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| Friday, May 24, 2013 |
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I’m not. Government revenue is raised through higher taxes. That’s about the all of it. I don’t know why you are confused. The government is not a business. |
and frankly, there are businesses that have raised revenue not from “selling” something, but for creating fees, such as banks. Most of their income doesn’t come from selling a product, but from actually taking away from their own customers. How very nice of them. |
Dan – I take issue with calling it revenue – it is not revenue, it is a taxation pure and simple. If the government were a business, then they could generate revenue. Fees are imposed on top of a service you are getting – for example, banks are providing a product (e.g., bank account) and if you want something else or break the rules, you get to pay a fee. |
Dan, selling a product (a sandwich) or a service (banking), doesn’t matter, as long as it’s done voluntarily, both parties benefit. Win-win. In other words, it is very nice of them. (Not saying banks don’t have their state-created privileges, but you get my point.) On topic, yes, calling it revenue is silly. A more accurate term would be “loot”. |
Google “define revenue.” And what does IRS stand for? Internal Revenue Service. Seems pretty straight forward to me. |
it is pretty straight forward, unless you fall for a certain Narrative that wishes to alter history to fit an ideology. |
I thought to save money by doing our own taxes the last few years (because the accountants had made mistakes the prior two years that I’d caught before submitting our return), but left out a step. So, in the last few months, we’ve had to pay almost $2000 more than we’ve paid for 2009 and 2010. We paid more than 10% of our income each year and we don’t make a ton of money. I’ve griped about this to high heaven, but I say we should just write a check to a freeloader who didn’t work, didn’t pay taxes and was given the amount we were billed as a “refund” or whatever they call it. Something is very rotten in Denmark. And maybe deciding to call taxes “revenue” is part of it. Dan, I don’t care which party is part of this—I know you’re going to make this about Republicans. To me, it’s about crazy government. |
Blame it on Lincoln: http://en.wikipedia.org/wiki/Revenue_Act_of_1862. “Tax” has become a dirty word to many people. “Revenue” doesn’t sound quite as bad–and, historically and currently, it means essentially the same thing. Narrowing the meaning of the word “revenue” might be good propaganda, but it’s not good English. |
Arlene,
“crazy government” has nothing to do with whether a tax is called a revenue or not. But if Republicans/conservatives wish to attempt to alter history and redefine words, then someone has to hit back against such lunacy.
Huh? Have you ever been to Denmark? Even so, I’m not sure what Denmark has to do with anything here. |
Tim, Nice pull there with Abraham Lincoln, that old time Republican. Fascinating that he and the Republicans of then actually raised taxes to pay for their wars. Tells you how far from the mothership today’s Republicans have gone. They spit in the face of Abraham Lincoln. |
Well in theory it could be revenue not all tax hikes are alike it depends on what side of the Laffer curve you are on but given the state of the economy I suspect you’re right. http://en.wikipedia.org/wiki/Laffer_curve |
heh, the Laughter Curve more like. Hey Howard, why didn’t the Bush Tax Cuts increase government “revenue”…oh sorry, government taxes… |
Dan I’m not arguing the politics of it revenue for government means the increase in assets that do not increase liability. |
Why Laughter Curve Dan? Clearly government income due to taxes is zero at both 0% & 100% tax rates now fill in the resulting curve. What else could it be? |
The phrase “raising revenue” is from the US Constitution, where it does seem to refer to taxation. I would assume that’s the source of the term. |
“All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” Article One, Section 7. |
16 – Tim, good job shutting down the (presumable) constitutionalist(s) using the constitution. I think the OP has a point about the euphemism. There’s a reason we don’t want to call it a tax. And really, this is just a piddly litte debate anyway. It’s not as if anything is going to happen out of the revenue or tax taxonomy discussion is going to merit anything substantitive. It’s just a fun attempt to engage at rhetorical banter. But to make it more serious, perhaps the strict constructionalist will also suggest that this is just proof the founders wanted revenue to be raised by the House and Senate passing bills to provide goods and services for which the American people would be willing to pay. You want a road? Pay a fee. And that generates revenue. I also have it on good authority the people who just fought a revolution didn’t like taxes, so perhaps even then the politicans were looking for other nice words to use in its place! |
