View Full Version : so who pays no income tax?
flowerseverywhere
4-19-11, 7:22am
I keep reading that 45% of individuals pay no federal income tax. I tried to figure out how that could be and found some statistics.
from CNN
http://money.cnn.com/2011/04/14/pf/taxes/who_pays_income_taxes/?cnn=yes
68% have incomes less than $50,000
of course that means 32% have an income more than that.
the article goes on to point out that many in this category still pay property and payroll (SS and medicare) taxes. But it blows my mind. I asked around and all of our friends are very average and middle class- some of us who are very frugal probably qualify at the lower end of upper middle class- and none of us could figure this out. Even an elderly family member, who lives a very low income lifestyle paid federal tax.
Bastelmutti
4-19-11, 8:33am
I was wondering about this also when I read that even unemployment benefits are taxable.
I was wondering about this also when I read that even unemployment benefits are taxable.
I've always thought that taxing unemployment benefits makes absolutely no sense at all. What's the point of that? If you're unemployed, you are spending what little you're getting--you're not saving a portion for your tax burden. I guess it makes sense if you come off unemployment and then can do some catch-up withdrawals to the IRS, but still...I just don't get it.
This is a couple of years old, but perhaps you can get an idea of who's paying and who's not from it.
http://www.taxpolicycenter.org/UploadedPDF/1001289_who_pays.pdf
I would love it if they could make paying taxes easier. Why can't they just take out the deductions? Have a house, great but forget getting a deduction, you have a home based business, great, but no deductions on that. Gave to charity, fabulous, but no write off. Same would be true for businesses. Take out the deductions. Have straight rates based on the money you earn. I am sure the fur would fly if this came true, but why not? Simplify and make easier for all.
I had other sources with the same table as Alan's link. Keep in mind that these figures (and our discussion) are referring to Federal Income Tax, which is different that deductions taken from pay for Social Security or Medicare. It is possible, and apparently common, to have paid into each of those programs and still have a zero Federal Income Tax liability. It may sound like splitting hairs, but it's not. Remember that the deductions for SS and Medicare fund ONLY those two programs. The Federal Income Tax goes toward funding EVERYTHING ELSE our government does.
I didn't pay any fed or state taxes this year - didn't even file. The reason: I choose to retire early and live on a small income from a state pension which is only partialy taxed, and an even smaller tax free military disability pension and suppliment both of those from savings I have in tax-deferable vehicles - so only pay tax on the small amount of "earned interest" on the savings I withdraw each year to suppliment my pension. Things like old EE saving bonds, I bonds, etc... Then I only have to pay fed tax on the interest on those. Some years I need more and pay more income tax, some years I need almost nothing, so don't pay any taxes or am in the 10% bracket. That was the case this year. Since my pensions cover most of my very spartan and minimalistic lifestyle (payed for house, no debt, no expensive hobbies, etc..) I can keep my taxable income at zero or 10% depending on how much I choose to spend each year out of my savings. In the future, when I'm I'm old enough to make withdrawls on my traditional IRA's , etc.. then I'll probably have to start paying more in taxes - or not. Because by then most of my tax deferred stuff like the bonds will be gone and the income from the IRAs will make up the needed supplimental income then. And BTW, I don't live an impoverished lifestyle - very modest lower middleclass I would say. Have a house, a couple of cars, and look just like everyone else. It's just that I payed off everything while working and don't spend much at all so I don't need a high income to fund my lifestyle. It's just food on the table for single me, a small amount in utilities, gas for the compact car, and low prop taxes and insurance. Get by on less than $1,000 a ,month easy.
As far as states taxing unemployment benefits - not all states do. Calif doesn't tax them. So check with your individual states.
goldensmom
4-19-11, 11:47am
We have neighbors with 10 children so that makes a family total of 12. They pay state and federal income tax during the year on their income but with so many deductions get it all back so in the end they pay no taxes. I know several families in that same situation. We pay a ton of state and federal income tax on multiple incomes. My 87 year old stroke victim mother also paid federal income taxes.
This is what angers me about the "tax the rich" mentality. I think everyone should pay into the system, even if its a token few dollars, just so there is some skin in the game. I think its a shame that half the people can pay no taxes, yet vote that the other half who is paying taxes should pay even more.
ApatheticNoMore
4-19-11, 12:26pm
I've done the calculations and it is *NEARLY IMPOSSIBLE* for a single person with no kids taking the standard deduction to not pay income taxes. My calculation was for last year not this but unless they've done a lot of inflation adjustment ....
But you have to be poor .... no, you don't understand. It is NEARLY IMPOSSIBLE for such a person not to pay taxes *EVEN IF* they are poor. I believe my calculations showed that even at MINIMUM WAGE (using the California minimum wage of $8 an hour, which is higher than some states, but so is the cost of living here), even getting an earned income credit (the earned income credit is not that generous if you don't have kids), you would STILL pay income taxes! And minimum wage here frankly would not even meet my current no fluff necessities budget (granted I could share an apartment etc.), to speak nothing of my actual budget of course which includes some non-necessities :)
As for people earning up to 50k not paying taxes. That's ridiculous. When by my calculation taxes were being paid on a minimum wage salary of less than 17k a year. 50k omg so ABSURD!!!!! Do you REALLY believe people earning 50k aren't paying taxes? Yea let's blame people earning 40-50k for not pulling their weight. You've sure been sold a line, haven't you?
Now this said there may be MANY people with a lot of kids or other deductions (possibly houses where houses are cheap, trust me noone around here earning a 50k household income is buying a house! the idea is completely laughable.) that are not paying taxes on incomes up to 50k but for a single renter it would be nearly impossible, like I said.
janharker
4-19-11, 12:30pm
www.fairtax.org Get this through congress and no one will pay income or payroll taxes.
ApatheticNoMore
4-19-11, 12:45pm
They really need to cap the child deduction at 2 kids (replacement rate is MORE THAN enough, the world is already overpopulated).
Yes, I do believe there are ways to pay less taxes on non-earned income (although not unemployment, that's taxed). I was talking about how to get out of taxes while WORKING FOR A LIVING and that's not even possible on minimum wage.
loosechickens
4-19-11, 2:19pm
well, my MIL paid no Federal income taxes this year, although she had about a median income. She also is confined in a rehab hospital for medical reasons, having several serious health issues at age 86, and has run through the days that Medicare will pay for such a facility, so is selfpaying the monthly charges out of her life savings, as just the monthly charge is far more than double her income. And she is allowed to deduct these medical expenses from her income, so pays no taxes.
Now, I guess they could not allow her to deduct those medical expenses, and collect Federal income taxes from her, but as she is quickly spending down a lifetime of savings in nursinghome type expenses, it would just make the day arrive more quickly when her funds are completely gone, and she goes on Medicaid for nursing home care. At least right now, she's not costing the government anything as she watches the work of a lifetime pour out of her bank account.
I don't understand why it always has to be an all or nothing venture. LC's 86 year old MIL deserves a break. OTOH 45% of Americans adds up to around 140,000,000 people. The VAST majority of them are NOT the elderly who are rapidly depleting their life savings in a nursing home. In fact the majority of them, just using simple demographics, are under 40 and capable of contributing something. No one is talking about forcing anyone to bankrupt themselves to pay taxes let alone inflict further hardship on those who are somehow infirm. Many deductions are merely subsidies for various industries and most all of them are taken advantage of by younger and more likely to be able bodied people. Think of the mortgage deduction. It subsidizes the homebuilders and realtors (two VERY powerful lobbies). There is no logical reason to give people a deduction on interest they pay to buy a home, IMO. Eliminate that and we have a couple hundred billion bucks and no little old ladies were thrown under the bus in the process.
"The roughly 45 percent of Americans who owe no income tax are heavily weighted in certain groups based on income and family status, according to the The Tax Policy Center, the nonpartisan research group that has run the numbers. More than half the tax-return filers in each of these groups owe no taxes: Those who earn less than $30,000, those who are elderly, and those who are single with children. "
BUT
"Among about 650,000 American tax filers with $500,000 to $1 million in income, 1,646 were categorized by the IRS as "nontaxable" returns in 2007, for example, meaning they paid no income tax. Chalk it up to the way Congress wrote the rules, and the way accountants learn to navigate those rules."
http://www.csmonitor.com/Business/2010/0412/Tax-day-101-Who-pays-no-income-taxes-on-April-15
goldensmom
4-19-11, 7:34pm
At least right now, she's not costing the government anything as she watches the work of a lifetime pour out of her bank account.
I sure can identify with that. My mom was in a private pay facility for a short while, never on Medicaid. I grumbled as I wrote the $7000+ check from her savings account each month. None of it deductible. I grumbled but her response was ‘that’s what it’s there for’.
www.fairtax.org Get this through congress and no one will pay income or payroll taxes.
