How much the rich are being taxed

[mathwonk]

I think anyone who makes more than I do should have to pay a tax to physics forum to post.

 

[russ_watters]

This statement is actually really hard to quantify, and (to me at least) doesn't seem likely to be true- sure, the trucker spends a lot of time driving, but presumably, your higher income means you purchase more goods that have to be shipped.

You're mixing up earning and spending.

Also, I'm not sure to task with "use-of-the-road" for a trucker driver- it seems like the owner of the trucking company derives more benefit from the roads than his employees, despite never driving the routes.

Many truck drivers are sole proprietors/contractors, but regardless, Ryan's marginal utility concept applies here too: even if the company takes more $ profit from the shipment than the driver (I doubt it, but we'll go with it*), the driver gets a much bigger benefit for what they get paid.

*You're assuming the company's profit is a larger number than the driver's pay, which is almost certainly wrong.

Since consumption of goods scales with income, and more exotic goods will often be shipped farther, I might suggest that roads enable more consumption for the higher end of the income distribution than the lower end, thus creating a fairly strong correlation between income and road-use.

Again, looking at the consumption is backwards. If I buy something off the internet and get it shipped via UPS, I'm the one paying the shipping cost, not getting paid by the shipping cost.

Pulling guestimates out of the air: Perhaps 1% of my income gets spent on shipping, but for someone who works at UPS, 100% of their income is earned from shipping. Other side of the coin: 1% of their income is spent on shipping while only 5% of my income is earned from "shipping" (myself to meetings).

I wanted to look at earnings only, but even if you include the spending, the earnings are so much larger of an issue that the spending really is irrelevant.

You also appear to be trying to have it both ways here, considering both sides of the coin (earning and spending) to benefit the richer, then flip-flopping them it when the direction is reversed. (If I earn money from shipping, I get the benefit, but if I spend money on shipping the benefit is still attributed to me).

[edit] And still I think this is all irrelevant anyway. We don't have to compare rich to not so rich, we can compare rich to rich and not so rich to not so rich. We'll find examples abound that show no correlation. I gave an example of two identical service companies that get vastly different benefits from shipping. On the other end, if we take a truck driver and trash collector at low-middle income and compare them to, say, janitors and food service workers who spend none of their time on the roads, we see vast differences there as well.

 

[ParticleGrl]

You're mixing up earning and spending.

No, I'm suggesting that both producers and consumers BENEFIT from the existence of the road network. In fact, consumption is a more direct measure of utility than production- and utility is what we really want to measure when we say someone benefits from something.

*You're assuming the company's profit is a larger number than the driver's pay, which is almost certainly wrong.

No, I'm assuming the salary of the manager/owner of a large trucking company is larger than the salary of the driver (which is almost certainly true). Neither would have their job without the road network.

You also appear to be trying to have it both ways here, considering both sides of the coin (earning and spending) to benefit the richer, then flip-flopping them it when the direction is reversed. (If I earn money from shipping, I get the benefit, but if I spend money on shipping the benefit is still attributed to me).

Yes, both producers and consumers derive utility from the existence of roads. Economics/utility is not necessarily a 0 sum game. In a competitive market, all transactions increase (or at least don't decrease) utility for both parties- its the backbone of the welfare theorems.

 

[nitsuj]

Um...I don't think you followed the discussion very well:

1. First, you claimed that the rich use roads and rail more than the poor.

No I haven't followed this discussion very well.

Here I thought we were discussing benefit, not use.

 

[nitsuj]

You're mixing up earning and spending. Many truck drivers are sole proprietors/contractors, but regardless, Ryan's marginal utility concept applies here too: even if the company takes more $ profit from the shipment than the driver (I doubt it, but we'll go with it*), the driver gets a much bigger benefit for what they get paid.

*You're assuming the company's profit is a larger number than the driver's pay, which is almost certainly wrong.
Again, looking at the consumption is backwards. If I buy something off the internet and get it shipped via UPS, I'm the one paying the shipping cost, not getting paid by the shipping cost.

Pulling guestimates out of the air: Perhaps 1% of my income gets spent on shipping, but for someone who works at UPS, 100% of their income is earned from shipping. Other side of the coin: 1% of their income is spent on shipping while only 5% of my income is earned from "shipping" (myself to meetings).

I wanted to look at earnings only, but even if you include the spending, the earnings are so much larger of an issue that the spending really is irrelevant.

You also appear to be trying to have it both ways here, considering both sides of the coin (earning and spending) to benefit the richer, then flip-flopping them it when the direction is reversed. (If I earn money from shipping, I get the benefit, but if I spend money on shipping the benefit is still attributed to me).