Silly posturing. First — what everyone else said: “revenue” is exactly the correct term. Second — your post implies that there is absolutely NO exchange of services when the government taxes us. If “revenue” could only refer to a process by which funds are raised through the exchange of goods or services for money, it would STILL be exactly correct. The average American tax-payer gets a LOT for their taxes. And not only do we get a lot, we’re paying less in taxes than our parents did — and getting a lot more in the way of goods and services. Of course, that’s why we’re experiencing near-crippling debt — because ideologues don’t want to pay for what they’re getting. Some, in some desperate attempt to cut the size of government without ever having to have the hard discussions about spending priorities; others because they want to cripple their gov’t, to ( as they’ve said themselves ) make gov’t small enough to drown in the bathtub. |
Howard,
It’s a laugh because it assumes that if taxes are 100% no one will have an incentive to work. That depends, of course, on what the worker receives back from that 100%. Just saying. The assumption is bad. Obviously 0% taxes equal 0% revenue. However, 100% taxes do actually bring in revenue. It’s a laugh also because taxes were ultra high after World War II (that generation actually felt responsible and actually paid their bills. But then again, that generation was not yet influenced by Ayn Rand’s selfishness), which produced enough revenue for the government to provide the services for the poor while also massively expanding our infrastructure (the freeway was built in the 1950s), AND paying off our war debts. Not only that, but during that very time of high taxation (and high government revenue), the economy was amazingly strong, the best it has ever been in American history. So yes, the Laffer Curve is pure ideological bunk and not worth except to wipe my butt of with it. |
Dan the curve is pure logic properly applied it is helpful in theoretically understanding a given economic situation when used incrementally not absolutely. Clearly the zero income at 100% taxation point on the curve does not assume a significant amount of socialistic contribution to workers needs as you suggest. I think what you have been laughing at is the political misuse of this concept in an attempt to justify unsound practice. |
My comment disappeared please retrieve it. |
Silus, I don’t want to debate with you regarding the OP, but I do want to suggest that if you believe the metric for what we get in return for our taxes is important in considering their merit, you should also consider that what we are getting has been diminishing since the 60s. If you see the chart here: Debt would seem to be a great deal, and most economists say it’s very good in a recession because it allows us to spend more now, and pay later. It’s a basic principle of finances that money now, is better than money later. So it’s a good deal for us to get the benefit of a dollar of borrowed money that we are not taxed for now (except extremely low rates of interest to pay for it). Except, that dollar we are borrowing now (and by extrapolation, in addition to the dollars we are also taxing) is giving us increasingly less and less return. In that sense, we are getting less than ever for all of our spending, so we should be concerned. Because at some point, that dollar that we borrowed with interest, which generated an additional 10-cents in GDP will have to be paid for. And we won’t be paying back a dollar, but depending on whether its short or long term debt, it will be anywhere from $1.05 to $1.30 (approx). So we have to ask ourselves the question is 10 cents now worth 1.05 to 1.3 in the future. Of course, other factors come into play like inflation, which reduces the value of our debt, but we keep borrowing continously as well which yields less return as we spend and increases our future liability considerably. In either case, we can bicker over the numbers, but the outlook really is not good. |
Chris, I’m not just using it to shut down those who worship the Constitution (and to be fair, you should be giving credit to Left Field, who pointed it out in the first place–I just tracked down the specific language). Definitions of revenue, the “Revenues” in IRS, the use of “raising Revenue” in the Constitution, etc. all show how common that particular definition of revenue is. I’ve noticed other incidents lately where people have tried to restrict a word to a definition much narrower than what the word actually means for political ends. It’s quickly becoming a pet peeve of mine. |
Revenue is the more appropriate word in this case as it is all-encompassing. Governments have all kinds of revenue generating mechanisms including fees, fines, tarrifs and seigniorage. The Federal Government used to generate most of its revenue from the sale of federal lands. Where I live in Arizona the state legislature started lease back of government buildings to temporarily generate revenues. I wouldn’t consider any of the above revenue generating mechanisms taxes. I personally want policy makers to consider all their revenue generating options rather than just taxation – don’t you? |
Silas lives! (and is spot on) |
Thanks, Marta! :) I do live … I just don’t comment much. Chris … great resource, thanks! |
