Debt Limit Deal: Almost 100% of the burden will be borne—via spending cuts—by the poor and the middle-class.

[luckytxn 2,265]

Since itis pretty much deficit spending and repaid in the FUTURE. Whoever pays the most taxes will have the heaviest burden. It is the richer now that pay the most and I am sure it will be the rich then.

[웃 910]

loss of jobs. loss of business. markets crashing, etc.

It's not a new concept.

You really should go back and take economics and accounting 101.

Accept science and fact my friend.

From 2005:

http://www.cbpp.org/...?fa=view&id=365

the consensus among economists and financial analysts, and the empirical data, are strongly consistent with the basic, common-sense notion that tax cuts do not pay for themselves. They result in less, not more, government revenue. Not only do the several recent years of revenue declines suggest this, but the experience of the 1980s and the 1990s does as well. The average economic growth rates for those two decades were virtually identical. But the rates of revenue growth diverged sharply. Revenue collections grew much more robustly in the 1990s — when taxes were increased — than in the 1980s, when taxes were cut sharply. Not coincidentally, the nation's fiscal position improved substantially in the 1990s, after deteriorating in the 1980s.

Economists agree that cutting taxes reduces revenue

No reputable economist, liberal or conservative, has ever shown that tax cuts pay for themselves, and economists are virtually unanimous in concluding that tax cuts reduce revenue. This consensus holds even among economists who have served at high levels in the Bush Administration.

For example, N. Gregory Mankiw, chairman of the President's Council of Economic Advisers during the President Bush's first term, wrote in his popular introductory economics textbook that there is "no credible evidence" that tax cuts pay for themselves, and that an economist who makes such a claim is a "snake oil salesman who is trying to sell a miracle cure."

Edited August 1, 2011 by Lord Infamous

[Obama 2012 1,714]

Accept science and fact my friend.

From 2005:

http://www.cbpp.org/...?fa=view&id=365

the consensus among economists and financial analysts, and the empirical data, are strongly consistent with the basic, common-sense notion that tax cuts do not pay for themselves. They result in less, not more, government revenue. Not only do the several recent years of revenue declines suggest this, but the experience of the 1980s and the 1990s does as well. The average economic growth rates for those two decades were virtually identical. But the rates of revenue growth diverged sharply. Revenue collections grew much more robustly in the 1990s — when taxes were increased — than in the 1980s, when taxes were cut sharply. Not coincidentally, the nation's fiscal position improved substantially in the 1990s, after deteriorating in the 1980s.

Economists agree that cutting taxes reduces revenue

No reputable economist, liberal or conservative, has ever shown that tax cuts pay for themselves, and economists are virtually unanimous in concluding that tax cuts reduce revenue. This consensus holds even among economists who have served at high levels in the Bush Administration.

For example, N. Gregory Mankiw, chairman of the President's Council of Economic Advisers during the President Bush's first term, wrote in his popular introductory economics textbook that there is "no credible evidence" that tax cuts pay for themselves, and that an economist who makes such a claim is a "snake oil salesman who is trying to sell a miracle cure."

you're just trying to dig for anything now aren't you?

[mawilson 2,133]

Almost 100% of the burden will be borne—via spending cuts—by the poor and the middle-class.

Very good. The poor and the middle class got us into this mess, they should bear most of the burden.

[웃 910]

Just do yourself a favor and embrace economics and facts. We'd be at a budget surplus this year if we listened to the facts made back in 2005 (apparently to you it is just coincidence and they made great guesses). I don't know about you, but it kinda saddens me to know that we'd be looking at a surplus this year without those tax cuts...These are FACTS

From 2005: http://www.cbpp.org/...?fa=view&id=598

2005

Without the Tax Cuts, Deficit Picture Would be Dramatically Improved

This year's deficit would be much smaller if the President's tax cuts had not been enacted. Based on the official cost estimates by the Joint Committee on Taxation, and accounting for the increased interest payments caused by borrowing to finance the tax cuts, the cost of the tax cuts enacted in 2001 and 2003 is equal to about 2 percent of GDP this year, while this year's deficit equals 2.7 percent of GDP.^a

Looking out over the next couple of years as well, the deficit picture would look far different except for the tax cuts. As the figure below indicates, large deficits will persist on into the future under the official CBO baseline forecast. But in the absence of the tax cuts, the baseline would show the nation returning to a surplus in 2011.

