Who's Paying the Taxes
http://thedianerehmshow.org/shows/2010-04-13/whos-paying-taxes
About 47 percent of U.S. households will not pay any federal income tax for 2009... and the highest earners are paying an increasingly larger share: How the tax burden is distributed...and how it may shift
Guests
Joel Slemrod
Paul W. McCracken Collegiate Professor of Business Economics and Public Policy at the Ross School of Business, and Professor of Economics in the Department of Economics, at the University of Michigan.
Roberton Williams
principal research associate, the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution.
David Leonhardt
reporter, New York Times
Comments
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The problem is that we Americans want every program or subsidy that benefits “me” but we want “someone other than me” to foot the bill.
We need a simple, fair, tax system where the taxes actually equal the total of our expenditures. How about one low rate for the first 30k income, another rate for the second 150K and a higher rate for any income over that? Maybe a top rate for income over a million a year? All types of income taxed at the same rate (dividends, wages, cap gains, inheritance) and there would be NO deductions and no subsidies. Even the mortgage interest subsidy would be phased out. Why should it make any difference on your income taxes if you are a renter or you have a million dollar mortgage?
If the Congress that we elect spends more than the taxes that come in, everyone would see their rate increase in order to pay for that spending. Today, it’s too easy to keep asking that Congress fund “my program”, “my subsidy”, the war that “I” think is necessary and, by the way, “no more taxes, we will just borrow the money”. If we did have a simple, shared tax system , it would be much easier to take “my” responsibility for ”my” country’s expenses rather than hope the taxes would be paid by “someone other than me” (i.e. “the rich”, “corporations”, “welfare cheats” )
Why not do away with all income tax?
What if, after Congress passed their budget, the Feds would create that much New money for the government to spend?
This would be completely fair because it would devalue all existing dollars equally - the more you hold the more you pay in terms of devalued wealth.
Besides it's simplicity, this plan would have the benefit of 'collecting' on all underground and illicit income as well as collecting from all holders of dollars worldwide.
Credits (payments) could still go to low income earners or any other special interest group congress wanted to pay, but there would be much more transparency than the current system of convoluted loopholes because of the explicit nature of writing checks.
Brian M
Louisville, Kentucky
For the federal level -- replace all current taxes with a ‘transfer tax,’ a very small percentage which would be applied every time money changes hands (or bank accounts) – for wages, for services, for rent, for retail and wholesale purchases, including homes, for purchase of parts, for savings deposits, for federal payments, for investment trading, for currency exchange, etc. A tax of this type offers some hope of affecting all income and wealth levels proportionately. I also think it would be a great way for the federal government to benefit from the playing with money, done by hedge funds and derivatives traders, which has created havoc for our economy.
America needs to create a sliding tax scale factoring in how many are in the house hold the cost of need per person (i.e. health care, food, clothing, etc, etc). We use this same kind of system for determining financial aid for college, so there should not be any reason why we can’t do the same thing to determine a fair tax contribution for every American whether it be as small as a dollar or as large as 50 million. There is no need for anyone to have a billion dollars, and I guarantee that 99% of the people earning minimum wage will work harder in their lifetime than the billionaires.
On a side note if we just regulated companies so that they are truly following a capitalist economic system. For example it seems that a majority of companies forgot that once profits have been made you are suppose to use some of those profits to lower the cost of goods thus allowing the lower classes to be able to support themselves. But that doesn’t put money into the top 1% pockets so it seems corporations decided to ignore that part of Adam Smiths economic system.
Please don't forget that income taxes are not the only taxes we pay. Everyone who works pays the payroll tax, which is rather regressive and the wealthy pay a smaller percentage of their income for this tax than the rest of us due to the cap. State and local taxes and sales taxes are also paid by all.
Saying that "47% of Americans don't pay taxes" is an incredibly misleading statement.
A RELATED ISSUE: If you didn't lose your job, your home, or your savings in the big financial blow-up, you have every incentive to return to business as usual. If you did lose your job, your home, or your savings you have every reason to be afraid of returning to business as usual.
SO: If you can avoid taxes, the system works for you!
