Federal Income Tax Distribution
- The bottom 40% of income earners in the US collectively pay negative 3.8% of our overall tax burden?
- The middle 20% of income earners in the US collectively pay only 4.4% of our overall tax burden?
- The top 40% of income earners in the US collectively pay 99.4% of our overall tax burden?
Everyone has their own opinions on who should finance government spending, but what I find intriguing is that essentially 60% of the voting population pays collectively no taxes. The majority of Americans (60%) then have little incentive to challenge government spending and in fact it is in their best interest to promote it because it offers them new goods and services at little additional cost to them. Perhaps this is why our government is so bloated and our country is trillions of dollars in debt.
US Government spending has risen consistently as a percentage of GDP (and GDP per capita has risen) over the last century. Will this ever stop (surely the latest stimulus package isn’t helping us buck the trend). The general population needs to have more of an incentive to control government spending. I bet if we were to employ a flat tax, or perhaps one that required a larger percentage of the population to participate, instead of our current progressive system, we would see the lines in the government spending graph move in a different direction.
*Note
Sure the initial numbers I presented are a bit deceiving, because the average American is not concerned about how much their social class collectively contributes, but is much more concerned with what their individual effective tax rate is. I get this. However, I still struggle to find fairness in having half the population fund the party for the whole. What is your opinion?
Yeah, but tell that to the guy in Fort Myers who wants unemployment to match his old paycheck dollar for dollar to pay all of his bills. He probably would not agree.
Of the bottom 40% of income earners, over half of those are considered to be “working poor”. They are unable to pay for the basic necessities of life. As bad as I feel for those who are over-taxed, I recognize that the reason these bottom 40% do not pay taxes is because most cannot afford to eat or provide shelter for themselves or their family.
If you really are concerned about addressing the inequities of taxation, you should focus on the ever-increasing inequity of wages, for they are inexorably linked.
You should refer to this chart, that shows income distribution over the past 40 or so years. http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1967-2003.svg
You may want to note that progressive taxation schemes are one of the few means that a government has to combat increasing inequities in income distribution, which is widely considered to be hugely consequential to a variety of quality of life indicators, such as health, crime and security, and even the risk of civil unrest.
My favorite line, though, is this one: “The majority of Americans (60%) then have little incentive to challenge government spending and in fact it is in their best interest to promote it because it offers them new goods and services at little additional cost to them.”
You seem to think people have an incentive to be impoverished. I personally think the issue is quite the opposite: The rich have an incentive to keep the poor impoverished, (to a point). The thing is, not only do they have the incentive, they also have the means… Quite the contrary position from those on the other end of the spectrum; you know, the ones that can’t even afford to eat, let alone lobby for tax reform.
Thanks for publishing this page, Brad. Im late, but perhaps my comments will matter. Im HAPPY that sideburnz gave his observations. We NEED people to talk honestly and rationaly about this issue.
Quite frankly, President Obama isnt representing ALL of America fairly. Hes inciting the American people to riot by pitting those who ARE hurting right now (largely because of GOVERNMENT) against those who want to help provide jobs (in spite of government interference). Im sorry, this is WRONG. When I look at these repeated blatent attempts to incite class warfare, I cant help but look back at the way the Nazis turned the Germans fears and anger against the Jews. That didnt turn out too well. Yeah, its a pretty brutal example, but Obama IS doing a pretty brutal thing. And people are ACCEPTING it. Scary.
My own experiences: I was about to become one of those “rich” folks. According to the latest numbers I could find the top 5% of the country (the “rich”) includes people making over $154,000. Um, thats not rich, not even close. Move to California (not that I ever would) and try to live on that. You know how much my small business was projected to make? $280k. I’ve decided to hold off for now. Be honest, can you blame me? I’m made $30k in 07. I’m down to about $19k now (not due to economy, caring for family member). I figure that I will end up employing 2 people. Not very many people, but It would be *stable* employment. 3 less people on welfare (including me) The plan is (was?) to keep about $20k for myself and reinvest the remainder back in. I drive a 97 Sidekick – not a Mercedes. I live in my wifes Grandmothers basement, not a mansion. What Obama is doing is affecting me. Ive recently heard an estimate that 80-90% of this country is made up of smaller businesses (most employ LOTS more ppl than me). Ouch, this is gonna hurt.
sideburnz said: “You seem to think people have an incentive to be impoverished… The rich have an incentive to keep the poor impoverished
(to a point).”