Since this is a Mormon blog, let’s look at a Mormon example. Sister Smith paid $1,000 of fast offerings in 2010. She is in the 15% tax bracket, so her taxes went down by $150 for a net cost to her of $850. Now say there were no charitable contributions deduction, but the government made direct payments to churches. Sister Smith would contribute in a way that incurs the same net cost ($850), and the government would write a check to the Church for $150. Everybody (sister Smith, the church, and the government) ends up with exactly the same amounts either way. So how should one characterize the repeal of the charitable contributions deduction when it is not replaced by direct government support? It looks like a tax increase, but is it really? If the program had been structured as direct government support for churches, its repeal would look like a spending cut. And the results of the two policy changes are exactly the same! Most economists consider the charitable contributions deduction an example of a “tax expenditure;” that is, government spending done through the tax code. So I think it entirely legitimate to characterize the reduction of a tax expenditure to be a spending cut (just as the reduction in a direct expenditure would be) rather than a tax increase. But it does increase revenues–hence the need for the terminology. |
Yawn. Who cares what they call it? The citizenry won’t dare let the gummint cut what needs to be cut, so the citizenry needs to pay more for it. “Revenue” is just another example of linguistic brilliance, like “death tax”. |
How could the name of something affect how much you pay? As I’ve said before, if you are paying more income tax under Obama with the same amount of income then either you’re doing it wrong or you weren’t paying enough previously. It has nothing to do with freeloaders and it has nothing to do with what politicians call it. |
17. chris – right on – I really despise the euphemism. It is not done to try to mimic Lincoln – it is done because the politicians think that if they “sell” it as revenue we will be less bothered than if they called it what it is – raising taxes. Massachussets did this a few years ago with a series of ads around “raise the revenue”. There were some polls done that showed that voters were more likely to vote for a “raise the revenue” pitch vs “raise taxes”… 18. Silus Grok – “Silly posturing.” That is what I am saying – the politicians are doing some silly posturing thinking that the voters are stupid… I imply there is some exchange of services for our tax, however, I would also argue that the more one pays, often the less one receives. I don’t pay Apple $10K so they can give an iPOD to 10 other people and I get a single $5 gift certificate to iTUNES. That is how I see it in regards to the Government… |
27. queuno – linguistic brilliance – I love it… |
I think that those that use the phrase “raising revenue” are simply trying to find a softer more gentle way to say “raise taxes” |
If the Republicans didn’t hate Our Inspired Constitution so much, they’d use the constitutional language, just like the Dems. But, seriously. I don’t get it. Revenue is governmental income. If you’re talking about generating income for the government, then “raising revenue” is the correct and perfectly clear way to refer to it. “Raising revenue” is a euphemism for “imposing a tax” the same way that “earning income” is a euphemism for “bringing in a paycheck.” “Calling something what it is isn’t a euphemism. |
Left Field – Euphemism – A mild or indirect word or expression for one too harsh or blunt when referring to something unpleasant or embarrassing… This qualifies in my mind… |
Here is an interesting distinction by one writer between taxes and revenue… |
Maybe if I wrote for the Atlantic… |
I don’t see how he distinguished between taxes and revenue, Devyn. Taxes ARE revenue. The government, as an entity, requires income in order to function. That income is revenue. That income, that revenue, comes from taxes (for the most part). Trying to say that taxes are not revenue is not understanding both revenue and taxes. His argument isn’t that taxes are not revenue, but that by streamlining the tax code, you increase revenue, or in other words, you maximize the efficiency of the taxes collected by the government. His argument is that you don’t have to raise the tax rate in order to increase the revenue into the government. I highly doubt Derek Thompson has argued that taxes are not revenue. On a slight tangent, Derek Thompson has argued quite well that the size of the government has shrunk under Obama. I gotta say, Obama seems to be quite a conservative guy in his policies….taking on the individual mandate (a conservative idea), shrinking the size of the government (a conservative idea—they have not practiced it well in the last 40 years). One would think Obama was elected by Republican voters or something. It certainly tells you how far to the right today’s Republicans have shifted. I am amazed you guys on the right don’t see this. |
35 – LL – I liked your Mormon version too, but the Atlantic was just a teeny tiny bit clearer :) 36 – Dan – first I am not “on the right”. I have traditionally voted for Dems, except in 2008, I did not vote for Obama given his lack of experience. If you read the Atlantic article, he does distinguish between the two (although I agree that Revenue is another way to describe taxes). We can argue all day about how much bigger or smaller the Government is, at the end of the day, we have to make some major cuts (& likely offset by raising taxes) |
Devyn, I don’t believe we need to do anything. In fact, if Congress does absolutely nothing, except increase the debt limit of course, the economy will right itself based on everything the way it currently is. The Bush tax cuts will expire next year (though they should have expired in 2010), Obamacare will continue getting implemented, and magically we won’t have a deficit problem. However, I do think we should tax those making over $1,000,000 at 50%. It was a rate that seemed to work just fine under Reagan. No reason for us not to go back to that rate. |