Will Ben Bernanke order the Treasury to print Quadrillion dollar bills to pay off the bondholders in China with?
flowerseverywhere
4-19-11, 10:18pm
Spartana and LC, I understand your situations, as well as the 10 children family. I must live a very sheltered life because I don't know anyone personally that has ever collected food stamps, ever been on medicaid or has had no federal tax. I do know some people who walked away from upside down mortgages and a few that declared bankruptcy, but they continued to work and get back on their feet.
All of my friends and family have spent a lifetime working, saving and paying taxes.
edited to add I have known of a lot of people that have had food stamps etc, I worked many years as a nurse on psych units, in an MD office and then in a school system. But my close tribe in times of trouble has been able to have help from churches, family and friends as opposed to government assistance when times got bad.
I've done the calculations and it is *NEARLY IMPOSSIBLE* for a single person with no kids taking the standard deduction to not pay income taxes. My calculation was for last year not this but unless they've done a lot of inflation adjustment ....
But you have to be poor .... no, you don't understand. It is NEARLY IMPOSSIBLE for such a person not to pay taxes *EVEN IF* they are poor. I believe my calculations showed that even at MINIMUM WAGE (using the California minimum wage of $8 an hour, which is higher than some states, but so is the cost of living here), even getting an earned income credit (the earned income credit is not that generous if you don't have kids), you would STILL pay income taxes! And minimum wage here frankly would not even meet my current no fluff necessities budget (granted I could share an apartment etc.), to speak nothing of my actual budget of course which includes some non-necessities :)
As for people earning up to 50k not paying taxes. That's ridiculous. When by my calculation taxes were being paid on a minimum wage salary of less than 17k a year. 50k omg so ABSURD!!!!! Do you REALLY believe people earning 50k aren't paying taxes? Yea let's blame people earning 40-50k for not pulling their weight. You've sure been sold a line, haven't you?
Now this said there may be MANY people with a lot of kids or other deductions (possibly houses where houses are cheap, trust me noone around here earning a 50k household income is buying a house! the idea is completely laughable.) that are not paying taxes on incomes up to 50k but for a single renter it would be nearly impossible, like I said.
Not everyone who doesn't pay taxes works. Many are retired living on social security (not taxed until after you make over $25K a year) or tax deferred investments like traditional IRA's, 457's and 401K's which aren't taxed until they are withdrawn, or Roth IRA's which are not taxed at all when you withdraw them. So a person could be living on a very large income funded by a Roth IRA completely tax free, and maybe combined with social security and an additional $10K per year with drawn from a traditional IRA, 401K or 457. Even with bank interest rates as low as they are, they may have alot in savings and only generate the approx. $9650 in interest income that the standard deductions and exemptions a single, under 65, non-blind person can take for the 2010 tax year. Meaning they could have large completely tax free incomes. Also many people with earned incomes from a job will fully fund a 457 or 401K and traditional IRA each year and that may reduce their taxable income down to the level at or below the standard deduction and exemptions. And "poor" is in the eye of the beholder. If you have a paid for home - even a 5 million dollar paid for home - no debt and an inexpesive lifestyle, you really don't need much money to live on. Especially if you are single. I've been retired going on 12 years now and can attest to that.
Spartana and LC, I understand your situations . I must live a very sheltered life because I don't know anyone personally that has ever collected food stamps, ever been on medicaid or has had no federal tax. I do know some people who walked away from upside down mortgages and a few that declared bankruptcy, but they continued to work and get back on their feet.
All of my friends and family have spent a lifetime working, saving and paying taxes.
Well speaking for myself I have worked all my life since age 12 and payed taxes all of my life. I have never taken a handout in any way, shape or form unless you consider my military disability pension of a few hundred bucks a month a "handout". I don't. I paid off my house and put money in the bank and in investments while working rather then spend it on all the nicest and newest thing-a-ma-jig that came along. I choose to live all of my life way below my means and saved as much as I could - much in tax deferred things like a 457 (like a 401K for govmint workers but with no matching contribution from your employer), IRA's, etc... So that when I hit the ripe old age of 42 and my job (that I loved) was changing due to consolidation, I was able to retire and live of my own savings (that I had already paid taxes on when I earned it - and then would pay taxes on the interest I would earn on it each year) until I could begin collecting my pension at age 50 - a pension that I payed into and even bought extra years (can do that with some govmint pensions). So, because I bought those extra years towards my pension (payed for from my own taxed savings and earnings), I am now able to pay less taxes on my pension because I already payed taxes on that money when I earned it during my working years. So should I be double taxed because I am not earning enough in taxable income to have to pay taxes or am in the lowest tax brackett? Is it fair that a person who choose to pay off everything while working, live modestly, and save their money pay extra? I can live on a small amount of money - and therefore pay less in taxes now - and don't feel I should have to go back to full time employment, taking a job from someone who needs it, just to pay more in taxes.
This is what angers me about the "tax the rich" mentality. I think everyone should pay into the system, even if its a token few dollars, just so there is some skin in the game. I think its a shame that half the people can pay no taxes, yet vote that the other half who is paying taxes should pay even more.
Some of us childless folks have payed huge amounts in taxes and prop taxes to fund free education for those of you who have kids - and we'll do that all our lives with our prop taxes but never reap the beneifts for that. And many of us have paid much more in income tax over the years because we don't have kids and the write offs they are allowed.
In addition, I have NEVER seen a person "voluntarily" give up any of their tax breaks. Those with kids will take their $3650/child and /parent tax exemption each year. Those with mortgages will take those deductions, etc... So should those who don't get tax breaks be required to pay MORE even if they have smaller incomes? I guess what I'm saying is that I would have no problem voluntarily paying more in income tax if others where also willing to give up their tax breaks and pay more too.
I still don't really understand how taxation works in the US. It all seems very complex... Up until recently, I never paid any tax because I didn't earn enough. Now earning only the equivalent of $19,000 per year (very low wage here), I have 10% of my income taken out of my wages each month. It's all pretty much done automatically here ("pay as you earn", it's called) unless you're self-employed or something. I don't have to go through the rigmarole of filling in a ton of forms every year for it.
loosechickens
4-20-11, 3:03pm
I saw this today and found it interesting. Lots of good information here:
here's a link to the whole piece: http://www.citybeat.com/cincinnati/article-23144-the-truth-about-taxes.html The piece is by David Cay Johnston.
ABOUT THE AUTHOR: David Cay Johnston is a columnist for tax.com and teaches tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management. He has also been called the “de facto chief tax enforcement officer of the United States” because his reporting in The New York Times shut down many tax dodges and schemes, two of which were valued by Congress at $260 billion.
Johnston received a 2001 Pulitzer Prize for exposing tax loopholes and inequities. He wrote two best-selling books on taxes, Perfectly Legal and Free Lunch. Later this year, Johnston will be out with a new book, The Fine Print, revealing how Big Business, with help from politicians, abuses plain English to rob you blind.
excerpt:
"Gretchen Carlson, the Fox News host, said last year, “47 percent of Americans don’t pay any taxes.” John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.
Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”
Actually, they pay lots of taxes — just not lots of federal income taxes.
Data from the Tax Foundation shows that in 2008, the average income for the bottom half of taxpayers was $15,300.
This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes. But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax free in America.
When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more."
flowerseverywhere
4-20-11, 3:10pm
Well speaking for myself I have worked all my life since age 12 and payed taxes all of my life. I have never taken a handout in any way, shape or form unless you consider my military disability pension of a few hundred bucks a month a "handout". I don't. I paid off my house and put money in the bank and in investments while working rather then spend it on all the nicest and newest thing-a-ma-jig that came along. I choose to live all of my life way below my means and saved as much as I could - much in tax deferred things like a 457 (like a 401K for govmint workers but with no matching contribution from your employer), IRA's, etc... So that when I hit the ripe old age of 42 and my job (that I loved) was changing due to consolidation, I was able to retire and live of my own savings (that I had already paid taxes on when I earned it - and then would pay taxes on the interest I would earn on it each year) until I could begin collecting my pension at age 50 - a pension that I payed into and even bought extra years (can do that with some govmint pensions). So, because I bought those extra years towards my pension (payed for from my own taxed savings and earnings), I am now able to pay less taxes on my pension because I already payed taxes on that money when I earned it during my working years. So should I be double taxed because I am not earning enough in taxable income to have to pay taxes or am in the lowest tax brackett? Is it fair that a person who choose to pay off everything while working, live modestly, and save their money pay extra? I can live on a small amount of money - and therefore pay less in taxes now - and don't feel I should have to go back to full time employment, taking a job from someone who needs it, just to pay more in taxes.
I wasn't making a personal attack on your or anyone else here. There are a lot of things I don't understand and I'll be the first to admit it.
I wasn't making a personal attack on your or anyone else here. There are a lot of things I don't understand and I'll be the first to admit it.
OOPS! Sorry - I thought you were talking about me specificly. Now that I re-read your post I realize you were replying in general to ALL the threads. Sometimes I read thru things to fast and don't get the full idea of what someone is talking about. It's not because I'm slow...or blonde... or old :~)!
flowerseverywhere
4-20-11, 9:37pm
loose, thanks for the book recommendations, free lunch is now on hold at my library, but there is a wait list even with several copies.