Further, because of the tax cuts (assuming they are extended), revenues will constitute a smaller share of the economy over the next 10 years than they averaged in the 1950s, the 1960s, the 1970s, the 1980s, or the 1990s.

^aEven if one were to assume some positive feedback effects on the economy, the cost of the tax cuts would represent a large share of the current deficit.

Edited August 1, 2011 by Lord Infamous

[Bad_Daddy 2,209]

Very good. The poor and the middle class got us into this mess, they should bear most of the burden.

??? #######?

Tell me you aren't serious. Your blaming the poor and middle class for the decisions that the presidents and congress have made over the years? I didn't even know the middle class and poor had lobbyist, I'm sure if they did there would have been no draft during Vietnam.

[Obama 2012 1,714]

Just do yourself a favor and embrace economics and facts. We'd be at a budget surplus this year if we listened to the facts made back in 2005 (apparently to you it is just coincidence and they made great guesses). I don't know about you, but it kinda saddens me to know that we'd be looking at a surplus this year without those tax cuts...These are FACTS

From 2005: http://www.cbpp.org/...?fa=view&id=598

2005

Without the Tax Cuts, Deficit Picture Would be Dramatically Improved

This year's deficit would be much smaller if the President's tax cuts had not been enacted. Based on the official cost estimates by the Joint Committee on Taxation, and accounting for the increased interest payments caused by borrowing to finance the tax cuts, the cost of the tax cuts enacted in 2001 and 2003 is equal to about 2 percent of GDP this year, while this year's deficit equals 2.7 percent of GDP.^a

Looking out over the next couple of years as well, the deficit picture would look far different except for the tax cuts. As the figure below indicates, large deficits will persist on into the future under the official CBO baseline forecast. But in the absence of the tax cuts, the baseline would show the nation returning to a surplus in 2011.

Further, because of the tax cuts (assuming they are extended), revenues will constitute a smaller share of the economy over the next 10 years than they averaged in the 1950s, the 1960s, the 1970s, the 1980s, or the 1990s.

^aEven if one were to assume some positive feedback effects on the economy, the cost of the tax cuts would represent a large share of the current deficit.

Surplus? A surplus? With this spending?

Are you out of your damn mind?

That's about the funniest thing I've heard in a LONG time.

Your "FACTS" are voodoo economics in which someone is trying to justify spending into oblivion by blaming a lack of revenues on tax cuts instead of the recession.

What a damn joke.

[Mr. Big Dog 10,747]

There isn't a revenue problem. The chart only shows that it can't blame the tax cuts for anything... Revenues actually increased when the tax cuts took effect. Though you choose to ignore that fact.

Naturally, when an economy rebounds from a recession, tax revenues will increase. What you're missing is that following the Bush tax cuts, revenues never made it back to the historical average even when the economy grew at 2.5, 3.1, 4.4, 3.2, 3.2 pct during the 2003 - 2007 expansion - that average obviously including lower revenues during recessions and higher revenues during expansions. Revenues never reached that average level anymore.

[luckytxn 2,265]

Guess Who Really Pays the Taxes

By Stephen MooreFrom the November/December 2007 Issue

Filed under: Economic Policy, Public Square

Yes, income in America is skewed toward the rich. But taxes are skewed far, far more. The top 5 percent pay well over half the income taxes. STEPHEN MOORE has the numbers.