Why shouldn't higher earners pay a larger share? They have more money left after taxes than the average person, don't they? The fact is, earnings depend on profit. Example: A teacher's earnings are lower than a basketball star because the teacher's work doesn't engender profit. Tax rates should balance out this earnings inequity.
AND
From today's Denver Post....
"The average American household will pay roughly 32 percent of its 2009 income to federal and local governments in taxes by Thursday. But U.S. corporations paid closer to 25 percent in taxes on last year's profits, perhaps even less when their foreign operations are taken into account."
In the article was this example....
"Molson Coors Brewing Co., actually received tax benefits — meaning the government OWED THEM MONEY — in 2009.
"In Colorado, Molson Coors reported a tax benefit of $14.7 million, or a tax rate of -2 percent of its pretax income — a fact that helped the brewer nearly double its profit in 2009."
To say 47% do not pay taxes is deceptive. Many low income people who work and qualify for credits and other deductions that would allow them to get all the Federal tax withheld back (plus more), do not FILE tax returns, Federal or State. So they they are effectively paying taxes.
When I was working illegally in the UK years ago, I had customary taxes withheld from my check, but I didn't file returns because I was afraid the UK govt might discover I was illegal and deport me. I've several friends working here in the US illegally who fear the same, so they never file returns, though they are low income and surely eligible to get their withhold income tax back. What about all that income? FICA paid out, especially!
Lastly, I have several immigrant friends who've heard immigrants to the US do not have to file tax returns for 7 yrs, so they have a chancet to "get on their feet", economically. This rumor is spread via email & word of mouth. Of course, this can get those folks in trouble if they owe taxes, but if they are due a refund, since you only have 3 yrs to claim your refund, many lose out due to this rumor.
During President Obama’s run for president, he repeatedly stated that “households that made less than $250K would not see their income taxes rise a single dime”, yet, this year, my wife and I have found that we are paying an additional $5K in income taxes over what we paid last year. I don’t understand how this is possible, when: (1) our gross income is approx. $160K, and (2) we made approx. $10K less this year than we made last year.
Can your panelists address this conundrum ?
This show continues a myth. It does not include social security and medicare taxes. They have to be considered taxes as they have been a principal source of funding for the General Fund, and have not been kept in the "locked box".
For the first time, SSN incomes are not adding to the general fund and this is a major cause of expected deficits.
It is convenient to artificially separate income taxes from SSN taxes when they are spent together. If you include SSN taxes, (payroll taxes)the lower income groups pay a substantial set of the tax burden.
"What if, after Congress passed their budget, the Feds would create that much New money for the government to spend?"
Brian,
The problem with that is that new money does not hit the market all at the same time. New money is loaned out to big banks and corporations first. The first people to spend the money get the current market value out of it. As that money trickles down into the rest of the system, existing money at the lower ends of the economy beings to feel that devaluation after the original owner has already gotten the benefit. This is already what largely happens in our economy, which is why the federal reserve is so destructive to the end consumer and poorer to middle income individuals.
Also, I think when considering tax law, it is important to take into account the history of taxation in the world.
http://www.youtube.com/watch?v=woyJyCAgikg&feature=PlayList&p=690B29B485...
David Leonhardt noted that tax cuts appear to stimulate the economy all other things being equal- but neglected to mention what the other factors are that can affect this. One of the biggest is inflation, and inflation can drastically increase the effective tax rate. During the late 1970s, high inflation increased effective marginal rates to over 100%, which drove money out of productive investments and into T-bills and overseas investments. The Reagan-era boom was as much due to cutting inflation as it was to lower taxes- and it was the lower inflation that allowed higher taxes to not hurt the recovery.
Why comment on restricting health care costs, when it is " paid for not by income taxes but Medicare payroll taxes?"
My story? I have been married for 15 yrs and since our first year of filing as a married couple we have had to write a check.
Nothing has changed this routine. Owning a home, increase in income, location, nothing. We do not have children and had never intended to do so. The over population of the planet should not be the basis for tax credits so I am hoping this alone is not the reason we owe every year.
We've filed with a CPA, a store front tax filer and done them ourselves. We itemize, we donate, we claim, zero, have an additional amount taken from each payroll and nothing ever changes. We owe, we owe, we owe.