Sorry Side, but I disagree. Heres why:
1) Its not that the people have an incentive to stay impoverished, its more like the people dont have an incentive to find a way out of being impoverished. And even if they try, have you seen how hard the govt makes it to work for yourself? Dont even get me started on the paperwork and tax forms. No wonder they *wait* for jobs that never come. I have no incentive to create them. They have no incentive to strike out on their own. The govt punishes them if they show initiative. I should note that “working for yourself” can be as simple as delivering groceries to elderly neighbors in exchange for cash. How hard is that?
2) Im sorry, but you’re so wrong about this one too: The rich have all of the incentive in the world to keep the poor afloat. The more people that have cash to spend, the more the economy thrives, the more business thrives, the more people that have cash to spend, the more economy thrives, …. etc Forget Reaganomics or Trickle Down theory. Its more like circle-of-life. Besides, poor people are EXPENSIVE. Who do you think pays for all of that free food and shelter? Well, the “rich” do, which is
the point to be taken from the article. Not ALL see that – but MOST small business ppl are smart.
I’m a fairtax.org guy. I really do care about the poor and hate to see how Obama is gaining support by using the poor and middle class as cannon fodder. The only think that he’ll end up achieving is financial collapse, and then the eventual rise of socialist (or even comunistic) government. Then we ALL lose. Why do I like the fairtax? The IRS is abusive. IRS goes away.
Freedom is good. Everybody SEES how much their govt costs. The poor ARE protected under fairtax. Less chance for govt to waste OUR tax dollars.
Our current financial crisis is like a Chinese Finger Puzzle. The harder we struggle (ie. harder we tax ppl) the harder it is to get out — until finally we pull so hard the puzzle breaks. Broken puzzle=fried economy. Govt got us into this mess. More will just make it worse. Massively more govt? Well pay the price in blood.
Ed
http://www.fivefiftyfive.com
When I watched President Obama’s speech on Tuesday, I listened to him describe a plan of action. One that focuses on much-needed investments in America. When we liberals talk about reforming healthcare, it is because those costs are growing faster than inflation. Left unreformed for years, it has crippled small businesses and made otherwise responsible corporations cautious about the prospect of new hires. It is common knowledge that the way to fix this is to invest in a system that keeps people out of the emergency room, and into the kind of primary and preventive care that all people should have access to before they need to take an ambulance ride. Yes, it costs more up front, but it pays out in the end and this is exactly the kind of issue that only a government can address adequately.
I sympathize with your current situation, medical bills are rediculou these days. But I cannot believe you that you’d rather be making 19k than 280k, or that you do so because of a president’s policies which have not yet even been enacted. If anything, put the blame where it rightly belongs: at the feet of the people who have ruined our credit markets, the people who’ve never regulated credit default swaps, who deregulated the commodities markets and put them in the hands of pirates, hiding inside a black box and gambling with the lifeblood of our economy. They have a name: Republicans.
I believe the path out of this mess is a simple one. It all goes back to investing in the very long term. When we talk about education investments, when we talk about healthcare reform, we are looking to the future with the dream that our sacrifices today, our budget deficits this year and our repeals of Bush-era tax cuts will yield dividends in the future: an educated and healthy workforce is one that innovates, that creates small businesses like you dream about, and that is how to show people like you and me the money!
I’m not privy to the cost of starting a new business, but in all my conversations with small business owners, I’ve never once heard anyone contradict this simple American maxim: if your idea is good enough, you won’t have to fund it yourself. That is, until this year with this situation, which was entirely created by those with a deregulatory mentality. I have to say, you have an incentive, actually, you have about 261,000 incentives denominated in dollars, by your own estimates. If that’s not an incentive, then brother, I don’t know what is and maybe I never will.
On your comments about fascism, I have to say, you’re no student of history and that kind of talk is unhelpful. The Nazi party was funded in whole by the industrial and business elite in Germany. It pandered to those interests with vast military expenditures, including wars of choice, and repression of workers rights, and supression of opposition. Name me a recent president that has followed that kind of tack and don’t forget the party affiliation. You’ll find a (R) at the end of his name. Nothing, whatsover, can link that historical tragedy with our president today.