Spartana, as I said before I understand how someone like you can do it. Living frugally, no debt etc. being below the federal tax radar is understandable. All about choice. Our fed taxes are not high, as have no debt, no kids at home but I can't imagine them being at 0 and despite all these pages of discussion it still slays me that there are so many people with zero fed tax liability that are significantly above the poverty line.
loose, thanks for the book recommendations, free lunch is now on hold at my library, but there is a wait list even with several copies.
Spartana, as I said before I understand how someone like you can do it. Living frugally, no debt etc. being below the federal tax radar is understandable. All about choice. Our fed taxes are not high, as have no debt, no kids at home but I can't imagine them being at 0 and despite all these pages of discussion it still slays me that there are so many people with zero fed tax liability that are significantly above the poverty line.
Well my income is much higher than what it would be to put me in a zero or 10% tax brackett. But, because a large part of my income is either tax free or tax deferred, I can choose to keep my tax bracket at zero. I think for a single working person who needs all their income to live on, it's difficult to get in the zero% or even 10% brackett. However many people who have high incomes and can invest in tax deferred things, have lots of kids and the $1,000s in write offs they are entiltled for the kids, and who can take $1,000's in other write offs each year can probably reduce their taxes by quite a bit but still maintain a fairly high income level. As someone above pointed out, the poor are often taxed more than the rich or middleclass because they can't afford to take all the write offs that are availble to someone with a higher income. Same with retirees who live on Soc Sec. and their tax deferred Roth IRAs. They may have huge tax free incomes because that money was already taxed when they earned it.
jennipurrr
4-21-11, 12:26pm
What is funny about those people who have spent so much money on homes so that they can qualify for the interest deduction, is that for every dollar in interest they pay, they are getting, tops probably, 28 cents in taxes. So, yes, they may pay no taxes with all the deductions, but they also have to spend a lot of money on interest and (if it is a bigger home) upkeep on a house. We bought a reasonable house in an ok neighborhood and our interest has never been enough to bump us up past the standard deduction...sigh.
I think it would be great policy to eliminate the mortgage interest deduction, but I don't think we will see it happen. I think it would remove the false incentives for buying a bigger more expensive home. I have met so many people sucked in by that interest deduction.
My DH generally leans towards the idealistic liberal side of the political spectrum, but come tax time he can get a big conservative streak. I think that comes not from wanting to pay our fair share, but it is slightly depressing to think that nearly half the country doesn't pay taxes and then we pay in the tens of thousands of dollars. We are not rich people - we are two working professionals with no kids and a small house. We are able to put some into our 403bs and then we have rentals that sometimes show a loss (although sometimes they show a gain = more taxes). So eh, no huge tax shelters here.
Well, I don't know about yalls kids, but mine cost way more than any deduction I got back. It's still a negative on the 'ol bank account ;) FYI
*but the two best things I've ever done :):):)
ApatheticNoMore
4-21-11, 12:56pm
This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.
Do the math: minimum wage in CA $8 an hour * 40 hour week * 52 weeks a year = $16640. Oops that is $7290 OVER the tax line for a single person!!!
And lets be honest a person earning that here isn't likely to be saving much for retirement. There may be people who aren't paying taxes but I'm not so sure it's the WORKING POOR, though I'm sure that is everyone's first assumption (those darn working poor, not pulling their weight etc. .....).
Well, I don't know about yalls kids, but mine cost way more than any deduction I got back. It's still a negative on the 'ol bank account ;) FYI
*but the two best things I've ever done :):):)
It's true that the free governmint subsidy/entitlement people get who have kids isn't going to make too big a dent in what it costs to raise children. But you CHOOSE to have kids and I assume were willing to pay for their costs and not expect handouts from the gov. - both in free money (i.e. paying less in taxes - sometimes in the thousands of dollars each year) and in a lifetime of free education (probably worth 10's of thousands over the years). Now I want to add that I personally have no problem what so ever helping support people with kids with my single childless persons income as I am a bit of a socialist, but I just like people to be aware that it is a govmint subsidy and free money. So that when people want to cut other govmint subsidies for the poor, ill, or aged (Medicaid, Medicare, foodstamps, etc...) those who have kids should be aware that they too are accepting free money if they have kids. This is especially important for conservative Republicans who are the first to want to axe those programs. I mean they have kids too - or is it true that they all eat their young :devil::D
Agreed spartana. And they can take away my 'child credit' if it keeps medicare, medicaid, food stamps, etc.. There should be a certain income limit for the child credit. As far as paying for other kids to go to school, well, we paid taxes before we had kids and have paid taxes since they are grown and gone. For this I have no complaint. This benefits us all as we really don't want to live in a country of illiterate people. Talk about crime, poverty and anarchy! An educated populace is a healthy, progressive populace. Our country never made such advances as it did right after WW2 when the GI bill allowed so many to go to school who otherwise wouldn't have gone. People often forget this was a major reason our economy and country as a whole boomed during this time.
Education is the key to everything!
ApatheticNoMore
4-22-11, 5:38pm
I don't know if there should be an income limit for the child credit so much as a child limit.
Well I don't know if a "child credit" is the same thing as the exemption that you can take for everyone - including for children - maybe it's something different. I was just saying that everyone is allowed an exemption of around $3,650 this tax year. So a family of 4 with an income of around $50K/year can write off more than half of that by just taking the standard deduction and exemptions for each person. Therefore reducing their taxable income to approx. $24,000 without having to make any actual investments (A single childless person with the same income would have deductions that would reduce their taxable income to just over $40K). A chart for 2010 said that a married couple with 2 kids filing jointly had standard deductions and exemptions of $26,000 and a single person with no kids had $9,350 worth of dedcutions and exemptions and a single person with 2 children had about $19,500 worth of dedcutions/exemptions.
Then, if a family of four could afford it, the could max out the 401K or/and traditional IRA to be in the zero % tax bracket. Of course most people with 3 kids can't invest that much but I know there are lot of other deductions that can be had if you choose to itemize rather than take the standard deduction. Things you would have already paid for anyways. So even an average middle class family could find ways to be in the 0 - 10% tax bracket.
Life_is_Simple
4-23-11, 5:50pm
I had read articles similar to what Loosechickens has posted. I didn't quite understand what I was reading so created a spreadsheet.
This is from 2006 data, because I needed to get enough details:
http://www.cbo.gov/publications/collections/tax/2009/all_tables.pdf
Bottom 20% of Income
Average Income: $16,500
US Tax: $1,403 (medicare/SS tax) + $83 (corp) + $314 (excise) - 1089 (income tax back) = $710 total US tax
4.3% US Taxes
State and Federal = $710 (US) + $1,799 (state) = $2,508, or 15%
Next 20% of Income
Average Income: $35,400
US Tax: $3,257 (medicare/SS tax) + $212 (corp) +$425 (excise) - 283(income tax back) = $3,611 total US tax
10.2% US Taxes
State and Federal = $3,611 (US) + $3,540 (state) = $7,151, or 20%
Middle 20% of Income
Average Income: $52,100
US Tax: $4,897 (medicare/SS tax) + $417 (corp) + $469 (excise) + 1,563 (income tax back) = $7,398 total US tax
14.2% US Taxes
State and Federal = $7,398 (US) + $4,897 (state) = $12,296, or 24%
4th 20% of Income
Average Income: $73,800
US Tax: $7,085 (medicare/SS tax) + $886 (corp) + $590 (excise) + 4,428 (income tax) = $12,989 total US tax
17.6% US Taxes
State and Federal = $12,989 (US) + $6,199 (state) = $19,188, or 26%
Highest 20% of Income
Average Income: $184,400
US Tax: $10,695 (medicare/SS tax) + $9,958(corp) + $738(excise) + 26,000 (income tax) = $47,575 total US tax
25.8% US Taxes
State and Federal = $47,575 (US) + $13,092 (state) = $60,668, or 33%
I got some of my info from this guy, DAVID LEONHARDT, who estimates based on those figures that somewhere < 10% of people are paying no US taxes. (less than half of that lowest quintile)
http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html
Let me see if I can find some data to add state taxes into that. State taxes can be regressive, as loosechickens points out that Alabama's poor pay a higher rate than it rich for state taxes.
ON EDIT: I am adding in state taxes found via Loosechicken's link, to this link: http://www.itepnet.org/whopays3.pdf
The STATE figures I added in are 2007 figures, and are "all state and local income, sales, excise and property taxes." State taxes per quintile: Quintile 1 (lowest income): 10.9%, Quintile 2: 10.0%, Quintile 3: 9.4%, Quintile 4: 8.4%, Quintile 5 (highest income): 7.1%
Life_is_Simple
4-23-11, 11:01pm
Oh, someone already did the full calculations with 2010 data, and my percentages were fairly close. See very bottom graph at this link - unfortunately I can't reproduce the image here.
http://www.ctj.org/pdf/taxday2011.pdf
ANd this graph:
http://civilizedconversation.files.wordpress.com/2010/12/total-tax-burden-bar-chart-shows-mild-progressivity.jpg
The lowest 20% made 3.5% of total income, and 2.0% of total taxes. The next 7.1% of total income, 5.2% of total taxes. etc.
