable.

We are paying the wealthy too much and everyone else too little.

And this is not because of some mysterious, unknown and unknowable economic factors that have elevated the unknown and unknowable so-called "true value" of the work that the wealthy do. It is because we have consistently applied economic policies to intentionally shift income from the lower 90% of earners to the wealthy. And these policies have worked.

Since 1970's the % of GDP that has gone to corporate profits has doubled to 11% in 2007, the last year before the Bush deregulation derangement financial crisis and recession temporarily suppressed them. And the % of the GDP that is paid out in wages has dropped by 6% of GDP. About the same amount that the corporate profits increased. Increased wages lower profits. Decreased wages increase profits. Even in the mainly fantasy world of mainstream neoclassical economics.

You are making the case that those with the wealth should be paying taxes in proportion to the wealth they control, and I agree. By that yardstick the wealthy are extremely undertaxed in the U.S. And of course they know it and they like it, which is why they keep crying that they are overtaxed. Pretty good scheme.

Yes, it should be obvious that the wealthy and the higher income earners should have to pay the bulk of the taxes. If for no other reason than the Willy Sutton rule, that is where the money is. In economic's terms that is where the discretionary income is. The income that is not used to buy food and shelter, the income that isn't used for the means of survival.

Auxlus is correct, the wealthy, the high earners do pay the vast majority of the income taxes. In fact, they pay about the same amount of the income taxes that they did before when the tax rates were much higher, about double what they are today. But the reason is that their incomes have more than doubled since the marginal income tax rates were cut in about half.

But the income taxes are only about half of the taxes that are collected. There are sales taxes, property taxes and payroll taxes. And the movement conservative/Republican consistent push over the last forty years has been to decrease the taxes paid by the wealthy, the income tax and property taxes and to increase the taxes paid by the not so wealthy, the sales taxes and the payroll taxes.

Forty years ago at the start of supply side/neoliberal/Reaganomics/trickle down economics, whatever you call it, there was broad acceptance among the proponents of it that economic fiscal policies determined the distribution of income, and therefore wealth. That tax rates and wage support government policies would have to be changed to shift more income to the rich to provide more money available for investment. .

And these policies were changed. And the changes worked, more income went to the already rich and less went to everyone else.

But today the proponents of neoliberal economics, I need to cut down to only one term for it, pretty much agree that the current income inequality isn't a result of their fiscal policy changes over the last thirty to thirty five years. They variously claim that the current and ever increasing income inequality is the result of :

• some unknown and unknowable economic factor,
• the way that the so-called free market would set the income distribution.
• that this is the income that the already rich deserve.
• we have to give the rich ever increasing income to maintain their incentive to work and innovate.
• we can't give the non-rich too much money in order to maintain their incentive to work.
• the rich are the job creators.
• only the rich know how to handle money, everyone else just wastes it on consumption.
• saving the economy from the evils of unions, the minimum wage, defined benefit pensions, reduction in the sainted 40 hour workweek, etc.
• anything else is the evil of redistribution. (redistribution to save us from redistribution!)
• policies that are required to reduce the federal government by starving it.
• just the way that things should be.

Economics' long term memory loss.

 

[ksen]

The tinfoilhat wearers are the only ones insane and irrational enough to believe that America's wealthy don't hid billions in foreign accounts and won't continue to do so.

There's got to be an explanation for why so many US citizens don't get it, whether it's taxes or healthcare or whatever. Maybe there's some kind of frontier egalitarian utopian mentality operating where everyone is a struggling pioneer swinging a pick or raising cattle. How else can you explain that a man can be convinced he does not need healthcare by a politician who gets his healthcare from taxes? Or maybe most voters are just ignoramuses when it comes to these issues, which would explain their seeing a chart that though perhaps factual, does not contain the information they need to make an informed decision.

they don't get it because SOCIALISM!!!