As to FairTax, that’s an interesting plan. However, the idea of a regressive tax system may be “fair” but life isn’t fair, especially in America. In effect, it is a regressive tax plan that would most benefit those whose consumption falls as proportion of their income. I’m really not one to lose sleep over the rich being taxed disproportionately, as they’ve benefited disproportionately from the stability and security our country offers them. If you’re making 19k a year, then I’d imagine you aren’t going to save diddily, which means you’ll be taxed in full as you spend every dollar you’ve earned. How would that be a path to riches for you or I? I’d suggest taking the rose-colored glasses off and stop representing the interests of people other than yourself.
Joe
First off: I went back and read what I said. Pretty STUPID. I asked for a
rational discussion and then I go off and offered a link between Obama and the Nazi/Jews. SideBurnz is right, unhelpful to say the least. I should have found a less offensive and more tactful analogy. No excuses, I was out of line. Period. I apologize.
Obama IS going for all out class warfare. It WILL hurt us all. As for Rep vs Dem, I dont care. GOVERNMENT and by extension professional politicians (actors?) are dangerous to our health. Lets learn from past leaders mistakes. I cringe when I see Obama repeating and magnifying PAINFUL past mistakes. I lean towards Libertarian *principles* with some nods back to Rep *principles*
but I have yet to find a leader that I agree with totally or that will hold to those principles. Therein lies the problem with relying on government, ALL politicians are human and thus are easily corruptible. Besides, how can they comprimise on such polar opposites? Socialist vs Capitalist Comprimises breeds ineffectiveness.
Minimalizing govt is the only solution that Ive heard over the years that can combat this. Stick with capitalism, the founding fathers knew their stuff. No, we havent had an abundance of capitalism in the past 8+ years. Massive govt regulation and taxes are the root of all of this. Sure, we cant survive on JUST 20 laws – but were so far overboard now…
YES, I voted for Bush. I’ll spend an hour talking about why it was a good dea. I’ll then spend another hour talking about why it WASNT a good idea. No, hes not the devil nor the cause of all of our problems. LOTS of blame to spread around. Yes,he gets an impressive share. Honesty is rarely easy, I wont take the easy way out and blame ONLY Bush. Some want me to believe that Bush was the ONLY person introducing and passing legislation during that last 8 years and that also that everything that happened BEFORE those 8 years had no bearing at all on our current situation. Then, some correct me and tell me the Repubs were the REAL problem. Hmm. I saw a lot of (D) letters in our govt roster in the
last 8+ years. I’m thinking that the origins of this “crisis” isnt so clear cut as some would have me think.
Healthcare is a massively complex issue. Our healthcare system is BROKEN. NO ARGUMENT THERE. Preventing illness/injury is obvious. WHO is to do it and how? I have spoken to a number of healthcare ppl, all of whom are VERY leary of MORE govt in healthcare. Mind you, they’re desperate for help. But most go on and on about laws passed with little thought of horrendous side effects that they create, which drive
up costs. Believe it or not, I suspect that SideB COULD be right. In THEORY govt could address it adequately – but
our govt isnt exactly known for showing restraint. Obama is proving that. Partisan politics are WORSE now. How long until abuses of power are used to DENY health care to individuals on a scale EVEN WORSE than our current system? Abuse examples exist in every govt agency out there already. As for abuse of power, Obama promised
transparency but the “stimulus” bill contains alarming health care provisions. He publicly mis-represents FUNDAMENTAL CHANGES to our healthcare
system as “upgrades and streamlining of the system”. WOW. Giving power to the government to decide what kind of treatment that Im *allowed to receive* (even if I pay CASH) is hardly a LAW our GOVT should have passed on a whim.
Surely pushing such a thing through congress in such a dishonest manner and misrepresenting it isnt the ‘plan of action’ that you had in mind? Was it? Shouldnt it be there for the PEOPLE to decide on? At least a seperate bill?
The silence of the main stream media on this is DISTURBING. Of course, Obama isnt alone. A majority in congress voted for this with NO chance of comprehending what they were signing.