ApatheticNoMore
4-24-11, 12:28am
Yea, that's the brackets themselves (and by the way it matches up with my W2), and since I don't take deductions it is how I am taxed on wage income. And incidentally those brackets themselves seem pretty fair to me. Gradual progressiveness. The problem is deductions and then AMT to catch deductions and how non-wage income is treated and basically all the nonsense that is the REST of the tax system.
Like Apatheticno more pointed out, those charts only show what a person earning X amount of dollars WOULD pay in taxes if they had no deductions. So by that a higher income person would pay higher taxes. But in realality, because of the many deductions, exemptions and tax write-offs a higher income person can afford to take, they often pay LESS in taxes percentage-wise than a low income person. They might have been able to buy an electric car or hybrid and take the $7,500 deductiuon for that (amonst the state deductions) as well as all the other "energy credits" for new windows, doors, fridges and a/cs, etc and on and on. They could possibly reduce their taxes to close to zero if they took advantage of all that - especially coupled with all the other write offs for kids, spouse, IRAs, 401Ks, prop. taxes, etc.. Many of those wite offs can't be taken by people with lower incomes because they need all of their incomes just to survive. So a person making under $20K/year may be in the 10% bracket and a person making $100K a year might also be in the same bracket (and pay the same amount in taxes) if they can take all the deductions allowed.
loosechickens
4-24-11, 2:07pm
Wasn't it VP Cheney one year, when they released his tax records, that he'd ended up paying something like 12% income tax on an income of some several, if not more millions that year?
It takes excess income over that needed for survival or even normal life to be able to take advantage of so many of the tax benefit writeoffs, just as Spartana says, and believe me, the more folks make, the more energy, time and expertise is spent in tax avoidance, for sure. And there are plenty of loopholes.
I don't blame people for using whatever tax savings they can get legitimately, but I'd like to see the number and kinds of tax benefits, exemptions and special circumstance rates changed. That alone would make the system more fair, although remaining progressive in nature, putting a heavier burden on those most able to shoulder it, as opposed to the fair tax, which, like sales taxes, are really regressive taxes and put a heavier burden on those with less ability to pay, rather than on those stronger financially and more able to pay without sacrificing needs.
loosechickens
4-24-11, 2:23pm
I Googled "VP Cheney paying only 12% income tax" and came up with this......this was for his 2003 return. Just to give an example (not meaning to pick on him especially) of how "where" your income comes from, "what" your deductions are, and "how" you are able to structure it makes a big difference in the ending up rate of income taxes you pay. Sometimes the really wealthy person DOES pay as low, if not lower rate than their secretary.....
President Bush, that year, in contrast, paid 27.7% of his income in Federal taxes......perhaps he should have used the VPs tax advisors......
http://docs.google.com/viewer?a=v&q=cache:JPbjF9EkvtQJ:www.ctj.org/pdf/bushchen.pdf+VP+Cheney+paying+only+12%25+income+ta x?&hl=en&gl=us&pid=bl&srcid=ADGEESiwgElpNNs8hbV_tuoDzyz6zr-6D6BVbCLR4hHKha_7MO2BOskwNqjNV3GFIJkWY1AGwf4ogSfPc MfuRaxE4J3KXFtqe7goLVGX5t8yovErrCFnKt1Xc3mzHswK_7x sZPZM3H-k&sig=AHIEtbQ3ofas-Ex6lJtHzNrXAyhERlUNwQ&pli=1
Vice-President Cheney paid only a 13.1 percent income tax rate:
# Vice-President & Mrs. Cheney reported 2003 total income of $1,900,339.
# The Cheneys’ income tax was $241,392, equal to only 13.1 percent of their
reported income.
# The Cheneys’ total income included $627,005 in tax-exempt interest, $279,012
in long-term capital gains and $84,132 in dividends. None of the capital gains
were eligible for the new 15 percent tax rate, however, because they were
realized prior to the May 6, 2003 effective date for the capital gains tax cut.
# The Bush tax cuts saved the Cheneys $10,937 in taxes in 2003.
# The Cheneys’ tax cut would have been much larger—$36,623—except that the
alternative minimum tax disallowed 70 percent of the tax cut they would
otherwise have received.
I don't know if there should be an income limit for the child credit so much as a child limit.
+1 If we're going to keep this deduction why not limit it to just the first one or two kids? While we're at it we could rewrite any legislation or programs that seem to encourage having more children. Remove the "incentives", as it were.
I agree Gregg. I don't think tax policies are an incentive to have children, but unlimited deductions is certainly not a disincentive either.
Even if they didn't reduce the child tax credit and exemption it would be nice if higher earning parents who have kids in public schools would help pay for that with some of their taxes rather than paying less into the system. I do get a little peeved when I see well to do parents buying new $50K SUVs to tote the kids to public school rather than paying towards their free education. They could do it on a sliding scale to reflect their income and number of kids in school.
Around here the school districts are supported with property taxes, not income taxes. The larger houses in more affluent neighborhoods have a higher property tax bill than more modest housing so, presumably, the residents do pay more to support the schools. It may work differently in other places.
Around here the school districts are supported with property taxes, not income taxes. The larger houses in more affluent neighborhoods have a higher property tax bill than more modest housing so, presumably, the residents do pay more to support the schools. It may work differently in other places.
That's the case here in Calif too. But I guess I meant that there is still a large Federal Govmint Dept of Education to pay for and that rather then give higher income parents thousands of dollars in federal tax breaks (those with kids in the public school system), they could eliminate those breaks and, on a sliding scale, tax parents instead and have that tax revenue go to funding the Dept of Education. Parents who choose to put their kids in private school, and pay for it themselves, would not have to pay those taxes. So that the more kids you have and the more income you make, the more taxes you will pay directly towards their education.
And of course childless homeowners like me will still continue to pay into our community schools with our property taxes even if we don't have kids in school.
That's the case here in Calif too. But I guess I meant that there is still a large Federal Govmint Dept of Education to pay for and that rather then give higher income parents thousands of dollars in federal tax breaks (those with kids in the public school system), they could eliminate those breaks and, on a sliding scale, tax parents instead and have that tax revenue go to funding the Dept of Education. Parents who choose to put their kids in private school, and pay for it themselves, would not have to pay those taxes. So that the more kids you have and the more income you make, the more taxes you will pay directly towards their education.
Education is one of the only areas that I will rarely not support INCREASING spending, but I think that needs to be carefully targeted to get the most bang for the buck. The Dept of Education, like everything else in government these days, needs to cut some fat, but while nothing in the budget should be sacred any more the DOEd is a pretty small slice of the Federal pie (~$47B, a little over 1%).
And of course childless homeowners like me will still continue to pay into our community schools with our property taxes even if we don't have kids in school.
That's a little tougher. I'm right at the end of kid #3 going through public schools so we've certainly got our money's worth, but am I entitled to a break once we don't have any more kids in school? I guess I can look at it in terms of supporting the village, making it more viable overall. Kind of like taxes for a bridge down the road that you personally never drive across, but one that is essential to the community.
low income young adults who are having multiple children out of wedlock are eligible for "earned income." They can actually get back more than they paid in to income tax if I am remembering this correctly. Does anyone know more about this?
We are busy supporting these families along with our own......when I was a young mother, I could only afford to take off a couple of months for a birth, they never go to work, or if they go to work it is low income or not turned in.
loosechickens
4-27-11, 2:57pm
The Earned Income tax credit only goes to those with earned income, and is a credit for the low to moderate working poor.
http://taxes.about.com/od/deductionscredits/qt/earnedincome.htm
excerpt regarding number of dependents, etc.:
"The earned income credit is a refundable tax credit designed for lower income working families and individuals. The amount of the credit varies depending on your level of income and how many dependents you support. The tax credit can even generate a tax refund larger than the amount of tax paid in through withholding. For the years 2009 through 2012, the Earned Income Credit is temporarily increased for working families with three or more dependents. Previously the earned income credit maxed out at two dependents. The earned income credit will revert back to maxing out with two dependents starting in 2013."
The Earned Income tax credit is the least of MY worries.....those working poor families can use all the help from my tax dollars that they can get, with my blessing. It's the shoveling out of tax benefits to large corporations, etc. that bother me. Some guy or single mom working at WalMart, or shoveling manure in a big corporate dairy operation for minimum wage or a little bit above, maybe even working two jobs, are not the problem, only the scapegoats, IMHO.
