Brenda wrote: > > On 2 Nov 2002 at 19:16, dsk wrote: > > > So guess who's going to be paying more taxes soon? > > It won't be the wealthy. They may pay a larger dollar amount but it's > > usually a much smaller PERCENTAGE of their earnings than middle-class > > people pay, and the Republicans would like that percentage to be even > > smaller. > > According to the Congressional Budget Office the top 1% of taxpayers pay the > highest total effective federal tax rate (percentage) among all groups: > > http://www.cbo.gov/showdoc.cfm?index=3089&sequence=11 > > And it has been that way for every year that is listed (since 1979). The only tax > which that groups pays a lower rate is "social insurance" or payroll tax. The top 1% > has paid in the neighborhood of 2% while most everyone else pays around 9%. > > Is there some analysis I'm missing here or some source that states otherwise?
Good find, Brenda. That chart is interesting to me for several reasons. For one thing it makes clear what kinds of taxes different economic groups pay: the poorest paying the highest percentage of sales (excise) tax; the middle groups bearing the highest burden for Social Security; and the highest income bracket paying the most corporate tax. I'm glad to see that the sales and payroll taxes haven't gone up in Bush's tax plan (yet), and it does look like the 2000 tax break was evenly distributed among economic groups. As one example of the point I was trying to make (that Republicans do not always give the middle class a tax break, as they claim to do), I looked through the info on that government site and before my mind got numb from all the details, saw that the last time the Republicans were in office, the highest tax rate went way down and Social Security taxes were raised three times, and hit self-employed people especially hard. Oh, yeah, I remember that now. When I was free-lancing during the 80s, after those changes, I no longer paid just the Social Security taxes an employee would pay (I think it was around 7%); I also had to pay what an employer would pay (also around 7%), so as a free-lancer my Social Security taxes were doubled, and to make it even worse, that was tax on the gross amount earned, so none of my expenses could be taken into account. That's hardly an incentive for entrepreneurship, which is supposedly so highly prized by the Republicans. I doubt that Reagan said much about that tax change. Anyway, back to your chart... it certainly looks like the people with the highest income (top 1%) pay the highest percentage of tax (32.7%). I don't think it's quite that clearcut, though. These are estimates, so within every group there will be some variation in the amount actually paid by individuals. (Just as an aside, it's hard to believe the middle economic group only pays around 17% in taxes.) So to look a little closer at that seemingly solid 32.7%: for one thing, taxes from higher income earners usually include taxes on capital gains, and there's considerable leeway regarding those taxes since people can choose when to sell their assets and so can pay the tax when it's most favorable for them. I think it's a much lower rate than personal taxes. There's no such flexibility when it comes to a worker's payroll taxes. My other thoughts are that the 32.7% tax is on the person's money that the government knows about. Sending money to offshore banks and not reporting it is one way to avoid paying taxes on all of it. Money is deposited in a bank in the islands, and the person can use an ATM card at any bank to withdraw whatever cash they need and the transactions can't be traced. From what I've read that's being done a lot these days. I'm not a financial planner or a millionaire so I don't know all of the ways wealthy people lower the amount of taxes they pay. From the little I do know, tax-free bonds, setting up trusts, giving to charity, and investing in failing businesses are common, and all perfectly legal, as is the scheme involving exchange funds that I read about recently in the NYTimes. I'll put that in another message since it's a long article and probably won't interest most people, but a couple of the paragraphs relate directly to this discussion: "... no revenue would be raised by closing exchange funds because 'the class of investors [people with $5 million or more] engaging in swap funds' would find other ways to avoid the tax." and "... the Bush administration 'is not for or against swap funds, but we are against taxes on capital gains in general and so we will not take any action against the funds.'" And people wonder why Republicans are seen as pro-business and giving advantages to the wealthy? Usually it's the well-to-do who pay capital gains taxes and if that rate is lowered (or ideally from a Republican's viewpoint, abolished), where does the needed revenue come from? I don't get the impression that wealthy people who have a lot of extra cash because of lower capital gains taxes are investing most of it in U.S. factories or businesses, which is the rationale behind lower capital gains taxes. If they were, at least the money, in theory, would be floating around the U.S. economy, by U.S. workers in those factories or businesses making a salary, which enables them to be consumers and to pay taxes, thus returning some of that money to the economy. (I'm speaking generally here; I'm sure that some individuals are investing their money in U.S. factories/businesses.) As another aside, one way that having money invested in factories in other countries hurts this economy is that the results of those investments primarily benefit the investor who's getting more return for the amount of money invested, and also benefits workers who are not spending their money in this country. Both of those can be seen as good things. I don't have any judgment on that other than to point out those effects of most of the investing being made in factories and businesses overseas these days. Those effects may be offset by the lower cost of some items here as a result of that overseas investment. Anyway, my original point wasn't to claim I knew exactly what percentage the wealthy pay, although I stick to my idea that in reality it's probably a smaller percentage of their true worth than a working middle class person pays, even though the dollar amount would be larger. Mostly, I was bothered by the Republicans pushing the repeal of the death tax in their campaigns as though abolishing that tax will benefit everyone. That's just not true. And it's not always true that just because the Republicans are in charge, working people will have lower taxes. Maybe yes, maybe no. It's certainly not as simple a situation as the Republicans claim it is and that so many voters think it is. Republicans are relying again on that "lower taxes" myth to get votes from the people they're least likely to help in my opinion. And before anyone accuses me of Republican bashing, I also think that the Democrats have their own set of myths that need to be looked at closely, but those are mostly in the "we'll help everyone" area. Debra Shea