1. Are income taxes fair?

That depends on who is offering the opinion. Democratic candidates for president certainly don’t think so. John Edwards has said, “It’s time to restore fairness to a tax code that has been driven badly out ofwhack.” Hillary Clinton laments that “middle-class and working families are paying a much higher percentage of their income [intaxes].” Over the past seven years, however, Americans in general think taxes have become more fair, not less. The Gallup Organization found in an April poll that 60 percent of respondents believe the income taxes that they themselves pay are fair, com­pared with 37 percent who believe the taxes they pay are unfair. In 1997, the figures were 51 percent fair and 43 percent unfair.

2. What income group pays the most federal income taxes today?

The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t includepayroll taxes for Social Security and Medicare.

3. But didn’t the Bush tax cuts favor the rich?

The New York Times reported recently that the average family in America with an income of $10 million or more received a half-million-dollar tax cut, while the middle class got crumbs (less than $100 shaved off their tax bill). If we examine the taxes paid in a static world—that is, if we assume that there was no change in behavior and economic performance as a result of the tax code—then these numbers are meaningful. Most of the tax cuts went to the super wealthy.

But Americans did respond to the tax cuts. There was more investment, more hiring by businesses, and a stronger stock market. When we compare the taxes paid under the old system with those paid after the Bush tax cuts, the rich are now actuallypaying a higher proportion of income taxes. The latest IRS data show an increase of more than $100 billion in tax payments from the wealthy by 2005 alone. The number of tax filers who claimed taxable income of more than $1 million increased from approximately 180,000 in 2003 to over 300,000 in 2005. The total taxes paid by these millionaire households rose by about 80 percent in two years, from $132 billion to $236 billion.

4. But haven’t the tax cuts put more of the burden on the backs of the middle class and the poor?

No. I examined the Treasury Department analysis ofhow much the rich would have paid without the Bush tax cuts and how much they actually did pay. The richare now paying more than they would have paid, not less, after the Bush investment tax cuts. For example, the Treasury’s estimate was that the top 1 percent ofearners would pay 31 percent of taxes if the Bush cuts did not go into effect; with the cuts, they actually paid 37 per­cent. Similarly, the share of the top 10 percent of earners was estimated at 63 percent without the cuts; they actually paid 68 percent.

5. What has happened to tax rates in America over the last several decades?

They’ve fallen. In the early 1960s, the highest marginal income tax rate was a stunning 91 percent. That top rate fell to 70 percent after the Kennedy-Johnson tax cuts and remained there until 1981. Then Ronald Reagan slashed it to 50 percent and ultimately to 28 percent after the 1986 Tax Reform Act. Although the federal tax rate fell by more than half, total tax receipts in the 1980s doubled from $517 billion in 1981 to $1,030 billion in 1990. The top tax rate rose slightly under George H. W. Bush and then moved to 39.6 percent under Bill Clinton. But under George W. Bush it fell again to 35 percent. So what’s striking is that, even as tax rates have fallen by half over the past quarter-century, taxes paid by the wealthy have increased. Lower tax rates have made the tax system more progressive, not less so. In 1980, for example, the top 5 percent of income earners paid only 37 percent of all income taxes. Today, the top 1 percent pay that proportion, and the top 5 percent pay a whopping 57 percent.

6. What is the economic logic behind these lower tax rates?

As legend has it, the famous “Laffer Curve” was first drawn by economist Arthur Laffer in 1974 on a cocktail napkin at a small dinner meeting attended by the late Wall Street Journal editor Robert Bartley and such high-powered policymakers as Richard Cheney and Donald Rumsfeld. Laffer showed how two different rates—one high and one low—could produce the same revenues, since the higher rate would discourage work and investment. The Laffer Curve helped launch Reaganomics here at home and ignited a frenzy of tax cutting around the globe that continues to this day. It’s also one of the simplest concepts in economics: lowering the tax rate on production, work, investment, and risk-taking will spur more of these activities and willoften produce more tax revenue rather than less. Since the Reagan tax cuts, the United States has created some 40 million new jobs—more than all of Europe and Japan combined.