The Earned Income tax credit only goes to those with earned income, and is a credit for the low to moderate working poor.
http://taxes.about.com/od/deductionscredits/qt/earnedincome.htm
excerpt regarding number of dependents, etc.:
"The earned income credit is a refundable tax credit designed for lower income working families and individuals. The amount of the credit varies depending on your level of income and how many dependents you support. The tax credit can even generate a tax refund larger than the amount of tax paid in through withholding. For the years 2009 through 2012, the Earned Income Credit is temporarily increased for working families with three or more dependents. Previously the earned income credit maxed out at two dependents. The earned income credit will revert back to maxing out with two dependents starting in 2013."
The Earned Income tax credit is the least of MY worries.....those working poor families can use all the help from my tax dollars that they can get, with my blessing. It's the shoveling out of tax benefits to large corporations, etc. that bother me. Some guy or single mom working at WalMart, or shoveling manure in a big corporate dairy operation for minimum wage or a little bit above, maybe even working two jobs, are not the problem, only the scapegoats, IMHO.
With the size of the deficit, I question the wisdom of giving back tax refunds larger than taxes paid in. I work in a high end financial services firm. Every once in a while one of our clients has a bad year and gets the earned income credit. I don't think they would miss it too much if they didn't get it.
I realize that GE has some interesting tactics for taxes, but the majority of the entities I see are reporting their share of income and either they or the owners are paying their share of taxes.
I realize that this is a thread about taxes, and I apologize for being slightly off topic, but nothing exists in a vacuum, including taxes. Discussing them without discussing spending at the same time doesn't really make sense to me.
With the size of the deficit I question the wisdom of congress spending hours and hours and hours fighting over what are literally pennies of the federal budget, just because it's one party or the other's pet issue. Even if we cut EVERY part of the federal budget that isn't military, medicare, social security or interest on the debt we won't even come close to balancing the budget. If we're serious about cutting the deficit the only way it's going to happen is if we focus on the big ticket items where large cuts could be made with the least amount of lost benefit. Cutting 1/2 or even just 1/3 of the military budget would have more impact than completely cutting all the little things out completely and given the misdirectedness of our current military spending and the bloat in it, it probably wouldn't even be missed except by companies like Halliburton that have gotten rich off the taxpayer while providing little of real value in return.
http://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Per page 97 of the attached, 22% of the national budget is military. Social security/Medicare, Social Programs, and physical...community development made up 70% of the budget.
While I think the military needs to be looked at, it's less than 25% of the budget. I also suspect our strong military provides more benefit than many realize.
We need to look at everything and reduce spending. There will be pain involved in doing that. It's inevitable.
http://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Per page 97 of the attached, 22% of the national budget is military. Social security/Medicare, Social Programs, and physical...community development made up 70% of the budget.
While I think the military needs to be looked at, it's less than 25% of the budget. I also suspect our strong military provides more benefit than many realize.
We need to look at everything and reduce spending. There will be pain involved in doing that. It's inevitable.
I agree that we need to cut spending as well as raise taxes. I suspect it will take both in order to stop at least a decade of stagflation.
Take a look at the graph ( The 2010 world's top 5 largest military budgets) and see if it doesn't look a bit peculiar? I would much prefer that the US offer a larger social safety net for it's citizens than continuing the "superpower" military status we seem so proud of. If you were ever in the military, I am sure you would agree that the waste was stupid. Nowadays it is even worse - one or more contractor for every uniformed soldier. Personally the only thing I see we are getting from our military spending is jobs - imagine working for an employer and being told to just go kill someone and don't ask questions. That is exactly what the military is all about.
http://upload.wikimedia.org/wikipedia/en/timeline/96eaf793a74453b1aafe7ddf6964a1ab.png
All of the "Support the Troops" bumper stickers in the world will not change the fact that we have become the enemy for much of the world with our misguided foreign policy. I personally think we can do much better but my visit to the local VFW last evening tells me I am in the minority but ya gotta "Keep Hope Alive!!"
Peace
I agree that we need to cut spending as well as raise taxes. I suspect it will take both in order to stop at least a decade of stagflation.
Take a look at the graph ( The 2010 world's top 5 largest military budgets) and see if it doesn't look a bit peculiar? I would much prefer that the US offer a larger social safety net for it's citizens than continuing the "superpower" military status we seem so proud of. If you were ever in the military, I am sure you would agree that the waste was stupid. Nowadays it is even worse - one or more contractor for every uniformed soldier. Personally the only thing I see we are getting from our military spending is jobs - imagine working for an employer and being told to just go kill someone and don't ask questions. That is exactly what the military is all about.
http://upload.wikimedia.org/wikipedia/en/timeline/96eaf793a74453b1aafe7ddf6964a1ab.png
All of the "Support the Troops" bumper stickers in the world will not change the fact that we have become the enemy for much of the world with our misguided foreign policy. I personally think we can do much better but my visit to the local VFW last evening tells me I am in the minority but ya gotta "Keep Hope Alive!!"
Peace
Well we really should expect a high degree of waste from the military, it's run by the government ya know.
What else do you want to cut to get our spending back in line? If we eliminate it entirely, we'll still spend more than we take in annually.
Got any suggestions?
loosechickens
4-30-11, 12:48am
well, one suggestion is that we can let the Bush tax cuts expire, especially for the richest, who would hardly miss the money, but if they whine TOO much, we could always let them expire across the board. Before the Bush administration instituted THAT big giveaway, remember that the Clinton years produced a SURPLUS, and the Bush administration managed to squander it and not only throw us back into huge deficits, but then when Wall Street in a paroxym of greed created the financial crisis, we've had to spend even more just to keep the country afloat.
Get rid of those tax cuts. Taxes were the lowest they'd been in our lifetimes BEFORE the Bush tax cut......we can live with going back to the taxes of the nineties if we have to.
Face it, the Republicans are using this as an excuse to dismantle everything they are against, and I'm not sure but that the Bush tax cuts were designed to help the process along.
Agreed with letting the Bush tax cuts expire - all of them. Also the present idea of austerity at this time is foolish. We only have to look at Europe and see the result.
We need to cut military spending 25% as a start and enact comprehensive immigration reform that brings more workers into our tax base. Nationalize our banking system similar to Canada (http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/469-canadas-strong-banking-system-benefiting-canadians) - our US banking system is a blight on America.
Term limits and campaign finance reform would also be a step in the right direction. Career politicians are not serving the people rather themselves and their corporate campaign contributors.
Peace
I agree that we need to cut spending as well as raise taxes. I suspect it will take both in order to stop at least a decade of stagflation.
Take a look at the graph ( The 2010 world's top 5 largest military budgets) and see if it doesn't look a bit peculiar? I would much prefer that the US offer a larger social safety net for it's citizens than continuing the "superpower" military status we seem so proud of. If you were ever in the military, I am sure you would agree that the waste was stupid. Nowadays it is even worse - one or more contractor for every uniformed soldier. Personally the only thing I see we are getting from our military spending is jobs - imagine working for an employer and being told to just go kill someone and don't ask questions. That is exactly what the military is all about.
http://upload.wikimedia.org/wikipedia/en/timeline/96eaf793a74453b1aafe7ddf6964a1ab.png
All of the "Support the Troops" bumper stickers in the world will not change the fact that we have become the enemy for much of the world with our misguided foreign policy. I personally think we can do much better but my visit to the local VFW last evening tells me I am in the minority but ya gotta "Keep Hope Alive!!"
Peace
We also need to cut back on military spending not included in the DOD budget. I don't have 2010 numbers but here are 2008 numbers for military spending elsewhere:
$481B - basic DOD budget
$141.7B - supplemental DOD budget to cover the wars in Iraq and Afghanistan
$23.4B Dept of Energy to develop and maintain nuclear warheads
$25.3B Dept of State for foreign military assistance
$38.5B Dept of Treasury for Military Retirement Fund
$7.6B NASA military related activities
$75.7B Dept of Veterans Affairs (unfortunately this one won't be reducable for quite a while)
Adding in all these other expenses pushes the real military budget up closer to $800B
The "official" DOD budget for 2008 was about the same as 2010, so I'd guess the "unofficial" military expenditures in 2010 were about the same as well.
well, one suggestion is that we can let the Bush tax cuts expire, especially for the richest, who would hardly miss the money, but if they whine TOO much, we could always let them expire across the board.....
.....Face it, the Republicans are using this as an excuse to dismantle everything they are against, and I'm not sure but that the Bush tax cuts were designed to help the process along.
Unfortunately, that won't cover our annual deficits either, even if you eliminated the military budget all-together.
I know no one wants to hear it, but it's the entitlement spending that's killing us. If we don't slow that down, eventually tax rates of 100% across the board won't even help.
If you were in charge of the country's budget, how would you bring it into line?
If you were in charge of the country's budget, how would you bring it into line?
1) Cut military spending 90% over the next 4 years
2) Gut a few other programs as my mood struck, with a goal of returning the federal government to its Constitutionally-detailed functions
3) Examine my breakfast napkin here closely, and act accordingly:
https://lh3.googleusercontent.com/_8bdYFKk3OW4/Tbxk0zAHgFI/AAAAAAAACsc/ChGkmGkEz_4/s800/%5BUNSET%5D.jpg
Face it, the Republicans are using this as an excuse to dismantle everything they are against, and I'm not sure but that the Bush tax cuts were designed to help the process along.