Really? You think we can continue to kick the can down the road and HOPE things get better? That is a very optimistic view. |
#33: To my ear, neither word is any more harsh, blunt, or mild than the other. They simply mean what they mean. I see nothing indirect about “revenue.” It directly refers to the concept of governmental income. Indirect would be something like “federal monetary enhancement.” But I guess directness and mildness are in the ear of the beholder. |
I wasn’t saying kicking the can down the road. Social Security is alright. Medicare needs help. There’s no question there. But one of the biggest problems we have facing the “deficit” Devyn, is lack of government revenue due to the Bush tax cuts. Remove those cuts and revenue will increase again. Personally I’m fine with the tax levels as they were under Reagan, but I’ll take the levels under Clinton too. We could even survive with tax rates as they were under Eisenhower (90% for the wealthiest Americans). Amazing how the wealthiest Americans still managed to work hard even though 90% of their income was taxed. That’s why I laugh at the Laffer Curve. In any case, I’ve made my point. I do wonder what’s going on Devyn, that you, who call yourself not a conservative, give in so easily into the conservative mantra and ideology vis a vis taxes. They’re not right, Devyn. They are terribly wrong. They spit in the face of their progenitors. Ronald Reagan raised taxes because he needed to in order to balance the loss of government revenue due to his earlier tax cuts. Abraham Lincoln raised taxes in order to pay for the Civil War. Where are the Republicans today who are willing to have their taxes raised to pay for the wars they endorse? They’re not around, Devyn. They don’t actually care about deficits. They don’t actually care about the fiscal health of the country. Let me let Mitch McConnell tell you why Republicans are saying what they are saying and doing what they are doing.
That’s what it is all about Devyn. I don’t know why you think the Republicans deserve any of your support. |
Come on Dan, that’s a bit of a red herring – “Amazing how the wealthiest Americans still managed to work hard even though 90% of their income was taxed.” Adjusted for inflation, in 1953 there were 27,000 millionaires. Even after a 27% decline in 2009 there were 7.8 million millionaires. |
Chris, that changes nothing but where you draw the line. |
Devyn was right when he accused Democrats of say they want to “raise revenue” and meaning “raise taxes” or more accurately “raise marginal tax rates”. Taxes are revenue, but not all revenue increases are due to increased marginal tax rates. The Laffer curve may be applicable for some taxes at this time, but it might not. The best single way to increase revenue right now is to get good economic growth. |
44 – tapped out consumers is the biggest change. |
Chris, |
Revenue is the right word here and always has been. It is essentially a synonym for gross receipts, i.e. total payments received. Businesses have gross receipts, the government has gross receipts, pretty much anybody who collects money has gross receipts, and hence revenue. The Laffer curve is rock solid economics. It implies that in a simple tax system there are two tax rates that produce the same amount of revenue, one below the peak revenue point, and one above. However, any suggestion that a tax rate decrease will increase revenue in the short run is contingent on the current tax rate being above the peak in the Laffer curve. All else being equal, we can’t possibly assume that the peak in the Laffer curve is at a net (total) tax rate of fifty percent. That includes state and local taxes of all types that apply to the same unit of net income. The vast majority of the Bush tax cuts went to people that earn the median income or below, so the idea that any of those would increase short term revenue is dubious at best. It is likely that some of the Bush tax cuts (notably the ones reducing the double taxation of qualified corporate dividends, and the one phasing out the similar double taxation implicit in the estate tax) had a positive revenue effect, but the Laffer case for all the rest at current tax rates is ridiculous. If total marginal tax rates were in the seventy percent rage, that would be different. The Bush/Obama tax cuts, however, are responsible for the fact that fifty percent of wage earners pay no income taxes at all, and a quarter pay no income taxes or social security taxes. Given our current problems, on balance we will be better off when they expire. It doesn’t do any good to cut taxes if you just borrow money instead. That is insane. |
We can’t assume the peak of the Laffer curve is at a net total tax rate below fifty percent, I meant to say. |
A quarter of wage earners don’t pay social security taxes? How does that work? I made the mistake of starting law school right before the Great Recession, so I might still be in a low tax bracket this year–how can I get out of paying social security taxes? I’ve certainly paid them as a student, while living under the poverty level. As far as I know, the only people who don’t pay a significant percentage of their income to social security are the super-rich, and even then they pay at least some social security taxes. |
