Dispelling the Tax Myth

[w¡n9Nµ7 §£@¥€r 123]

Is he a good contracter? Does he earn that much? I don't know.

No, you don't. But insinuating that it's unlikely is unfair given how easy it is to break 150.

[Peikko 1,575]

Unfair? Since when has this election been about being fair?

[w¡n9Nµ7 §£@¥€r 123]

[mawilson 2,133]

Is he a good contracter? Does he earn that much? I don't know.

No, you don't. But insinuating that it's unlikely is unfair given how easy it is to break 150.

Especially if you're a plumber. Plumbers make more money than PhDs!

[Biologist turns plumber for a doubled wage]

[rebeccajo 14]

You have to look closely, but what you can see is that Joe the Plumber is really re-distributing his wealth upward instead of downward.

How so?

Redistribution of wealth means taking money from one person and giving it to another person

in the form of a tax credit.

What I see here is that the highest earners (top 1%) paid about 27-28% of their AGI in taxes

before the Bush tax cuts and about 22-23% after. Obama wants to roll back the Bush tax cuts

for the top 1%, so their average tax rate will go back to 27-28%. At the same time, the middle

class and the poor (who pay no taxes) will get a tax credit. That's wealth redistribution

downward, not upward.

The highest one percent aren't Joe the Plumber.

Well, Joe is in the top 5% and his average tax rate today is 20-21% (as opposed to 23-24% before the Bush tax cuts.)

Please help me understand your argument.

Well - it seems to me that looking at Adjusted Gross Income of all taxpayers is the only way to get a 'level playing field' picture of our progressive tax system.

There are a myriad of credits and deductions available to taxpayers, but the availability of these depend on the particular tax situation. If you are poor, you have the Earned Income Credit. If you are wealthy, you deduct your legitimate business expenses. We hear a lot about the wealth of our nation being concentrated with a very small percentage of taxpayers, but the extant question is how much of that wealth actually gets taxed.

According to this article (http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html), in 1998 (the last time reliable figures were collected) the upper 5% of US Taxpayers held 59% of the wealth in this country. If you look at table 5 in the article I cited, in 1998 these individuals (after their income was adjusted) made up 32.85 percent of the base upon which tax dollars were collected. Joe the Plumber is in this group.

The converse of this is telling - the remaining 41% of wealth in the US made up the adjusted base from which taxes were collected. 41% of the wealth made up for 71.44% of the base on which taxes were collected.

Edited November 1, 2008 by rebeccajo

[mawilson 2,133]

Becca, isn't this a function of how "wealth" is measured?

The standard definition of wealth is "assets minus liabilities". Assets include equipment,

inventory, buildings, vehicles, etc. Liabilities include money owed to creditors, mortgages,

loans, accounts payable to suppliers, etc.

A "million-dollar business" doesn't necessarily generate $1m a year and so is taxed accordingly?

[rebeccajo 14]

"Assets minus liabilites" applies to any taxpayer. That's a separate accounting function from the way taxes are figured.

Average households aren't given the same latitude to reduce their adjusted gross as a 'million dollar business'.

[mawilson 2,133]

"Assets minus liabilites" applies to any taxpayer. That's a separate accounting function from the way taxes are figured.

Not really - "wealth" has nothing to do with the way taxes are figured.

Exxon-Mobil's "wealth" in 2007 was $500 billion - that's how much they were worth then. (They are worth less now.)

Their profit, however, was $40.61 billion - that's what they are taxed on.

Average households aren't given the same latitude to reduce their adjusted gross as a 'million dollar business'.

Agreed.