Grover Norquist, president of American's for Tax Reform, made the famous quip: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Unfortunately the republicans only seem to want to drown the parts that don't involve spending tax revenue to their good friends.
Examine my breakfast napkin here closely, and act accordingly:
https://lh3.googleusercontent.com/_8bdYFKk3OW4/Tbxk0zAHgFI/AAAAAAAACsc/ChGkmGkEz_4/s800/%5BUNSET%5D.jpg
And the obvious questions are, at what point of the taxation axis does revenue reach it's peak and should the same rates apply to everyone?
Bae - Didn't the Laffer curve come from him scribbling on a napkin? Supply Side or Voodoo economics were based on the Laffer Curve and we all know how that worked out?
Do you really think this works or is it for personal reasons (wealth)?
Peace
Bae - Didn't the Laffer curve come from him scribbling on a napkin?
Yes, thus the joke of me doing the same and posting a picture. Well done!
Supply Side or Voodoo economics were based on the Laffer Curve and we all know how that worked out?
And yet the curve itself clearly, mathematically, must be true. At 0% taxation, there is no revenue. And at 100% taxation, there is no revenue. There is a curve between those two points. Question is, what is the shape of the curve?
... or is it for personal reasons (wealth)?
Have you stopped beating your wife recently?
Zigzagman
4-30-11, 10:13pm
Yes, thus the joke of me doing the same and posting a picture. Well done!
And yet the curve itself clearly, mathematically, must be true. At 0% taxation, there is no revenue. And at 100% taxation, there is no revenue. There is a curve between those two points. Question is, what is the shape of the curve?
Have you stopped beating your wife recently?
:~)
Peace
Yes, thus the joke of me doing the same and posting a picture. Well done!
Although Laffer himself says he doesn't remember drawing it on a napkin, he admits that if Jude Wanniski says he did, that's ok with him. He has said that his only question about Wanniski's version of the story is that the restaurant used cloth napkins and his mother had raised him not to desecrate nice things.
That said, Mr. Laffer is on record as using the principle in his classes to represent the tradeoff between taxes and revenue well before that fateful night in a Washington restaurant.
Zigzagman
4-30-11, 10:29pm
As you know the idea of cutting taxes for the wealthy is based upon us being on the right side of the curve......However I think we are on the left side. I think the Pre-Bush taxes cuts (Clinton administration) prove that argument. With the added influence of the Fed effectively printing dollars the picture is skewed even further.
I say let's just go back to the good old days of "I didn't inhale" and see how that works!!:cool:
Peace
loosechickens
4-30-11, 10:41pm
How different were entitlements during the Clinton years, and how different were they when the George W. Bush administration was handed a budget surplus? What has changed hasn't been entitlements (unless you want to count as entitlements the hundreds of billions we've placed in banker's pockets, rapacious contractors in Iraq and Afghanistan on no-bid contracts, etc.)
What changed was the Bush tax cuts, the boondoggle of George W. Bush administration doing a prescription plan that was totally nonfunded and a huge giveaway to the pharmaceutical industry (was that another shot toward the "drowning in a bathtub" that would occur after it turned out to be totally nonsustainable, not all that much help to seniors, and a huge moneymaker for pharmaceutical companies?), and invasion of Iraq, a country that had not done anything to us, was not behind 9/11, yet has sucked up hundreds upon hundreds of billions of taxpayer dollars because of the Bush administration's misplaced priorities.
How different were entitlements during the Clinton years, and how different were they when the George W. Bush administration was handed a budget surplus? What has changed hasn't been entitlements (unless you want to count as entitlements the hundreds of billions we've placed in banker's pockets, rapacious contractors in Iraq and Afghanistan on no-bid contracts, etc.)
What changed was the Bush tax cuts, the boondoggle of George W. Bush administration doing a prescription plan that was totally nonfunded and a huge giveaway to the pharmaceutical industry (was that another shot toward the "drowning in a bathtub" that would occur after it turned out to be totally nonsustainable, not all that much help to seniors, and a huge moneymaker for pharmaceutical companies?), and invasion of Iraq, a country that had not done anything to us, was not behind 9/11, yet has sucked up hundreds upon hundreds of billions of taxpayer dollars because of the Bush administration's misplaced priorities.
Oh yeah! I keep forgetting it's all Bush's fault. The funny thing is, after several years of opportunity to change everything you blame Bush for, opportunity provided by the Obama administration, a Nancy Pelosi House and a Harry Reid Senate. It's all still exactly the same.
Except of course for the fact that the hundreds of billions of dollars in deficits during the latter part of the Bush administration have been replaced with the trillion + dollar deficits of the Obama administration.
But let's not talk about that unless we can blame that on Bush as well. We gotta stay on topic.
loosechickens
5-1-11, 1:11am
Well, there WAS the little matter of the new administration having to pull us back from the brink of total economic collapse, try to find a way to wind down two wars, etc. Cleaning up the mess has caused a huge amount of spending, but really shouldn't be laid at the door of the present administration. If you're not the one who sh*t on the floor, just because you're cleaning up the mess and expending resources, (soap, water, etc.) to accomplish the task, doesn't mean that you "caused" the expense.
Yes, please.....stay on topic. The fact that the George W. Bush administration was handed a surplus and managed to not only turn it into a HUGE deficit, invade a country that hadn't harmed us, and somehow not be noticing that Wall Street was running amuck.......
What role do entitlements have in that? One, I guess might be the giveaway to the pharmaceutical industry disguised as a prescription drug plan for seniors, done completely on credit, not even allowing for negotiation with the companies on price, etc...........
c'mon, Alan.......we had a surplus when Bush took office, and a huge deficit when he left. Not to mention a country in danger of complete economic collapse. How much can President Obama OR the Democrats be blamed for spending to try to clean up the mess, get the economy moving again, etc.?
why, oh why do I let myself get drawn into these dead horse conversations???????
Let's be consistent. If Barry doesn't deserve the blame for lowered tax revenue during a recession, Clinton should not get the credit for tax revenue windfalls during the dot com bubble.
flowerseverywhere
5-1-11, 8:23am
Alan and Loose, isn't the bigger question not how we got here which you could argue for years and never agree (in my opinion a bunch of errors made by both parties) but what we are going to do going forward?
What are we going to do about all these unfunded pension liabilities that we see in our States and local school districts while still providing a good education for our kids? How are we going to ensure that hard working adults have access to affordable health care? How are we going to keep our infrastructure up to date so bridges aren't collapsing? How do we determine what is a fair tax policy?
What suggestions going forward will help us get on the right track and out of debt?
Alan and Loose.......What suggestions going forward will help us get on the right track and out of debt?
That's the question I asked a few posts ago. All I got back was blame Bush. Maybe you'll have better luck.
loosechickens
5-1-11, 2:37pm
I gave an answer, Alan, and it wasn't just "blame Bush", although if we don't LOOK at how we went from surpluses to deficits, it's hard to understand how we avoid the same mistakes.
We need to be grownups. We need to recognize that this constant lowering of taxes has not been good for our infrastructure, our educational systems, or any of the other things that help us have a great country. Taxes are HALF in many cases of what they were when we look back at the "good old days" when we had a vibrant middle class, healthy business communities, and far less of a spread in income inequality than has occurred in the past thirty years.
Systematically, the "have the most" top few percent have gradually, and sometimes not so gradually tilted the playing field in their favor, which has resulted in them mopping up most of the true growth in our economy in the past thirty years, leaving the middle class at best, sitting still, and at worst, falling behind.
We need to eliminate the Bush tax cuts, which were ill advised (and perhaps PART of the Grover Norquist wish to get government small enough to "drown in the bathtub"), recognize that we can't do the things we want government to do without paying for it. Yes, we have a spending problem, and there are many areas where we could eliminate waste and certainly our military does not need all that is spent on it, since we spend more than all the other nations put together already, but we also have a problem of thinking that we can continue to lower taxes, again and again, and somehow not end up in debt worse and worse all the time.
We need to redo the Bush prescription drug plan for seniors that was literally designed, not as a boon to seniors, but as a complete giveaway to the pharmaceutical companies. Unlike the VA, which uses the size of its purchases to get the best prices for drugs, the Bush prescription plan specifically PROHIBITED negotiation with the pharmaceutical companies on price, but simply paid whatever the companies wanted to charge. Talk about corporate welfare!
If you work at a job and they cut your pay, at first, you can make substitutions, eliminate waste, reduce expenditures, etc., but after your pay has been cut four, five or half a dozen times, what you have is not a problem with your spending, but with your earning. And that is the position that our government is in, which is, after all, just the "collective us".
We want bridges, we want schools, we want good roads, we want fire and police systems, we want an efficient military, we want an effective regulatory system, judicial system and educational systems, and we've got to realize, as grown ups do, that those things cost money, and pony up accordingly.