[edit] And still I think this is all irrelevant anyway. We don't have to compare rich to not so rich, we can compare rich to rich and not so rich to not so rich. We'll find examples abound that show no correlation. I gave an example of two identical service companies that get vastly different benefits from shipping. On the other end, if we take a truck driver and trash collector at low-middle income and compare them to, say, janitors and food service workers who spend none of their time on the roads, we see vast differences there as well.

purely by this "utility concept" the poorer benefit more than the rich. Don't need all that other "thought".

 

[nitsuj]

I'm assuming the salary of the manager/owner of a large trucking company is larger than the salary of the driver (which is almost certainly true). Neither would have their job without the road network.

Exactly my thinking, however you may be countered with, "but the manager/owner doesn't need "that" money as much as the truck driver."

My logic is the rich are richer than the poorer, I measure "benefit" by richness.

Russ says the benefit of richness is diminishing, to an exactness that the poorer are the ones who benefit most from...I guess road / rail in this example.

I find it impossible to conceive how the poorer benefit more from road / rail than the richer. "More to lose" comes to mind...oh right utility of money..shoots .

 

[Johninch]

I have been hearing talks about this along the aisle where one person says that the rich need to pay their fair share and another saying, no the rich do pay their fair share as it is.

It’s difficult to measure fairness. Most people would like to reduce their taxes, although many make voluntary contributions to good causes.

Basically I see paying taxes as part of the agreement between the state and the citizen, in the community or country where he lives and/or operates.

Most of us have the benefit of growing up in a country without paying any taxes. Then when we start working and earning we find out how much we have to contribute.

Since no individual has much influence over the tax rates, it is (or should be) a case of paying up or going elsewhere. There are legal tax avoidance schemes but these are considered unfair and are challenged by the IRS.

The problem for citizens of the USA is that it’s difficult to leave the country and its tax system by emigrating. I think this is a source of unfairness.

Apparently, the US does not agree to bring up citizens for 20 years and then let them go elsewhere without paying back the cost to the state.

Then when he dies after making a lot of money overseas, the family of the deceased ex-US citizen has to pay the very high US estate duties.

In Europe you are taxed where you live and operate. (The new French government has threatened to start taxing its emigrants, but this would be an exception).

There is the question of protection of passport holders, but this costs very little. In my 30 years outside of the UK I have never cost the state anything. Sometimes I go and spend money there.

Is it the opinion here that the US system of taxing ex-US citizens is unfair? Or do you consider that your ex-citizens ‘belong’ to the country?

.

 

[Galteeth]

One of the problems with trying to get into a discussion about "fairness" in terms of taxes is that there is a hidden underlying assumption that money earned is relatively equivalent to value added. Not only is this not the case, but the notion of value is one that depends on subjective judgments.
I don't think the "utility" concept mentioned is useful since it focuses only on the most obvious use of government funds. All society runs on government funds. A hypothetical financier in a city who never uses roads or has anyone else use roads still benefits from them, as they surely at least benefit companies he is invested in, help ship products, etc. Let's also not forget since part of the government contract involves defense of property, the greater the value of the property defended, the higher the cost of its defense would be if such costs weren't socialized.

 

[ramsey2879]

Here's a question for all...
Why should the rich pay more than anyone else in taxes?
BUT, before you answer, there is a catch...your answer cannot in any way mention that they 'can afford it', 'have more', or in any way imply that it's strictly because of their financial status.

Think about it, and enlighten me; at the federal level, what services do the rich use more than those with less, that would justify them being charged more to live and prosper in the same country?

That question ignores the early history of of government funding where funds for running the government were paid only by the rich and the rich considered that to be their duty to the country. Before the present tax system 100 percent of the revenues came from tariffs on imports and exports. Only the rich paid tariffs. Also, during the period from 1920 to 1950 taxes on the rich were as much as three times higher than the current tax rate. I say let's go back to the idea of viewing support for running this country as being a necessary response to the privilege of living in a free society. I do agree, however, that the present system of redistributing the wealth does almost as much harm as good because it fails to insure that each American does a fair share of a days labor. America, as a whole, needs to get back to the work effort.

 

[Claude Bile]

Taxation is about wealth redistribution. At present wealth distribution is far too skewed toward the wealthy - Off the top of my head the top 1% own something like 20% of the wealth, while the bottom 50% own 0.5%. Increased taxation on the top 1% can redress this wealth imbalance. Addressing this wealth imbalance is a good thing, as it means a greater % of people can afford the basics and live above the poverty line.

IMO, it's not so much a matter of fairness as it is social stability. Having 20-30% of citizens living below the poverty line (which the US is rapidly belting toward) is a seriously destabilising economic influence. Ergo, a gross wealth imbalance costs everyone in the long run, both the rich and the poor.

Claude.

 

[telecomguy]

Taxation is about wealth redistribution.
Claude.