7. Are lower tax rates responsi­ble for the big budget deficits of recent decades?

There is no correlation between tax rates and deficits in recent U.S. history. The spike in the federal deficit in the 1980s was caused by massive spending increases.

The Congressional Budget Office reports that, since the 2003 tax cuts, federal revenues have grown by $745 billion—the largest real increase in history over such a short time period. Individual and corporate income tax receipts have jumped by 30 percent in the two years since the tax cuts.

8. Do the rich pay more taxes because they are earning more of the income in America?

Yes. There’s no doubt that the share of total income earned by the wealthy has increased steadily over the past 25 years. Since 1980, the share of income earned by the richest 1 percent has more than doubled, from 9 percent to 19 percent. The share ofthe income going to the poorest income quintile has declined. Income disparities, in absolute dollars, have grown substantially.

What is significant is that for the top 5 percent and 10 percent of earners, the ratio of taxes paid compared with income earned has risen. For example, in 1980, the top 10 percent earned 32 percent of the income and paid 44 percent of thetaxes—a ratio of 1.4. In 2004, this group earned more of the income (44 percent) but paid a lot more of the taxes (68 percent)—a ratio of 1.6. In other words, progressivity—in terms of share of total taxes paid—has risen. On the other hand, for the top 1 percent of earners, progressivity has declined from a ratio of 2.2 in 1980 to 1.9 in 2004.

9. Have gains by the rich come at the expense of a declining living standard for the middle class?

No. If Bill Gates suddenly took his tens of billions of dollars and moved to France, income distribution in America would temporarily appear more equitable, even though no one would be better off. Median family income in America between 1980 and 2004 grew by 17 percent. The middle class (defined as those between the 40th and the 60th percentiles of income) isn’t falling behind or “disappearing.” It is getting richer. The lower income bound for the middle class has risen by about $12,000 (after inflation) since 1967. The upper income bound for the middle class is now roughly $68,000—some $23,000 higher than in 1967. Thus, a family in the 60th percentile has 50 percent more buying power than 30 years ago. To paraphrase John F. Kennedy, this has been a “rising tide” expansion, with most (though not all) boats lifted.

10. Does the tax distribu­tion look a lot different if we factor in other federal taxes, such as the payroll tax?

It’s true that the distribution of taxes is somewhat more equally divided when payroll taxes are accounted for—but the change is surprisingly small. Payroll taxes of 15 percent are charged on the first dollar of income earned by a worker, and most of the tax is capped at an income of just below $100,000. The Tax Policy Center, run by the Urban Institute and the Brookings Institution, recently studied payroll and income taxes paid by each income group. The richest 1 percent pay 27.5 percent of the combined burden, the top 20 percent pay 72 percent, and the bottom 20 percent pay just 0.4 percent. One reason that the disparity in tax shares is so large is that Americans in the bottom quintile who have jobs get reimbursed for some or all of their 15 percentpayroll tax through the earned-income tax credit (EITC), a fairly efficient poverty-abatement program.

11. How do tax rates in the United States compare with tax rates abroad?

Overall, taxes are between 10 percent and 20 percent lower in the United States than they are in most other industrial nations. This gives America a competitive edge in world markets. But America’s lead in low tax rates is shrinking. For example, the United States now has the second-highest corporate income tax in the developed world, after Japan. Our personal income tax rate is still low by historical standards. But in recent years many European and Pacific Rim nations have been slashing incometaxes—there are now ten Eastern European nations with flat-tax rates between 12 percent and 25 percent—while the political pressure in Washington, D.C., is to raise them.

12. Do tax cuts on investment income, such as George W. Bush’s reductions in tax rates on capital gains and dividends, pri­marily benefit wealthy stockowners?