This year the IRS has suggested that we file as single. Huh? Hello, I have been married for 15yrs, make a modest living, have a home, medical insurance premiums, student loan debt, credit card debt, car liens and all the same things most married couples do. How come we have to pay out at the maximum single rate? 47% will not pay tax this year! Why? We make less than $100k a year, this tax system does not work.
Again, talking about paying out SSN and Medicare as an income tax problem, BUT NOT including SSN and Medicare as income raising taxes.
They fall primarily on the middle and lower income earners.
To not include SSN and Medicare as income in this, continues the double talk. I expected more.
If people knew where their tax dollars went, really knew, the free lunch crowd would be smaller. Think simply about the 3% of federal taxes that goes to transportation. The clothes you wear, the food you eat, the seeds you plant, the corn you harvest, the bread that comes across highways from wheat fields to processing plants. All of this is subsidized. And that's just 3% of the budget. Of course you could pay tolls every five blocks.
Pleae address the fallout from the Bush Alternative Minimum Tax repeal. How big were the refunds to large corporations and how effective was it in reviving the climate of business in America during this past decade?
Instead of taxing income, why not tax assets?
It would seem to me this would be a better way of getting people to pay according to the benefits they have derived from being a member of our society.
Simply because none of today’s guests believe that reducing income taxes creates measurable economic growth does not make that true so please don't assume that "the evidence shows" this to be the case. Using WWII as an example to show tax increases can cause economic growth is ludicrous. So what does cause economic growth - government spending? The guests either believe that ridiculous notion or don't know (but they do seem to know that tax reductions do not).
More nonsense is that high income taxpayers are hiding lots of income. I would like to see the evidence of that. True, many are taking advantage of legal tax "loopholes" (for lack of a better term) but don't mistake that with the hiding of income. How about unreported tips, cash income and other underground economy transactions? Many people who are paying little or no taxes are hiding substantial amounts of income from the government so let’s not pretend the inequity in the tax system is lessened because high income filers are hiding lots of money they owe the government.
In summary, the lack of equity of the tax system with about 40% of the population paying no taxes and the vast majority of taxes being paid by the upper 10% of earners is the problem. It puts groups of Americans against each other and in the long run (as we have seen from history including the US and French revolutions) is unsustainable. Those who pay no taxes have no investment in our country - they are simply taking from it and will continue to do so at an every higher rate until we are bankrupt.
Several comments have been made about how progressive the tax system is in the US. I'm not sure of the exact percentage, but isn't it true that about 80% of all Federal Income Tax is paid by the top 10% of earners? If that's true, then isn't that progressive enough?
Also, the comments about Social Security taxes are interesting. If the government had not spent the Social Security Trust fund on general operaing expenses, we would not have a short fall in the system. This has just become another income tax, and now benefits will need to be cut because of this spending.
Thanks,
Tom
Let's focus on one statistic that you've presented this morning. 47% OF AMERICANS PAY NO INCOME TAXES...ZERO! This means that 53% OF AMERICANS ARE CARRYING 100% OF THE SPENDING of this country! THAT'S WRONG! That 47% ought to pay income taxes...they ought to pay for the services they receive...schools...roads...defense. My parents would call these people FREELOADERS! Maybe they should have worked harder in the free public schools and prepared themselves for a better paying job, maybe they should have refrained from having childred they can't afford. I'm sick of hearing that I'm supposed to support people that I don't know and I don't care about. My responsibility it to take care of me, my family and my close friends. Period. And if everyone felt that same responsibility, we wouldn't have the social problems we have. But why should they bother to have that sense of responsibility when they have me and the rest of the 53% to suck money from. I'm part of that 53%, I don't make a huge income, an impression that those who want to increase my taxes love to promote, I feel like the center of the tax burden/potential increase bulls-eye and I"M FURIOUS. If this administration continues to follow this tax policy, or expand it, they're going to strangle the productive engine of this country.
What happen to equality under the Law. why are some people treated different under the tax law. Don't tell me it is not the law but a tax code, if they can put me in jail of not complying with the tax code, than the tax code is a LAW.
