The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.So, let's get this straight - the top 400 adjusted gross incomes average $345 million and average a 17% tax rate. Let's see, that .17 x $345,000,000= An average of $58, 650,000 tax per household. The total of these income taxes is 400 x $58,650,000 or $23,460,000,000. That's $23.5 billion dollars. From 400 households.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
The reported seems to feel that amount ought to be doubled.
But the kicker in the article is that line about "There are so many breaks that 45 percent of U.S. households will pay no federal income tax . . ." In fact, not only will 45% not pay taxes, many of that 45% will receive tax "rebates" (credits or whatever) on taxes they didn't pay. Yep, they will get checks from the government as part of the tax process out of tax revenue to which they contributed nothing. Nada, zip.
Which, for the benefit of the AP reporter writing this article ought to suggest that there is a large class of people who should be marked in some way - not as "pay[ing} so little in taxes" or "pay{[ing] no federal income tax" but instead, marked as receiving tax free income (as in a check) from the state often at some fairly high percentage rate of their actual earned income. Where's the part in the article about how much money that involves as a transfer payment from the wealthiest Americans to the poorest (not even counting the other government programs paid for out of tax dollars?)
Where's the part of the article about tax credits ("paid for" by other taxpayers) for people who bought certain cars, or windows or air conditioners?
You want "tax fairness." Write about it fairly.
And Jesus sat over against the treasury, and beheld how the people cast money into the treasury: and many that were rich cast in much.
ReplyDeleteAnd there came a certain poor widow, and she threw in two mites, which make a farthing.
And he called unto him his disciples, and saith unto them, Verily I say unto you, That this poor widow hath cast more in, than all they which have cast into the treasury:
For all they did cast in of their abundance; but she of her want did cast in all that she had, even all her living.
So, what would Jesus have said if the poor widow had not only not cast any mites into the treasury, but had reached in and grabbed a handful of money and then complained that the "rich" were not paying their fair share?
ReplyDelete"The necessities of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion." - Adam Smith, The Wealth of Nations
ReplyDeleteAdam Smith never met the welfare programs of the 21st century.
ReplyDeleteLast month in the U.S., The New York Times revealed that GE, one of the nation’s largest companies, earned 46% of its revenue in the U.S. over the last three years but booked less than one-fifth of its profits there, shifting most of its booked profits to low-tax countries. In 2010, taking advantage of loopholes in U.S. tax laws (for which the firm had lobbied Washington lawmakers), GE paid negative taxes: despite $5.1 billion in declared pre-tax U.S. profits, the firm received a $3.2 billion tax credit.
ReplyDeleteSo what?
ReplyDeleteAs GE pays its U.S. employees, they pay tax on the pay. As U.S. GE stock owners receive, from the profits of GE, dividends from their investment in GE, they pay taxes on those dividends. As retirement funds receive money on their GE portfolio, they distribute that money to retirees or their survivors who pay tax on that distribution.
GE employees and stockholders also pay state taxes on payments from GE, and, after paying those federal and state taxes, use the remaining money to pay property taxes, sales taxes and more. If they bank what's left, interest on the that money is taxable.
How many times should the same money be taxed?
Further, if you took all of GE's $5.1 billion in "declared pre-tax profits" and sucked up as taxes, what would happen to the investors - the shareholders, pension funds and the retirees? Where would make up the money that you just took out of their pockets?
GE takes part of the money and invests in its business that it does do in the U.S. which yields property tax, sales tax and so forth.
How important is that? Ask every state that offers various incentives to attract large businesses to set up a facility in their borders.
Put all that into your calculations and get back to me.
You want loopholes? What about the loopholes that allow 45% of the households to pay no tax? Not even a single dollar. Do they not use the roads, the schools,the libraries, or call on government agencies for assistance? Why not condemn their lobby organizations?
How much do that non-paying 45% contribute to the non-governmental agencies that provide assistance to those in need in this country?
Finally, who really pays the taxes that GE pays? Why, it's the customers of GE - as the price of each GE product includes some portion allocated to paying all the taxes (not just federal income tax) that GE will have to pay. You want your GE dryer or washer to cost just a little more? Want healthcare to cost more? Then raise the taxes on GE healthcare products. Corporations just pass taxes along to you. So, if you want to tax yourself some more, then, by all means, close all those "loopholes."
Oh no, the rich and powerful in the US are neither rich nor powerful enough --- modern conservatism in a nut shell.
ReplyDeleteThat 45% who do not pay taxes, really is 45% of American adults who do not pay net federal income taxes. Most of those adults pay FICA, most of those adults pay the gas tax etc.