The New York Times reported that America’s millionaires raked in 43 percent of the investment tax cut benefits in 2003. It’s true that lower tax rates have been a huge boon to shareholders—but mostof them are not rich. The latest polls show that 52 percent of Americans own stock and thus benefit directly from lower capital gains and dividend taxes. Reduced tax rates on dividends also triggered a huge jump in the number of companies paying out dividends. As the National Bureau of Economic Research put it, “The surge in regular dividendpayments after the 2003 reform is unprecedented in recent years.” Dividend income is up nearly 50 percent since the 2003 tax cut.

The same phenomenon occurred with the capital gains tax, which is essentially a voluntary tax because asset owners can avoid it by simply holding onto their stock, home, or business. This “lock-in” effect, as it is called, can be economically inefficient, since owners have a tax incentive to keep poor investments, rather than drawing out the cash and putting it into assets that are more productive. When the capital gains tax is cut, people unlock their assets and reinvest in other enterprises.

The 1997 tax reform, passed under President Clinton, reduced the capital gains tax rate from 28 percent to 20 percent, and taxable capital gains nearly doubled over the next three years. The 2003 reform brought the rate down to 15 percent, and between 2002 and 2005 there was a 154 percent increase in capital gains reported as income.

This explosion in realized gains cannot be explained only by the rise in the stock market, which averaged just 13 percent annually between 2003 and 2005. Capital gains tax receipts also far outpaced the revenues that the government’s static models predicted. Between 2003 and 2007, actual tax receipts exceeded expectations by $207 billion.

[Usui Takumi 1,562]

??? #######?

Tell me you aren't serious. Your blaming the poor and middle class for the decisions that the presidents and congress have made over the years? I didn't even know the middle class and poor had lobbyist, I'm sure if they did there would have been no draft during Vietnam.

I think he is referring to the sub-prime crash.

[luckytxn 2,265]

The Rich Pay More Taxes: Top 20 Percent Pay Record Share of Income Taxes

By Curtis Dubay<br style="border-top-width: 0px; border-right-width: 0px; border-bottom-width: 0px; border-left-width: 0px; border-style: initial; border-color: initial; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; ">May 4, 2009

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Since the passage of the 2001 and 2003 tax cuts, critics have claimed incessantly that they disproportionately benefited the rich while burdening the poor. Now that the data is in, these claims have been shown to be unquestionably false.

Squeezing the Wealthy Even More

According to a report issued by the Congressional Budget Office (CBO), the tax cuts significantly increased the share of federal income taxes paid by the highest-earning 20 percent of households compared to their levels in 2000, President Clinton's final year in office.

In 2006, the latest available year from CBO, the top 20 percent of income earners paid 86.3 percent of all federal income taxes, an all-time high.[1]This is an increase of over 6 percent from 2000, when the top 20 percent paid 81.2 percent. During the same period, the bottom four quintiles all saw their share of the federal income tax burden fall sharply:

• The bottom 20 percent of income earners' share of federal income taxes fell from -1.6 percent in 2000 to -2.8 percent in 2006;
• The next 20 percent's share declined from 1.1 percent to -0.8 percent;
• The middle quintile's share dropped from 5.7 percent to 4.4 percent; and
• The fourth quintile's share decreased from 13.5 percent to 12.9 percent.

Each of these four quintiles' shares was an all-time low.

2001 and 2003 Tax Cuts Removed Low-Income Earners from Roles

The 2001 and 2003 tax cuts removed millions of taxpayers from the federal income tax rolls, leaving only those at the top to pay the bill. They lowered every federal income tax rate and created a new 10 percent bracket to further reduce taxes for low-income earners.

While these tax rate cuts lowered taxes for all taxpayers, low-income earners got the biggest cut. In addition to these rate cuts, the 2001 and 2003 tax cuts expanded the refundable Child Tax Credit from $500 per child to $1,000 per child. The combination of lower tax rates and an expanded Child Tax Credit meant many low-income taxpayers no longer paid any federal income taxes.

Was Greater Income the Cause?