 

[ronburgundy]

Then why do we seem to get so much less bang for our buck? For example roads in Germany are much better with few potholes or these steel slabs you see around here all the time. And that is with all the extra investment Germany puts into public transportation - much better coverage, more modern fleet etc.
Or take power. Most local power lines are buried there which means very few outages.
I know part of the reason is smaller population density but in Atlanta metro we have power lines strung between timbers even within built-up areas. Also many potholes and crappy public transport.

Mass transit isn't a good comparison--the effectiveness of mass transit is highly related to population density. Mass transit works pretty well in the US in the high density areas. It's just most of the US is pretty low density.

It is true that pop density matters and US is overall low density, and yet has little of it landmass that is so low density that no major infrastructure is needed, unlike Scandinavia, Australia, and Canada. This is why for most infrastructure needs related to water, power, roads, etc.., the US low but not zero pop density means much higher per capita expenditure is required just to meet those basic needs. This is why the US would need to have many times the per capita spending of any comparable developed nation in order to meet its basic needs at a similar level of quality as those other countries do. Yet, we spend less per capita than almost half of those comparable countries.

It true that mass transit in sparse rural areas makes little sense. However, the US fails miserably in mass transit even in densely populated urban areas. NYC is our sole city were more than half of daily commuters take public transportation, and the only other 5 cities where a little more than 1/4 use it are D.C., Boston, Chicago, Philly, and San Fran. This use corresponds directly to the quality and quantity of the public transportation available. There is simply nothing respectable available in any other US city, and we have dozens of other very densely populated urban areas. The US had decent and growing public transport systems in 50-100 cities in the first half of the 20th centuries. It is an established fact (resulting in prison time convictions) that the US auto industry and Petroleum industries conspired to gain control of and dismantle those systems in several dozen cities, and they did so with the aid of a complicit government (Corporate corruption of US government to the detriment of the people has been going on for centuries).

 

[Loren Pechtel]

Who cares about quintiles. We all know that the upper quintile or the upper part of the upper quintile controls the wealth. Therefore they should be paying the taxes in proportion that support that wealth, which they do not. If I control 90% of the wealth I should be paying 90% of the taxes. That is certainly not the case in the U.S.

We have an income tax, not a wealth tax. Wealth taxes are a very bad thing.

 

[Loren Pechtel]

I am curious how someone with an average "market income" of $15K can only pay $500 in "Federal taxes" (which according to the link include, among other things, income and payroll taxes) when FICA on $15K of wages is $1147.50.

Maybe the lowest quintile is living off their dividend stream?

ETA - Note that "market income" does *not* include Social Security, so it's not lots of poor old folks not paying any taxes on their SSA check...

EATA - The only thing I can think of that makes any sense is that EITC gets counted as a (negative) Federal tax, and not as a Government Transfer.... Yep - see footnote 14 on page 14....

Yeah, it's the EITC. The EITC pretty much nulls out the FICA taxes until it reaches it's peak.

 

[Loren Pechtel]

If there really wasn't a way to hide accounts would Congress be going nuts with this FATCA garbage?

I fixed your statement, assuming you must have meant the opposite, since legislation to coerce foreign banks to disclose accounts by Americans makes no sense unless undisclosed foreign accounts by Americans to evade taxation is a known pervasive problem costing the Fed billions.

The problem is that FATCA is a very heavy-handed way of dealing with it that is having repercussions for US expats. They didn't pay any attention to the laws of the other nations--some of which have laws specifically prohibiting the disclosures required under FATCA. The banks are responding by booting customers with US passports.

In addition, the Swiss government had to pass their own law in 2013 allowing banks to cooperate with FATCA, because for more than a half century it has been explicitly illegal for banks to divulge information about their customers accounts to anyone, including governments. Below is what was true up until the new law went into effect less than a year ago:

And the US shouldn't be meddling in their internal issues.

The tinfoilhat wearers are the only ones insane and irrational enough to believe that America's wealthy don't hid billions in foreign accounts and won't continue to do so.

I'm not denying that money was hidden. I'm saying that the current approach is not a good one. One simple measure of the problem: It's not reciprocal. We should not be demanding data that we are not also willing to hand over.