There are two basic reasons why there are so many people who don't pay net federal income taxes. The first is low income. We as a society have basically said the standard deduction+ personal exemptions should be sufficiently large so a slightly above poverty level income (family size adjusted)is not taxed at the federal level. For example, a family of three (married, filing jointly) has the first $22,500 tax free (roughly) while a single adult has the first $9,000 tax free.
The second reason is the American public wants a social welfare state, but is not willing to face reality that a social welfare state requires actual expenditures, so we back-door everything through the tax code such as the Health Savings Account deduction, retirement savings account deductions, Dependent Care deductions for day-care, Child Tax credits, home mortgage tax credits etc. We do that instead of offering targeted day-care subsidies, or targeted housing assistance or expanding Social Security. Tax expenditures/deductions is a back-asswards way of having a social-welfare state without visibly raising taxes.
The earned-income tax credit is an idea from a very conservative economist, Milton Freidman.
ReplyDeleteThe rich tend to focus on federal income tax because as you say 17% of a lot of money is a lot of money. But people with income too low to pay federal income taxes pay taxes as well: payroll, sales, excise, gas and other taxes.
I pay taxes twice when I use after tax income to make a purchase (sales tax) why should corporations be any different? Taxes on corporations are an established part of U.S. tax code like it or not.
GE receives services from the government, it is very profitable, it should pay it's fair share of taxes.
A 17% hit on a million dollars is going to hurt a lot less then a 10% on $10,000
"To whomever much has been given,much is required"
There were about 142 million tax returns filed in 2010. See here, which states: "A record number of the 142 million tax returns filed in 2008 resulted in no tax payment, according to a Tax Foundation analysis of IRS data. That means the tax filers got back every dollar that had been withheld from their paychecks, and often more. Roughly 51.6 million tax returns, or 36.3 percent, were filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due."
ReplyDeleteAccording to this, about 60 million people receive Social Security, SSI or both. Of those, about 38 million are over age 65. Assuming they are retired, they no longer pay FICA. So, a retiree with a pension (no FICA from pensions) and Social Security may have to file a tax return on the his/her income (because that total of pension and SS may exceed a threshold limit), and may owe income tax after those "exemptions, deductions and credits."
But even those taxpaying elders are certainly not, as you postulate, paying FICA. Now, I don't know offhand how many of the 65+ retirees fit into that category, but let's round the number of 65+ retirees to 40 million and assume about half pay tax but not FICA. The other half, another 20 million, neither paying income tax nor FICA.
Of the 51.6 million returns filed, 20 million or so may have involved people who did not pay into FICA. The number may be larger. It may be possible that the entire 40 million 65+ age group makes up the bulk of the "45%" or the 51.6 million return on which not tax was owed and money refunded. And, again, they pay no FICA.
But read the bit about "Roughly 51.6 million tax returns, or 36.3 percent, were filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due."
People who bought a house (deduction), had big medical expenses (deduction), had kids (credit) or had other credits or exemptions - had their tax "wiped put." So, some of these people could have incomes well above federal poverty level but took advantage of the tax laws to invest in a house or had unusual expenses that eliminated their tax obligation.
You also need to consider other groups who may not pay any sort of taxes or who are not paying tax on certain benefits.
For example, people on welfare are not taxed, as welfare is not "income" according to IRS Pub 17. Investment income for retirees is not taxed.Neither of these groups pay FICA.
What are the numbers? According to this, "More than 50 million Americans are on Medicaid . . ." . . ."More than 40 million people get food stamps . . ." . . . "More than 4.4 million people are on welfare..."
Medicaid and food stamps are not taxable and neither is public assistance. IRS Pub 4128.
To the last Anon - you make a pretty good case for the "Fair Tax" as set out here.
As to GE, unless you assert something more than moral outrage (as in making an allegation that they acted illegally) then the worst you can say is that GE took full advantage of the law. A situation, by the way, that the Fair Tax would fix.
The original post had nothing to do with GE and corporate tax, but if you think it is okay for GE shareholders to pay taxes on the same money several times, and also that it is also okay for you to do the same thing with your hard earned income, my arguments will never convince that is just silly.
My view is that you should be outraged that you "pay taxes twice."
It doesn't have to be this way.
Eagle,
ReplyDeleteAs a student who fished commercially in 2010, I paid about 10% of my income to the Federal Government. I'm not understanding why someone who made about 345 million isn't capable of paying more than 17%. I mean, if you can't survive on 250 million a year, you're doing something wrong.
Probably, but that is not the point.
ReplyDeleteWhat is the point? That 45% of households don't pay federal income tax. Aren't these people taking advantage of the same breaks that allow others to pay 17% instead of 35%? They just have a far lower income, meaning they won't pay federal income tax.
