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RICH SOAKED
Bush tax policies are routinely assumed to favour the rich. Not so, writes the Wall Street Journal’s Steve Moore:
New IRS statistics on the taxes Americans pay show that George Bush’s tax policies actually soak the rich.
It turns out that the income tax burden has substantially shifted onto the wealthy. The percentage of federal income taxes paid by those who make more than $200,000 a year has actually risen from 41% to 47% in recent years.
In other words, the richest 3 out of 100 Americans are now paying close to the same amount in income taxes as the other 97% of workers combined.
It’s also a common myth that the rich are hording all the wealth, while the middle class stays stuck in economic quicksand.
The IRS data show that the share of all income earned by the wealthiest 10% of Americans has actually fallen since 2001. The rich are earning less of the total income but paying more of the total taxes.
No wonder John Kerry is so grouchy these days.
Yeah, no kidding. This is no plug but Rush Limbaugh has all of the IRS stats on his site every day. Even if you don’t like Rush, he makes it easy to grab the stats.
There is a law of unintended consequences going one here. As the tax base shrinks-vis-a-vis liability to pay, the ability to bring about effective tax policy also declines. As more and more of the people are taken out of the tax pool, the ability to cut taxes on those paying the taxes declines. This will have a direct effect on longterm capital formation. Fewer and fewer people paying taxes means higher and higher rates on the one’s that do. If you do not pay taxes you are not going to vote for any politician who wants to put you back in that pool.
yojimbo—As more and more of the people are taken out of the tax pool, the ability to cut taxes on those paying the taxes declines.
Not only that but those 50+% of Americans who don’t pay income taxes have no vested interest in voting to keep the tax rates low or even reasonable. In fact, their interests lie in keeping those rates high. And Democrats won’t rest until they’ve elimated the payroll tax for this group as well. I don’t approve of exempting anyone from paying income taxes—if one of us pays, we all pay, even if it’s only $100 a year. This is one of my pet peeves.
California’s income tax is structured to soak the rich. The problem is that when the economy goes south, as it does from time to time, the rich pay a lot less in taxes and the State finds itself in deep dodo. It’s a ridiculous system.
No wonder John Kerry is so grouchy these days.
Oh, not at all. His wife has much of her dead husband’s fortune invested in tax free bonds. As I recall, in ‘03 she paid just over $300K on income of over $5M.
Posted by Kyda Sylvester on 2006 04 29 at 01:44 PM • permalinkKyda Your correct, and a great many of those Kali’s are coming to Arizona and Nevada. On he national level you will be facing class warfare, but from the top down this time.
Ushie. Hollywood people don’t like to pay taxes either. Clinton tried to exempt them from his tax increases. That failed so they simply formed personal production companies. These corps take in all of the income and the EXPENSES. Hike their rates and they just manufacture more expenses. The IRS has neither the manpower nor the competence to audit these corps. With a Dem president their life will be complete and audit free.
I’m very much on your side on this, but we should keep in mind that “those who make more than $200,000 a year” is not a constant; it grows too (over how many “recent years” are we talking about?). So you simply have a growing number of people paying an growing percentage of the income tax—that’s an indeterminate ratio that needs more detail to make your point.
Posted by KipEsquire on 2006 04 29 at 02:46 PM • permalinkBit of a shell game going on with Moore.
The very wealthy are not necessarily paying much income tax on their asset increases, since that doesn’t usually come in the form of taxable income.
Also, if you take $200K (or any other number) as a cutoff, you have to adjust for inflation. More people are in the $200K class and thus are counted among the 47% of taxes paid by the over-$200K class, but that does not mean they have joined the Old Rich.
Why do you think the Republicans pay so much more attention to capital gains taxes than to income taxes?
Posted by Harry Eagar on 2006 04 29 at 10:10 PM • permalinkWhy do you think the Republicans pay so much more attention to capital gains taxes than to income taxes?
Because capital gains taxes are taxes on inflation.
Because capital gains taxes are taxes on job creation.
Because the Gingrich era residential capital gains tax relief enabled me to move up into the middle class.
You got it Ushie. Except for some of the trolls, of course. The word “production” may be a bridge too far for most of them.
The alternative minimum tax(AMT) is not adjusted for inflation and is going to rake-in a great many in the middle class here in the next few years.
Kip. Dynamic scoring! You should be ashamed.
Also of interest, I was looking at some reports from the BLS for 2001 and 2003. Income hase increased for the bottom earners, but expenditures have gone down. Kind of blows away the argument that wages are flat and they are earning less due to inflation. Inflation doesn’t seem to target their expenses as much.
Most economists I respect would do away with the capital gains tax altogether. Want to hear a bunch of rich people squeal? Start touting a tax on wealth or net worth.
Posted by Kyda Sylvester on 2006 04 30 at 12:43 AM • permalinkCongress decided to screw the First Amendment’s free speech provisions because it found itself unable to resist the money coming its way (supposedly, anyway). Then Congress has found itself in a major scandal concerning kick-backs on earmarked monies going to constituents. Congress has the money to toss $300 million for a bridge here and $300 million to tear up a newly rebuilt railroad there. That’s money to buy money to campaign with, that they want to control so that no one but the encumbant benefits. (Assaults to free speech began much earlier than those damn cartoons, and from our “friends,” not our enemies.)
Congress has too much of our money. It allows them to use our money against us. It gives them the power to write laws and play favorites all over the place. We pay them to do this. We need to cut them off.
Tax is, not surprisingly, a really interesting topic. I recently read this (PDF) at the von Mises Institute, on income tax.
Still, I can’t help wishing there were a few trolls here to get a smack-down :(
This post needs more sock puppets, right, Nathan?
Posted by Some0Seppo on 2006 04 30 at 02:00 PM • permalinkNot all capital gains are due to inflation. If that were true, we could shut down Wall Street, as no one would need any capital.
The point is, once you are a capitalist, you have options in defining your income that wage-earners do not have. Your definitions will be driven, almost entirely, by tax laws.
Of course you’d rather define your asset increase as capital gains at a low rate rather than income at a high rate.
Who wouldn’t?
Income tax receipts tell us exactly nothing at all about relative asset flows to different classes.
Posted by Harry Eagar on 2006 04 30 at 03:44 PM • permalinkIncome tax receipts tell us exactly nothing at all about relative asset flows to different classes.
Then we’ll stop hearing the crap about “the rich don’t pay their fair share”? Because you’ve just said we can’t tell who’s paying what and what’s a “fair share” and what’s not.
Posted by Rob Crawford on 2006 04 30 at 06:23 PM • permalinkI didn’t say you couldn’t tell. I said you couldn’t tell from income tax receipts.
I’m not offering an opinion one way or the other about United States tax policies. (OK, I’ll offer one. Flat tax is a bad idea.) I’m just saying that the approach here cannot give the result claimed.
yojimbo mentioned the Alternative Minimum Tax. That was enacted because it was relatively easy for persons with large gains in assets to avoid income tax altogether, or mostly.
Posted by Harry Eagar on 2006 05 01 at 12:49 AM • permalink
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Which is why I’m not wealthy. Tax avoidance.
And, Kerry isn’t rich…his wife is. He’s just soaking in it.