Critics counter that the increase in tax shares for high-earners was due to income increases at the top of the income spectrum. But a closer look at the data shows this just is not the case.

The top 20 percent of earners saw their share of pre-tax income rise from 54.8 percent to 55.7 percent, from 2000 to 2006. During that same period, their share of federal income taxes increased from 81.2 percent to 86.3 percent.

The modest increase in incomes is not large enough to explain the large increase in the share of income taxes paid by the top 20 percent. Rather, the removal of substantial numbers of low-income taxpayers from the federal income tax rolls is the real culprit.

Refundable Credits Redistribute Income

The bottom 40 percent of income earners actually paid a negative share of federal income taxes in 2006. In other words, these taxpayers are actually paid money through the tax code. This happens through refundable credits like the Child Tax Credit and the Earned Income Tax Credit, which result in "refunds" when they are greater than the taxpayer's total income tax liability.

For instance, if a family with one child has an income tax liability of $300, it can claim the Child Tax Credit, which wipes out their tax liability, and still receive $700 from the IRS for the remainder of the $1,000 credit. On April 15, not only do the bottom 40 percent of all taxpayers pay no taxes, but they actually receive additional income from the IRS.

Refundable credits redistribute income from the top 20 percent of earners to the remaining tax filers, with the bottom 20 percent the prime beneficiaries. The bottom quintile's share of income, measured after taxes, actually increased a whopping 17 percent compared to its pre-tax levels because of the income they got from refundable credits. Comparing shares of income before taxes are paid to after, only the top quintile saw their share of income decline.

Obama's Tax Policies Widen the Gap

President Obama's tax policies would cause federal income taxes paid by the top 20 percent to increase and the shares of the remaining 80 percent to decrease even further. These policies include those passed as part of the stimulus legislation and those included in the President's Budget Blueprint.

The stimulus created the Making Work Pay Credit[2] and expanded the Child Tax Credit and Earned Income Tax Credit. These refundable credits will knock even more taxpayers from the federal income tax rolls and send more money to low-income taxpayers.[3] With fewer low- and middle-income taxpayers paying federal income taxes, the burden will shift even further in the direction of top earners.

President Obama also proposed in his Budget Blueprint to increase income taxes on those making over $250,000 by increasing their tax rates on investment income and reducing the amount they could deduct.[4] This would dramatically increase the share of taxes paid by the top 20 percent while the remaining 80 percent of earners would not pay higher taxes as a result of these proposed tax hikes.

Stop Shifting Burden to Top 20 Percent

To stop the shifting of the tax burden to a dwindling number of taxpayers, Congress should:

• Make the 2001 and 2003 tax cuts permanent for all taxpayers, not just those making under $250,000. This would slow the shifting of the burden to the top 20 percent.
• Stop creating and expanding refundable credits. Welfare spending and subsidies to low-income earners should be done through traditional spending programs, not hidden in the tax code. This would stop a growing portion of the population from being removed from the tax rolls.
• Cut top tax rates to return the shares of income taxes paid by each quintile to their more-sustainable 2000 levels.

On Dangerous Ground

The shifting of the tax burden to a small segment of high-income taxpayers is economically dangerous. The beneficiaries of government services are increasingly those who share little or none of the tax burden to pay for them. As they become more numerous, they put more pressure on Congress for more services. Meanwhile, those who bear most of the burden are being squeezed even more, shrinking their number. The result is a growing group of government beneficiaries clamoring for more of a shrinking group's wealth. Congress should put an end to this practice.

Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

[luckytxn 2,265]

Do the rich pay very little tax? Wouldn't a flat tax be fairer?

January 26, 1996Dear Cecil:

We ran across the enclosed item in Marilyn Vos Savant's column in Parade magazine and were astounded by her reply. Our first thought was, we should ask Cecil the same question. However, we're equally interested in your response to her answer.

— Claire and Harold, San Rafael, California

Cecil replies:

Here's the question from Marilyn's column:

Q: Is it true that the rich pay very little tax?