ReplyDeleteI'm not really understanding this: ""paid for" by other taxpayers) for people who bought certain cars, or windows or air conditioners?" Am I taking advantage of the Government (and the other taxpayers) because I deducted the miles I drove to work?
Will - the "point" is that 45% of the people pay no taxes and thus "have no skin in the game" - meaning that they have no incentive to vote against any increased government largess.
ReplyDeleteAs to other protests about GE not paying US tax - you do realize that no corporation actually pays tax, do you not? Any "tax revenue" collected from a company is simply passed on to the consumer in the form of higher prices.
No, you got that point - it is perfectly okay to avoid paying more tax than you must pay.
ReplyDeleteWhy condemn anyone who uses the law to avoid paying more than they have to, regardless of their income level, since that is the system we have?
As far as the comment about the cars, that was meant both as a reference to the concept that tax credits" or "tax cuts" must be "paid for" by raising taxes somewhere else apparently to balance the transaction instead of just reducing spending. Remember "Cash for Clunkers?" "A study published after the program by researchers at the University of Delaware concluded that for each vehicle trade, the program had a net cost of approximately $2,000, with total costs outweighing all benefits by $1.4 billion." Thar $1.4 billion came out of our pockets, Will. It was used to buy cars for people who are not me and probably not you.
The dolars we earn are all taxed away to nothingness in the end anyways.My employer buys raw goods that have been taxed for their profitability at sale(that business increases cost to maintain profit margin), that raw material is turned into something of greater worth with the profit taxed(our business increases cost to maintain profit margin)and the consumer has to pay a tax for the priviledge of purchasing that product on top of the passed on tax burden from them. All along the way the employees of every company that contributed to the rising value of the product pay a tax on their share of the profit (wages & salary) and the smuck who employs their services pays an additional tax for the sin of paying them (matching taxes) which is also added to the price of the product.So tell me what percentage of anything you buy is in actuality increased cost of that product due to taxation all along its path to point of sale with each business adding its tax burden to the cost of the end product,so in the end only the consumer and employees of the businesses are actually paying any taxes.NO Business or business owner will ever pay a tax since they simply add that cost to what they are selling and if they are priced out of the market because the foreign competition doesn't have the same cost then he'll close the US factory and move it to the other country or close his business.
ReplyDeleteMichael Gene
Eagle, I don't want to be rude, but the fair tax is a bunch of bull.
ReplyDeleteIt shifts the burden of the lower/middle class and plants it squarely on the shoulders of the middle/upper middle. The very rich are barely touched.
Also, it's not written by internet savvy politicians. Amazon.com already gets away with not paying sales tax in 44 of 50 states. Even if they get a handle on how to regulate US-based e-commerce, how will they control foreign websites (and what's to stop Amazon from re-basing offshore like so many other companies)? 20%+ sales taxes will create a hell of an incentive to cheat and gives unregulated websites a tremendous advantage.
How about a flat tax, say 10% (or whatever) for everybody? No sales tax. Then I'd be happy to do my banking in USA instead of Bahamas. Corporations get zero tax. Why? It will bring them back to the Homeland.
ReplyDeleteI don't agree on a sales/consumer based tax system. Because it avoids what people should pay to support the country based on their income, not their spending habits.
A good critiques of the Fair Tax at here (pdf). And here. Don't forget to look at the Fair Tax response document that Fact Check links to, which contains the following: "We very strongly disagree with FactCheck.org’s analysis of the FairTax, believing that it failed to escape the class warfare arguments the public has been conditioned over the past 50 years to accept as the only true measure of tax proposals and that FactCheck has uncritically accepted many misleading arguments by defenders of the income tax system who profit handsomely from the status quo."
ReplyDeleteAs for a flat tax, there are problems there, too, as noted here, "Critics of the flat tax argue that the marginal dollar to the low income is vastly more vital than that of the high income earner, especially around the poverty level. In their view this justifies a progressive taxation system as the added income gained from a flat tax rate to the rich would not be spent on vital goods and services for survival as they might at the poverty level with reduced taxation."
As far as taxes go, it may be a case of the "least unfair" system that we ought to examine.
"The least unfair" - which sounds like flat tax to me. Because the reality is that those at the top and lower end of the income scale pay the least (or none) in proportion to income earned; seems the the middle bears the weight.
ReplyDeleteHow about talking about a TAXING system we talk about an EARNING system? Where everyone gets paid the same and gets govt services and education for free? Sure, you only get to vote for one political party; but is that soooo different from TWO which doesn't change anything in the end?
You must be kidding.
ReplyDeleteWow a civil debate with people of differing viewpoints. Presented intelligently and without malice towards the other. This is the way its supposed to be. Well done and tips of the hat to both of you.
ReplyDelete