We need equality under the law all Americans should pay the same percent of tax.
"Those who pay no taxes have no investment in our country - they are simply taking from it and will continue to do so at an every higher rate until we are bankrupt."
Many who are not required to pay Federal Income tax have withholding taken from their pay anyway, plus SS tax. But they don't file returns, so they don't get that money back. Who benefits from that income? Also, just because a low income earner can't afford to own a business or even a home doesn't mean they don't have an investment in our country. Those individuals consume the majority of goods and services in this country. And you have jobs created to care & serve those people. More teachers, more fire dept staff, more nurses and doctors needed, all those jobs serve those individuals who are "bankrupting" our country.
Diane,
In reply to the lady who was so overwrought that high income people pay more taxes, I suppose I am one of the higher income people who does not mind paying taxes and believe I am getting a bargain considering the benefits I am and have received. Even though most of my income is invested in tax sheltered and/or tax deferred instruments, I will be paying upwards of $20,000 in income taxes this year. I live in a moderate priced home which is paid for and do not want another. I drive a moderate priced car which is paid for and will be replaced after it is ten years old. I just do not spend that much as I have so many other things to do that I do not have time to spend in consumption other than those subsistence and maintenance expenditures that arise. I want services and they cost money. If I have all the money in the world but everything is crumbling around me, what good is the money. I do not consider myself altruistic just pragmatic.
47 percent of U.S. households will not pay any federal income tax for 2009. This is BULL. I can't believe you didn't ask to qualify this. If the household earns money they can defer the taxes but they must pay taxes. I'm sorry to see that you now have turned into FOX news.
Jim Morris - Was a listener....
The guy from the NYTimes was a bit over the top. The 1950's were boom times not due to high taxes but despite high taxes. There was a huge demand for goods and near full employment. Fast forward to now and most of those factories have moved or gone out of business. The failed "free trade" idea has ruined our tax base and now we are just feeding off each other.
Would you please ask you guests about what I call the Social Security Bait and Switch ploy?
In 1986 congress told working Americans that they would be taxed at a higher level than withdrawals demanded so that there would be sufficient reserves for when baby-boomers began withdrawing money. But those surpluses ended up funding Republican tax cuts. Now that the SS system is nearing the point where withdrawals exceed contributions, Republicans are up in arms that "the system is going bust" and demanding that cuts be made.
Thank you.
Pat Thompson
As a side tangent - I constantly find that a major issue that keeps getting sidelined and overlooked happens to be party representation. My oppinion is that the current two party system has long outlived its utility in representing the growing populations of separate interests. To think that the Republican Party and Democratic Party covers the interests of all interest groups is absurd. I may have only been a registered voter since 1991, however since then every presidential election year I make sure to pay attention to all of the candidates and I vote independently. I am sure that more people would vote independently if the political arena was not dominated by the election funds currently being divided between the two political parties. I have also taken note that during the elections where third party funds have been on the ballot, an issue I have adamantly voted in favor of every time, watching the results with baited breath. As we all know, the third party funding issue has always been halted. The Presidential Election year we had the infamous issue with chads on ballots in florida with the recount faux pas, the third party funding issue failed with 4 percent going to one of the third party candidates. That year the Third Party Funding needed 5 percent to go to one candidate to pass the legislation to allow Third Party Funding. One wonders if that 4 percent was tampered with in the state of Florida, disguised behind the mask of presidential votes with chads hanging on. That is my question to the rest of the nation. How could an issue like Third Party Funding have a fair representation of voting if it is not a separate issue with its own vote and count, when one considers BOTH the Republicans and Democrats would oppose the issue at every turn?
I don't know exactly what that 47% represents, but here are some statistic from the IRS (from yearly year) that should be kept in mind when HONESTLY discussing income, taxes and wealth. The average US family income was $39-K$40K, however, the modal income (the peak of the distribution curve which represents the income that the highest fraction of families make) is only $20-$25K, which is close to the poverty level. The distribution of income in the US is highly skewed, so when someone quotes the average or median income to defend their argument, they are either ignorant of the income distribution or are being deceitful.
Tim