A: No, and this is the myth, more than any other, that has created the unwarranted and destructive dissension among the so-called economic classes in this country. The wealthy pay a truly stunning amount of tax, and there are virtually no exceptions. Anyone who thinks otherwise has been misguided.

Regarding Marilyn's answer, I'll just say that when you make sweeping claims like this you might want to back them up with a little detail. She's not wrong, though. As a general proposition, the wealthiest Americans do pay the bulk of the individual income taxes collected in the U.S. That's a point worth making, since the belief that the rich pay zip while the little guy gets slugged is the impetus behind the "flat tax" proposal, the stupidest idea to come down the pike since pet rocks.

Here are the numbers for 1992 from the Statistical Abstract of the United States: The top 7 percent of those filing returns, those reporting adjusted gross income of $75,000 or more, paid 51 percent of total U.S. income taxes. People making $75,001, a group that includes many households in which both spouses work, may object that they don't feel particularly rich. They should talk to a single mom who's mopping floors. But let's work our way up the income scale: The top 3 percent of filers, those making $100,000-plus, paid 40 percent of the taxes. The top four-fifths of 1 percent of filers, who make $200,000 or more, paid 26 percent of the taxes. The top one-twentieth of 1 percent of filers, those making $1 million or more--and Tom Wolfe's little demonstration in Bonfire of the Vanities notwithstanding, nobody's going to tell me those guys aren't rich--paid 10 percent of the taxes. That's a mere 67,000 households, who on average paid income tax of $707,000 apiece.

OK, but what about Marilyn's second point, namely that the rich pay big with "virtually no exceptions"? In their entertaining 1994 book, America: Who Really Pays the Taxes?, investigative reporters Donald Barlett and James Steele note that the number of filers reporting incomes of $200,000-plus who paid no tax, presumably through outrageous but legal tax dodges, has risen steadily, from 155 in 1966 to 1,081 in 1989, despite numerous attempts to plug the loopholes. That sounds pretty bad, but let's put it in perspective: the number of people making $200,000-plus shot up dramatically during the same time, from 13,000 in 1966 to 787,000 in 1989. The proportion of rich tax dodgers has dwindled from 1 percent of the $200,000-plus class to one-tenth of 1 percent in recent years.

The purpose of this exercise is not to make you feel sorry for the poor rich people. Quite the contrary. Barlett and Steele make the point that most efforts at tax "reform" are really attempts to reduce the tax burden on the wealthy. The most blatant recent example of this was the tax act of 1986. Between 1986 and 1987 the effective tax rate on millionaires fell from 40 percent to 29 percent, and as a result they paid $3.6 billion less in tax. Meanwhile people making from $50,000 to $75,000, a reasonably prosperous but hardly rich crowd, paid $7.6 billion more. Some reform.

The flat-tax scam is more of the same. Nobody's sure what the actual flat-tax rate would be, but let's suppose it was 20 percent. Based on the 1992 returns, if this inane proposal were implemented, taxes on everybody making $200,000-plus will go down and those on everybody else will go up. Malcolm Forbes Jr., one of the richest men in America, was the leading backer of the flat tax during the 1996 presidential campaign. Now do you see why?

FLAT LINERS FOR THE FLAT TAX

Dear Cecil:

Re your column on taxes, I was curious about some of your conclusions. You say "people making $50,000 to $75,000 . . . paid $7.6 billion more" [after the 1986 tax reform]. What was the average increase per person? Or was there an increase in the number of people in this bracket, which would have increased the total collected? How much was the tax increase on these people as a percentage of income? You don't say.

In your conclusion you start with a supposition of a flat 20 percent rate (higher than any I've heard proposed) without any mention of the automatic exemption of the first $20,000 to $30,000, which would result in the poor paying no tax at all. I assume this was a lapse and not an act of deliberate mendacity.