Also, it does nothing about the money that is held in other names.

 

[untermensche]

Who cares about quintiles. We all know that the upper quintile or the upper part of the upper quintile controls the wealth. Therefore they should be paying the taxes in proportion that support that wealth, which they do not. If I control 90% of the wealth I should be paying 90% of the taxes. That is certainly not the case in the U.S.

We have an income tax, not a wealth tax. Wealth taxes are a very bad thing.

What we have now is a bad thing, an oligarchy.

More and more of the people in the top 0.1% are there through inheritance, not any effort of their own.

More and more of our lives are dictated by these freeloaders.

 

[dismal]

We have an income tax, not a wealth tax. Wealth taxes are a very bad thing.

What we have now is a bad thing, an oligarchy.

More and more of the people in the top 0.1% are there through inheritance, not any effort of their own.

More and more of our lives are dictated by these freeloaders.

At some point you should attempt to make your argument consistent with the facts.

 

[untermensche]

What we have now is a bad thing, an oligarchy.

More and more of the people in the top 0.1% are there through inheritance, not any effort of their own.

More and more of our lives are dictated by these freeloaders.

At some point you should attempt to make your argument consistent with the facts.

Here are the facts;

Capital in the Twenty-First Century

http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/ref=sr_1_1?ie=UTF8&qid=1418239039&sr=8-1&keywords=capital

If you have read it you understand the facts. And the facts are we are living in an oligarchy of inherited wealth that is rapidly becoming more entrenched.

Only suckers and the insane still roll on their bellies and sing praises to the American oligarchy.

Sane people seek to dismantle it.

 

[ronburgundy]

I fixed your statement, assuming you must have meant the opposite, since legislation to coerce foreign banks to disclose accounts by Americans makes no sense unless undisclosed foreign accounts by Americans to evade taxation is a known pervasive problem costing the Fed billions.

The problem is that FATCA is a very heavy-handed way of dealing with it that is having repercussions for US expats. They didn't pay any attention to the laws of the other nations--some of which have laws specifically prohibiting the disclosures required under FATCA. The banks are responding by booting customers with US passports.

Whether FATCA is a wise solution to the problem is separate from the fact the its existence shows there is a serious problem of Americans hiding wealth from taxation in foreign accounts. The support for such a law that pisses off our allies is based in the fact that it is known wealthy Americans are avoiding billions in taxes via such accounts.

In addition, the Swiss government had to pass their own law in 2013 allowing banks to cooperate with FATCA, because for more than a half century it has been explicitly illegal for banks to divulge information about their customers accounts to anyone, including governments. Below is what was true up until the new law went into effect less than a year ago:

And the US shouldn't be meddling in their internal issues.

Again, whether you think the US should use FATCA to try and prevent Americans from illegally hiding billions in income in foreign accounts, is a separate issue. The fact remains that the Swiss bank secrecy policy exists because it makes them billions, and it only does this because of market demand, which means wealthy foreigners wanting to secretly hide their money from their own governments. The existence of Swiss secrecy laws are themselves evidence that the wealthy are hiding billions from taxation in those accounts.

The tinfoilhat wearers are the only ones insane and irrational enough to believe that America's wealthy don't hid billions in foreign accounts and won't continue to do so.

I'm not denying that money was hidden. I'm saying that the current approach is not a good one.

That is fine, but irrelevant to the thread and the point of my bringing up Swiss accounts. The thread is about the validity of using the CBO numbers to infer the relative % of income paid in taxes by the rich vs. others. The fact that the rich use foreign accounts to hide many billions in income from taxation (and have done so for a century) completely undermines the validity of the CBO data by showing that the % of income paid in taxes by the rich is an extreme underestimation. Foriegn bank accounts are just one way in which the rich hide the income and wealth from taxation, which doesn't show up in any of the official numbers conservative like to throw out to support their claim of extreme progressive taxation.