I missed that the last few times I read the US Constitution. I guess I got the impression taxes were intended to fund the responsibilities of the federal government, namely "to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity"

 

[russ_watters]

Taxation is about wealth redistribution. At present wealth distribution is far too skewed toward the wealthy - Off the top of my head the top 1% own something like 20% of the wealth, while the bottom 50% own 0.5%. Increased taxation on the top 1% can redress this wealth imbalance. Addressing this wealth imbalance is a good thing, as it means a greater % of people can afford the basics and live above the poverty line.

IMO, it's not so much a matter of fairness as it is social stability. Having 20-30% of citizens living below the poverty line (which the US is rapidly belting toward) is a seriously destabilising economic influence. Ergo, a gross wealth imbalance costs everyone in the long run, both the rich and the poor.

Claude.

Fairness is a matter of opinion, but your poverty rate stat/prediction is nonsense. The rate was 15% in 2011 and that was very likely its cyclical peak. http://www.census.gov/hhes/www/poverty/data/incpovhlth/2011/highlights.html

 

[russ_watters]

I said in another thread recently it would be nice if the media would occasionally present the other side of the coin for balanced treatment of the issue. To my shock, CNN recently published this:

The top 10 percent of taxpayers paid over 70% of the total amount collected in federal income taxes in 2010, the latest year figures are available, according to the Tax Foundation, a think tank that advocates for lower taxes. That's up from 55% in 1986.
The remaining 90% bore just under 30% of the tax burden. And 47% of all Americans pay hardly anything at all...

http://money.cnn.com/2013/03/12/news/economy/rich-taxes/index.html

Actually, that last part isn't quite right: it isn't "hardly anything at all", the lower 47% pay nothing or less than nothing. And note, yes, this is just the federal income tax. It doesn't include the payroll (SS/Medicare) tax or state and local taxes. Still, it is quite striking how much the imbalance has grown in the past 20 years.

My concern is the opposite of Claude's. My concern is that because this is a democracy, we have the potential for a tyranny of the majority whereby the majority votes themselves the minority's money.

 

[Jimmy Snyder]

70.6% of the income taxes. What percentage of the income do they receive?

 

[Vanadium 50]

70.6% of the income taxes. What percentage of the income do they receive?

40% on the left side of the plot, 50% on the right side.

 

[russ_watters]

30%.

Not sure of the source, it was the first I could find: http://rwer.wordpress.com/2012/08/2...d-by-richest-10-the-usa-ranks-26th-out-of-28/

 

[russ_watters]

40% on the left side of the plot, 50% on the right side.

You mean in 1986 the top 10% received 40% of the income and in 2010 they received 50%?

...wonder why that conflicts with what I found...Does mine include government subsidy?

[edit] That's probably it. In normal income only, your numbers look right. See:

The top 5 percent earned 31.7 percent of the nation's adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.

http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0

That's the top 5% not 10%, but the numbers seem to line up better with what you said.
[edit2] Should have read further. That has for the the 10% as well: it was 43.2% of adjusted gross income. I don't like that metric though because it doesn't count all income.

 

[russ_watters]

This is an eye-opener:

social welfare benefits make up 35 percent of wages and salaries this year [2011], up from 21 percent in 2000 and 10 percent in 1960...

http://www.cnbc.com/id/41969508/Welfare_State_Handouts_Make_Up_OneThird_of_US_Wages

Hopefully that will drop with the economy recovering, but still that's an alarmingly high number.

 

[Number Nine]

Your plot isn't particularly surprising; a large percentage of the population doesn't have have enough income to pay any income tax, let alone a substantial amount. Of course, income tax is not the same as "tax"; the payroll tax, for instance, is a far greater tax burden on most of the country than is the income tax, and is disproportionately payed by those with lower incomes.

 

[russ_watters]

...the payroll tax, for instance, is a far greater tax burden on most of the country than is the income tax, and is disproportionately payed by those with lower incomes.

The way you worded that is not correct in the context of what we've been discussing. The CNN article is talking about the percentage of total dollars for the entire country paid in tax by each group whereas your statement is about taxes paid as a percentage of income. And even for what it is, it is still pretty misleading because:

1. For anyone under about $105k in income it is basically flat (slightly progressive).
2. SS was set up to look like a retirement savings plan, where what you get paid back is related to what you paid in. It wasn't supposed to be re-distributory.
3. And the sum of #1 and #2 is that for people above $105k, they don't pay additional into it, but by the same token won't be getting paid SS based on that either.
4. For the medicare part, it is re-distributory since it is basically charging different people different amounts of money for the same health insurance.

I wonder if we get a nationalized healthcare system that is paid via a flat tax rate, liberals will complain that it makes our tax system less progressive.