Yes, Forbes wants his taxes to go down. I want mine to go down too. Under every flat tax proposal I've heard (except yours), mine would go down dramatically. Doesn't mean I'm going to vote for Forbes, but right now I find him more honest than you.

Can you explain why we should have a graduated tax system in the first place? Is it to make sure that everybody ends up with the same amount, regardless of effort? Isn't that called socialism?

Following this logic, shouldn't rich people also pay more for everything else? Why not a sliding scale for bus fare, Big Macs, movie tickets, etc.? After all, the rich can afford more.

Why do we need an income tax in the first place? Why don't you consider the merits of the "Liberty Amendment," which would abolish the IRS? --Jim MacQuarrie, via the Internet

Cecil replies:

Way to go, Jim, defend the rights of the rich! Shows you what a great country we've got here. Also shows you that whereas left-wingers are jerks, right-wingers are nuts. To be fair, though, the flat tax is like a date with Julio Iglesias. It takes you a while to realize you've been screwed.

Let me explain. Following the 1986 tax reform, the average income tax paid by somebody in the $50,000-$75,000 bracket indeed went down, and I mean way down--$1,100. The total tax take for that bracket went up $7.6 billion because there were many more taxpayers in that range in 1987.

Ha, you say, Cecil was using statistics to lie! Uh-uh. Fact is, taxes for virtually all tax brackets went down. Yet the total tax collected went up. How was this miracle accomplished? By eliminating many popular tax deductions. This forced millions of Americans into higher brackets, so they paid more tax. Example: elimination of the IRA deduction. If you and your spouse (a) both worked, (b) made a total of more than $50,000, and © had previously both taken the maximum IRA deduction, in 1987 your taxable income increased $4,000 even if your real income stayed the same. Assuming two kids, $53,000 in joint income, and $9,000 in deductions in both '86 and '87, your taxes went up $862.

Taxes went up for most affluent Americans. In 1987 they reported an additional $300 billion in income, of which maybe two-thirds stemmed from closed loopholes. As a result, people making from $50,000 to $1 million paid an extra $24 billion in tax. OK, nobody's bleeding for a $500,000-a-year lawyer. But look who paid less tax: those making under $50K (average tax cut: $5 to $867) and those making $1 million and up (average cut: $214,000). Like I say, some reform. Other points:

(1) Forbes claims his flat tax rate will be 17 percent. Most knowledgeable observers say if that happens the government will go broke. The real flat tax rate will have to be at least 20 percent. The working poor will get screwed because they will lose the earned-income credit, which lets them collect a tax "refund" greater than the amount of taxes withheld. You don't have to be a genius to figure out that if taxes for the Forbes crowd go down, they have to go up for somebody else.

(2) The income tax is progressive for several reasons, the cynical one being that there are a lot more poor voters than rich ones. The practical reason is that a progressive income tax overcomes the regressivity of the sales tax, which falls most heavily on the poor, and the property tax, which falls most heavily on the middle class. Some analysts say total taxes as a percentage of income are about the same for all income levels.

(3) No income tax at all? Fine. When the guys in the military come looking for their pay, we'll tell them to see you.

— Cecil Adams

[mawilson 2,133]

Very good. The poor and the middle class got us into this mess, they should bear most of the burden.

??? #######?

Tell me you aren't serious. Your blaming the poor and middle class for the decisions that the presidents and congress have made over the years? I didn't even know the middle class and poor had lobbyist, I'm sure if they did there would have been no draft during Vietnam.

Of course it's the poor and middle class. Who do you think are the beneficiaries of Social Security, Medicare and Medicaid? Millionaires and billionaires?

[웃 910]

The Rich Pay More Taxes: Top 20 Percent Pay Record Share of Income Taxes

I feel terrible for them. I am just glad that people with $1 million dollar annual incomes and higher are averaging $129,000 savings on their taxes

[Ban Hammer 13,491]

i bet those with million dollar annual incomes didn't get there by spending a considerable amount of time whinging on about tax rates for the rich.