 

[maxparrish]

An odd criticism in that the numbers involved are rather large.

What is odd is why you think the metric has any meaning. The amount of money that changes hands doesn't matter: Consider a hypothetical country that uses tax revenue only for wealth transfers, in other words it collects taxes and pays exactly the same amount back to people. The total would be zero in this case, and therefore any amount - be it $1 or $1 billion - of taxes paid by the richest quintile would be an infinite percentage. Heck, you could even imagine a country that pays more than it taxes, and finances it from other revenue sources such as profits from government owned businesses. In this case the total of taxes plus transfers would be a negative amount. Calculating a percentage of something from something doesn't make sense if the values of that other something is on a scale that is not fixed to zero.

If we assume 25 million households per quintile, the total net taxes paid by quintile are:

5th - receive $215 billion
4th - receive $313 billion
3rd - receive $228 billion
2nd - pay $18 billion
1st - pay $1,163 billion
Total net = pay $425 billion

The percentages are -51%, -74%, -54%, 4%, 274%.

The top 20% pay 274% of the net taxes collected.

It's just facts.

What does it mean if a richest quintile pays 274%, 100%, 0%, -100%, or 1,000,000,000% of the net tax burden? What does that tell us?

Answer: absolutely nothing.

One would have thought, with transfer payments, it tells us which income quintile pays the most for government and which quintile is the mooch - which is, by the way, what the thread OP is about.

 

[untermensche]

One would have thought, with transfer payments, it tells us which income quintile pays the most for government and which quintile is the mooch - which is, by the way, what the thread OP is about.

Isn't the mooch the one who takes the most from government without paying for it?

Foreign wars and military bases overseas to protect oil profits is the biggest mooching going on.

Too big to fail banks being propped up by the government when they are crushed by their own malfeasance is the biggest mooching going on.

 

[maxparrish]

That is fine, but irrelevant to the thread and the point of my bringing up Swiss accounts. The thread is about the validity of using the CBO numbers to infer the relative % of income paid in taxes by the rich vs. others. The fact that the rich use foreign accounts to hide many billions in income from taxation (and have done so for a century) completely undermines the validity of the CBO data by showing that the % of income paid in taxes by the rich is an extreme underestimation. Foriegn bank accounts are just one way in which the rich hide the income and wealth from taxation, which doesn't show up in any of the official numbers conservative like to throw out to support their claim of extreme progressive taxation.

Alleging some vague amount individuals about "hid(ing) many billions from taxation" is little more than your 'article of desperate faith', unconnected to any attempt to demonstrate that these unsupported speculations have a significant effect on computed rates for the higher or highest quintile.

After following your 'arguments', it seems that when you run out of supportative facts, you argue methodology. When your methodological knat swatting fails, you pound the table with speculation.

 

[maxparrish]

One would have thought, with transfer payments, it tells us which income quintile pays the most for government and which quintile is the mooch - which is, by the way, what the thread OP is about.

Isn't the mooch the one who takes the most from government without paying for it?

Foreign wars and military bases overseas to protect oil profits is the biggest mooching going on.

Too big to fail banks being propped up by the government when they are crushed by their own malfeasance is the biggest mooching going on.

Except, as we are so often told by the left, banks (corporations) aren't people. Right? Or perhaps you mean their shareholders, which by the way, represent a wide range of income groups as institutional investors (e.g. State Employee and Teacher Pension funds).

 

[coloradoatheist]

One would have thought, with transfer payments, it tells us which income quintile pays the most for government and which quintile is the mooch - which is, by the way, what the thread OP is about.

Isn't the mooch the one who takes the most from government without paying for it?

Foreign wars and military bases overseas to protect oil profits is the biggest mooching going on.

Too big to fail banks being propped up by the government when they are crushed by their own malfeasance is the biggest mooching going on.

That one is a harder one to answer because your argument would be that it's driving up oil prices. If that's the case, should the people of Venezuela and Russia be paying for our national defense since they benefit the most from high oil prices?