One of the main reasons that CA has gotten itself into the mess that it has, after years of a shining economy, the best schools practically in the nation, and free college educations, or nearly free for all students in the state is because they started letting people vote for what services they wanted, but then they also started letting them vote for what TAXES they were willing to pay, and the predictable happened. They voted for the stuff, and also voted not to be taxed for it. What was the government supposed to do, put the benefits out of a hat?
We seem to act as though "government" is some monolithic entity, seen by many as trying to exploit them, confiscate their money, and "the enemy", as opposed to a collective "us", who deals with things that can't be dealt with on an individual level, provides services needed and wanted by citizens, and the citizens are part of the "us" who pays the bills for those things.
A good start is to eliminate the completely unfunded Bush tax cuts, which won't solve the problem but will stop to some degree the continual hole digging, as a first step. We could accomplish a huge percentage of that by just eliminating the cuts to the top few percent, but they do 99% of the whining, so we might as well eliminate them for everyone, because the middle class, at least, whines a lot less, so it should even out. And when the richest few percent see that even the peasantry is able to manage without that several percentage points of tax cuts, maybe they will shut up and stop acting as though the maximum tax rate on billionaires being raised from 35-36% to 38-39% will literally take food out of their children's mouths.
Let's do the Time Warp again!
Let's do the Time Warp again!
Oh how I wish we could - as I bet most of the world does!! Back to 2000, please and thank you!
As we move closer to extending the debt limit in political preparation for 2012, once again we are facing $4 gas. Will Obama lift the ban on offshore drilling as his predecessor (I refuse to say the name on Sunday) did in July '08? At the time Obama condemned the move, saying: "It would merely prolong the failed energy policies we have seen from Washington for 30 years." Stay the course, my brother.
I am seriously hoping that we see a progressive attempt to move away from fossil fuels and promote US green energy. Subsidize clean energy by canceling oil subsidies. Challenge America for Green energy as JFK did with the space program. Raise income cap on SS to avoid future shortfalls. Also I hope the President remembers his statement in 2002, "I don't oppose all war; I am opposed to dumb war." Same here Compadre!! Let's leave the war-mongering to the right - those that mostly never served or even belonged to the Boy Scouts!
I think we can do lots of things to make things better and little things amount to big things over time. Since capitalism seems to be on it's last legs maybe we can indeed make a silk purse out of a sow's ear for future generations.
Peace
"Will Obama lift the ban on offshore drilling as his predecessor (I refuse to say the name on Sunday) did in July '08?"
So, if it was lifted in '08, why aren't we swimming in oil?
So, if it was lifted in '08, why aren't we swimming in oil?
I think the problem is that a whole bunch of people *were*....
http://upload.wikimedia.org/wikipedia/commons/thumb/2/21/Deepwater_Horizon_oil_spill_fishing_closure_map_20 10-06-21.png/760px-Deepwater_Horizon_oil_spill_fishing_closure_map_20 10-06-21.png
"Will Obama lift the ban on offshore drilling as his predecessor (I refuse to say the name on Sunday) did in July '08?"
So, if it was lifted in '08, why aren't we swimming in oil?
Well, I don't know that we'll ever be "swimming in oil", but just because a ban was lifted in '08 didn't mean that the current administration couldn't place a moratorium on it in '10.
Granted, the moratorium was eventually lifted after being ordered to by a Federal judge, but this administration has still been able to severely limit production by a combination of footdragging in the permitting process and regulatory interference.
Last December, the government's Energy Information Administration predicted that domestic output would drop by 170,000 barrels a day in 2011. At the same time, the American Petroleum Institute forcast a 2011 drop of 13% over 2010 levels.
It seems clear that we'd prefer to buy our oil from foreign sources and simultaneously keep the prices at the pump as high as possible. Department of Energy Secretary, Steven Chu is on record as saying "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe".
Gasoline prices in S/W Ohio jumped from $3.79 to $4.15 a gallon last week. I think Mr Chu is finding his groove.
It seems clear that we'd prefer to buy our oil from foreign sources and simultaneously keep the prices at the pump as high as possible. Department of Energy Secretary, Steven Chu is on record as saying "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe".
Gasoline prices in S/W Ohio jumped from $3.79 to $4.15 a gallon last week. I think Mr Chu is finding his groove.
At some point, President Obama or one of his successors will have to stand up and offer the American people a clear choice: start paying for your oil at the pump while preparing to permanently replace it as the country's dominant transportation fuel, or continue to pay for it at the end of the year in the form of tax dollars sent to oil companies and weapons systems purchased for foreign dictators—while receiving no protection from the inevitable upswing in oil prices that will someday make $3.50 gasoline seem like a quaint reminder of simpler times.
Most Americans remain somewhat oblivious to how much gas actually costs in other parts of the world. In fact, if not for the litany of expensive subsidies, tax loopholes and dubious foreign policy dealings that by most accounts have actually kept fuel costs in the United States artificially low, we might not be too far off from $10 gas right now.
Is “drill baby, drill” easier to digest than reality?
- Expect Calls for More Drilling, Until Somebody Tells the Truth About Gas Prices (http://www.plugincars.com/expect-calls-more-drilling-until-somebody-tells-truth-about-gas-prices-106942.html?page=1)
Peace
flowerseverywhere
5-1-11, 10:26pm
Let's do the Time Warp again!
I just don't know how we are going to win on this one. Every suggestion has met with someone else saying it is not a good idea.
I do not envy our leaders these days. Too much information and misinformation instantly available to please anyone.
Most Americans remain somewhat oblivious to how much gas actually costs in other parts of the world. In fact, if not for the litany of expensive subsidies, tax loopholes and dubious foreign policy dealings that by most accounts have actually kept fuel costs in the United States artificially low, we might not be too far off from $10 gas right now.
Peace
I would counter that gasoline prices are not artifically low in the US, but are artificially high in most other countries. Throughout Europe, combinations of fuel and VAT taxes vary in the $5 to $6 range, often 2 to 3 times the actual cost of the product.
If you want to consider not taxing a product at several hundred percent of cost to be a tax loophole or subsidy, that's your perogative. I just hope that sort of thing doesn't catch on in this country.
I completely agree with you Alan as far as gas pricing in other countries, especially Europe, being extreme thanks mostly to the tax burden there. I am, however, one that does feel gas/oil prices in the US have been kept artificially low. A suppose a person could easily argue that rather than our gas prices being artificially low our taxes to support the actions of the US are higher than they need to be. Six of one, 1/2 dozen of the other to our wallets.
It's more a matter of accounting cost allocation than suppression of prices, IMO. Even though none of our military actions in the middle east have been directly attributable to oil (;)) the assurance of protection from the US has kept the tap flowing much more smoothly than it would otherwise. I'm one that thinks the Pentagon budget exists as it does in large part to insure the citizens of the US are supplied with enough oil to maintain our rather opulent lifestyle. If there were no protection and/or threat of retaliation from the US small scale terrorist acts, like pipeline sabotage in the middle east, would probably be much more common place. Speculation combined with political instability makes the oil markets extremely volatile and very sensitive to such acts. It won't take much of 'situation' for today's $114 oil to flirt with that $147 mark from 2008 or beyond. Our military presence, for now, will at least help such spikes to be short in duration. People can call that price support or an indirect subsidy or whatever they want, but in my way of thinking it has kept the price much lower than it might have been otherwise for the past 60 years or so.
Mangano's Gold
5-14-11, 5:05pm
I had read articles similar to what Loosechickens has posted. I didn't quite understand what I was reading so created a spreadsheet.
This is from 2006 data, because I needed to get enough details:
http://www.cbo.gov/publications/collections/tax/2009/all_tables.pdf
Bottom 20% of Income
Average Income: $16,500
US Tax: $1,403 (medicare/SS tax) + $83 (corp) + $314 (excise) - 1089 (income tax back) = $710 total US tax
4.3% US Taxes
State and Federal = $710 (US) + $1,799 (state) = $2,508, or 15%
Next 20% of Income
Average Income: $35,400
US Tax: $3,257 (medicare/SS tax) + $212 (corp) +$425 (excise) - 283(income tax back) = $3,611 total US tax
10.2% US Taxes
State and Federal = $3,611 (US) + $3,540 (state) = $7,151, or 20%
Middle 20% of Income
Average Income: $52,100
US Tax: $4,897 (medicare/SS tax) + $417 (corp) + $469 (excise) + 1,563 (income tax back) = $7,398 total US tax
14.2% US Taxes
State and Federal = $7,398 (US) + $4,897 (state) = $12,296, or 24%
4th 20% of Income
Average Income: $73,800
US Tax: $7,085 (medicare/SS tax) + $886 (corp) + $590 (excise) + 4,428 (income tax) = $12,989 total US tax
17.6% US Taxes
State and Federal = $12,989 (US) + $6,199 (state) = $19,188, or 26%
Highest 20% of Income
Average Income: $184,400
US Tax: $10,695 (medicare/SS tax) + $9,958(corp) + $738(excise) + 26,000 (income tax) = $47,575 total US tax
25.8% US Taxes
State and Federal = $47,575 (US) + $13,092 (state) = $60,668, or 33%
I got some of my info from this guy, DAVID LEONHARDT, who estimates based on those figures that somewhere < 10% of people are paying no US taxes. (less than half of that lowest quintile)
http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html
Let me see if I can find some data to add state taxes into that. State taxes can be regressive, as loosechickens points out that Alabama's poor pay a higher rate than it rich for state taxes.