Are there bad bus’s out there? YES. Are there bad poor ppl out there? YES. I WILL go back to $30k, but why go further? No, I wont have 250,000
incentives. More like 250000 – TAXES. Furthermore, the govt doesnt care
how many years it took me to get to the point where I can bring in that kind of money. I dont get to divide my taxable profit by the number of years it takes me to get to that point. Many businesses arent just about getting some investor to throw money at it. It requires TIME (in my case, lots of it) to get there. Whats at the end of my journey? 50% of MY profits? 40% ? 30% ? How much is “good enough?” Why would I
spend all the time, just to wait for the next suprise Obama springs on me? Businesses need stability. Obama panders to the crowd and gives away other peoples lives, work, and health. How is that in any way showing stability? No thanks, I’ll stay
at my “safe” $30k. It sucks, but the risk is too high now. Im NOT alone here.
Difference is that Im not established yet. Others are and walk a fine line between profitable and too-much-hassle for the owner. Businesses have been under attack for a long time now. Not a new thing, its just about to be magnified GREATLY.
As for investing in our future, is it for Obama or the government to decide? “We” arent investing, only a small percentage of us are. Its always easy to spend other peoples money. It isnt “our sacrifices” when such a small portion of the population is/was doing the sacrificing. I heard an interesting claim on the radio the other day re: the Bush Tax Cuts: those who earned and provided got the refund – it was their money to begin with. I plan on looking into that.
Take less of OUR money away and we’ll be better able to afford education *on our own* When I went to college, I had to pay back those loans, so I made every penny count. On the contrary, MANY (not ALL) of those given a free ride didnt seem concerned (goofing off and disrupting classes, etc). Lots of those folks graduated, but the *quality* of their education was pretty
dismal, it was REALLY obvious. I tutored, I saw it firsthand. I see no problem with the govt giving *loans*.
BUT, as with any loan, there are always strings attached – as it should be. Education should be results based, a minimal GPA (or some equivalent) should be required. The requirement should get more stringent over time. I’ll agree that more education loans are a good idea, but not for the sake of flooding our colleges with unmotivated students. There is a fine line here. I know plenty of people that wasted their money on a college education because their parents insisted. Its not for everybody. Theres NOTHING WRONG with that.
Fairtax: Net is full of people describing it very well. Poor benefit WELL beyond what our current farce of a system does. Its not that the fairtax is so great. Its that our current is SO BAD. Seriously. Try the fairtax book. Maybe you wont agree with fairtax. Youll get an insight as to why and how our *current* tax system ABUSES EVERYBODY. Problem is those that get hurt the most dont even see it. Excessive and concealed taxes damage
poor the most. Obama even agrees with this: he wants to reduce payroll taxes
affecting the poor. Of course, repealing payroll taxes without compensating in other ways just pushes it back to, you guessed it, the “rich.”
“I’m really not one to lose sleep over the rich being taxed disproportionately, as they’ve benefited disproportionately from the stability and security our country
offers them.“
Others benefit disproportionately from the stability and security of this country because of the “rich” contributions to our economy. BOTH of our statements are misleading. Circle of life. Rich need workers. Workers need rich. Whos more important?
Neither.
“If you’re making 19k a year, then I’d imagine you aren’t going to save diddily, which means you’ll be taxed in full as you spend every dollar you’ve earned.“
I encourage you to read about the fairtax. You statement is COMPLETELY false, for MULTIPLE reasons. You only have PART of the picture about what the fairtax is about. It benefits everybody. Poor, rich, midclass, Dem, Repub, Libert, even Enviro.
“I’d suggest taking the rose-colored glasses off and stop representing the interests of people other than yourself.“
SO many people are ONLY thinking about their own interests. *gasp* a conservative said that. Everybody matters. Circle-of-life: The Lion King, Its hilarious that a *cartoon* can demonstrate such a profound and deeply relevant concept. Poor, Midclass, Rich. All are related. Hurt one, hurt everybody. It has been, is currently, and WILL keep happening until we change this. I sound like a hippie. Well, truth is truth, I suppose.
I’m looking through a variety of information researching tax data and trying to understand clearly when/which is directly comparable and which is not.
I believe it is true, but would like to confirm tat the information you cite is Federal Income tax only – and does not included social security contributions.
Could you please confirm?
Kind thanks,
DH