ON EDIT: I am adding in state taxes found via Loosechicken's link, to this link: http://www.itepnet.org/whopays3.pdf
The STATE figures I added in are 2007 figures, and are "all state and local income, sales, excise and property taxes." State taxes per quintile: Quintile 1 (lowest income): 10.9%, Quintile 2: 10.0%, Quintile 3: 9.4%, Quintile 4: 8.4%, Quintile 5 (highest income): 7.1%
Thanks, this gives a much better picture than just looking at the Federal Income tax. It shows a moderately progressive overall tax system.
And don't forget about all those corporate giants that earn billions a year and never pay one cent in Fed taxes. General Electric being one amongst others - including big oil. I know there are tons of tax breaks for corporations but a few bucks to the public coffers from them seems fair IMHO.
As per the above quote showing % of Fed taxes paid by various income ranges - you are again forgetting about all the deductions (exemptions, tax credits, etc..) that each person takes depending on their marital status, number of kids, 401K or IRA, etc... You can't put people into a one-size-fits-all tax % since it can vary greatly between people. I didn't pay any taxes this year (state or fed) but had an income that was much higher than the lowes amount shown of $16K. My income was from previously taxed investments and the rest was below the taxable amount. Not that I'd have any problem paying taxes or higher taxes, but I'm just using myself as an example of a higher income person paying no taxes.
Mangano's Gold
5-24-11, 12:55am
As per the above quote showing % of Fed taxes paid by various income ranges - you are again forgetting about all the deductions (exemptions, tax credits, etc..) that each person takes depending on their marital status, number of kids, 401K or IRA, etc...
I like that you have a skepticism with tax numbers. No doubt, there are information wars.
In the case of the numbers quoted above, imo they are good. Well, they are good in the sense that they are not intentionally misleading. The biggest quirk, and I'm saying this based on the brief description the CBO gives, is on what is considered "income". Often, these types of numbers simply use Adjusted Gross Income (AGI). AGI is an easy number to use since it is on Form 1040. And the IRS has computers. Generally speaking, it includes all income except income that excluded somehwere in the Internal Revenue Code.
The numbers above use a broader definition of income. For example, if someone received food stamps that would be income. If someone received Medicare benefits, that would be income. Contributions to 401(k) plans, not distributions, are income. The cost of your Group Health Plan would be income. Typically none of those are taxable, and thus none would be part of income for AGI purposes. The analysis above considers them income, so there may be a shift in who is in which quintile bucket. And since your" income" is higher, your effective tax rate willbe lower.
My sense is that the overall picture wouldn't change much. You'd still see a moderately progressive tax system.
There are games played, though. The biggest gimmick is to choose the most progressive tax (the Federal Income tax) and use that to tell the story you want.
I like that you have a skepticism with tax numbers. No doubt, there are information wars.
Oh I think those number are very correct as far as just a general guide to what a person is suppose to pay in taxes based solely on their income (how ever you want to define "income"). However, as has been pointed out here, a family of 4 earning $50K a year may actually end up paying alot less in taxes than a single person earning $25K a year just by being able to take a greater number of tax breaks that they are entitled to. So just using a tax table that says if you have X amount of income, you owe Y amount of taxes doesn't reflect reality. Like the corporate giants who may have earned billions a year, just because a tax table says they are suppose to own X% of that income in taxes, the allowable write-offs mean that, in many cases, they payed nothing.
Mangano's Gold
5-24-11, 2:26pm
Oh I think those number are very correct as far as just a general guide to what a person is suppose to pay in taxes based solely on their income (how ever you want to define "income"). However, as has been pointed out here, a family of 4 earning $50K a year may actually end up paying alot less in taxes than a single person earning $25K a year just by being able to take a greater number of tax breaks that they are entitled to. So just using a tax table that says if you have X amount of income, you owe Y amount of taxes doesn't reflect reality. Like the corporate giants who may have earned billions a year, just because a tax table says they are suppose to own X% of that income in taxes, the allowable write-offs mean that, in many cases, they payed nothing.
I understand what you are saying better now. I never looked at the data as prescriptive (ie this person should be paying this). I just see it as telling a story of what actually did happen.
Don't forget that the kids whose parents are getting those deductions are going to grow up some day, work and pay taxes to support retirees.
early morning
5-28-11, 9:59am
But AnneM, those kids will do that even if their parents DON'T get a deduction for them. Or do you think that the tax break figures into a decision to have kids or not?
I think there should be a tax incentive for those that chose not to have children instead of the other way around - we have enough people already and the world will not be a better place as the numbers increase.
Peace
loosechickens
5-28-11, 2:40pm
Well, when you think about it, lots of people get all foamy around the mouth when talking about women getting additional welfare for having more children (as though the welfare payment even made a dent in the costs of taking care of such children), saying that it's an "incentive" for them to keep having kids........
SO.......why wouldn't it be an "incentive" to people to have extra children for the income tax deduction?
Of course, personally, I think neither is true, but if you believe one, then logically, the other really SHOULD follow.......
For myself, I think that anything that encourages folks to have more kids than "replacement value" ought to be discouraged, so if financial or tax systems are set up to encourage not stopping at one or two, I'm all for taking them away.....
what's sauce for the goose, etc......
Think of the mortgage deduction. It subsidizes the homebuilders and realtors (two VERY powerful lobbies). There is no logical reason to give people a deduction on interest they pay to buy a home, IMO. Eliminate that and we have a couple hundred billion bucks and no little old ladies were thrown under the bus in the process.
Ouch. Phase it out if you want, or grandfather people in. But man, get rid of it entirely? That saves us $840 a month in Fed taxes. Truth is, people take that into account when they buy a house and have for a very long time. You want to kill an already depressed housing market? I think you found the way.
ApatheticNoMore
6-3-11, 2:05am
Doesn't it follow that renters are currently overpaying in taxes then?
Mangano's Gold
6-3-11, 8:28pm
Ouch. Phase it out if you want, or grandfather people in. But man, get rid of it entirely? That saves us $840 a month in Fed taxes. Truth is, people take that into account when they buy a house and have for a very long time. You want to kill an already depressed housing market? I think you found the way.
Your case makes both a good point and counterpoint. On the one hand, an $840 a month subsidy for somebody who is relatively high income is kind of crazy and almost can't be good policy. On the other hand, some people may have arranged their personal finances in such a way that it would be unfair to pull the rug out from under them.
Your case makes both a good point and counterpoint. On the one hand, an $840 a month subsidy for somebody who is relatively high income is kind of crazy and almost can't be good policy. On the other hand, some people may have arranged their personal finances in such a way that it would be unfair to pull the rug out from under them.
And I live in Cali, with Prop 13, which is both a blessing and a curse.
Curse: people down the street pay $500 a year in property taxes.
Curse for me, blessing for them, as they aren't priced out of their own house as housing prices go crazy.
But also a curse that we pay $7000 a year in prop taxes.
I like my subsidy because it's the only one we get. Yes, we have high incomes. But we get no other tax breaks whatsoever. We "income-out" of most tax breaks, and don't cap-out on FICA. When you look at the group that pays the greatest % of their income on taxes? That's us. We're not rich, we're not poor. Middle and upper-middle class bear the brunt.
Mangano's Gold
6-7-11, 7:30pm
And I live in Cali, with Prop 13, which is both a blessing and a curse.
Curse: people down the street pay $500 a year in property taxes.
Curse for me, blessing for them, as they aren't priced out of their own house as housing prices go crazy.
But also a curse that we pay $7000 a year in prop taxes.
I like my subsidy because it's the only one we get. Yes, we have high incomes. But we get no other tax breaks whatsoever. We "income-out" of most tax breaks, and don't cap-out on FICA. When you look at the group that pays the greatest % of their income on taxes? That's us. We're not rich, we're not poor. Middle and upper-middle class bear the brunt.
Yeah, upper income W-2 workers often pay the highest taxes. Sorry. :-(
On a separate note, I personally don't like Prop 13 style laws at all. I would absolutely vote against any such attempt to do something like that here.
My property taxes are almost 3% the value of my house. Unthinkable in California. Undoable in CA. But we have no state income tax.
Yeah, upper income W-2 workers often pay the highest taxes. Sorry. :-(
On a separate note, I personally don't like Prop 13 style laws at all. I would absolutely vote against any such attempt to do something like that here.
My property taxes are almost 3% the value of my house. Unthinkable in California. Undoable in CA. But we have no state income tax.
I think we would totally score there. Our state income tax last year probably came out to about 3% of our house value. Plus we paid our 1.25%
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