If you look at all taxes paid rather than the artificial and misleading “income” tax, you’ll see that the poor pay more proportionate tax than the uber rich. The tax code is extremely unfair because the rich are the freeloaders. For example, the lowest quintile makes 9.8% of the money, but pays 13.0% of taxes. Compare this with the top quintile that makes 45.0% of the income but pays only 34.5% of the taxes. How can this be fair in anyone’s book? How? How? How? |
Seeing as how the Bush tax cuts cut the taxes on the highest earning individuals by lowering the marginal rates at the high end and cutting taxes on capital gains and other forms of “income” almost exclusively reaped by very wealthy people, I’m not sure how anyone can say that the biggest beneficiaries of the Bush tax cuts were to people that earn the median income or below. The wealthy received a disproportionate share of the Bush tax cuts. |
We know how to get out of the recession/depression. Henry Ford knew too. Too much money is concentrated in too few hands. The income disparity is strikingly similar to that just before the great depression. Tax the rich already, and put those out of work back to work rebuilding our crumbling infrastructure. Oh, and reinstate Glass-Steagall. It worked before for us; something similar just worked for Germany, and worked spectacularly for Brazil, which is becoming a first world economy by following the 1930′s lessons from the US that we’re ignoring as we sink into third world status. |
Tim, the answer is that typical households below half the median income are refunded everything that they pay in income taxes and payroll taxes in the form of the Earned Income Tax Credit, or EITC. This statistic recently came out here: http://economix.blogs.nytimes.com/2011/06/21/are-taxes-high-or-low-a-further-look/ The EITC is a refundable tax credit. For many it is larger than the entire amount of income and payroll taxes withheld during the year, such that no net income or payroll taxes are paid at all. According to the Treasury department this is the currently the case (on average) for four person households with less than half median incomes. That is a major change from a decade ago, in my opinion a bad one. We can’t fund the government, let alone Social Security and Medicare if a quarter of all households don’t pay the federal government a dime. So despite some healthy aspects, when the Bush/Obama tax cuts expire at the end of 2012, it will on the whole mark a return to fiscal sanity. |
The problem with Glass-Steagall is that it was not radical enough. What we really need to do is to forbid banks from lending out deposits, and split the depository operations of banks from the lending operations. And where would banks get the money to lend, do you ask? By issuing bonds and originating loans for other investors, both practices that are commonplace today. |
I’m sure the use of the term ‘revenue’ is a rhetorical device intended to make it sound more appealing to voters. That said, there are options on the table–things like ending tax breaks for certain companies or industries–that I wouldn’t call tax hikes per se. What I don’t get is why so many ‘patriotic’ Americans hate the government so much. Why does government have such a bad reputation while businesses are seen as efficient and trustworthy? My experience has been very much opposed to that–government agencies provide services comparatively efficiently, and usually have to get by on relatively small budgets. I’ve overpaid the IRS a couple of times and they’ve corrected my return and sent me a refund. I can’t imagine Verizon, or most of the other companies I deal with, doing anything like that–they’re more likely to hide charges or somehow set things up in such a way as to take me for everything they can. Honestly, I’m grateful for my government and for all it provides for me and for the rest of this country. I don’t begrudge the government a penny of tax money–I feel like I get far more in return, not only in directly provided services but also from the stable, prosperous society we all benefit from. |
djinn (#52), one more thing: the Wikipedia page that you cite is about the 2003 tax cut, which was far smaller than the 2001 tax cut. For that you need to refer to this page: http://en.wikipedia.org/wiki/Economic_Growth_and_Tax_Relief_Reconciliation_Act_of_2001 The 2001 tax cut created a new 10% tax bracket and greatly increased the per child tax credit. These two facts account for the greatly reduced taxes of most households anywhere near or below the median income level, which you can see by referring to the chart on the New York Times page I linked to above. And that is why ending the Bush/Obama tax cuts “on the rich” alone is estimated to bring in only 70 billion dollars over ten years. The real money is in ending all of them, or at least almost all, something that will bring in on the order of 1.2 to 1.5 trillion dollars over ten years. Hardly enough to close a sixteen trillion dollar deficit, but a good start. |
We can’t fund the government, let alone Social Security and Medicare if a quarter of all households don’t pay the federal government a dime. Why not? That bottom 25% of the population make less than 10% of all income (though that graph is in quintiles, so it really shows that the bottom 40% of income earners receive about 11% of all income) so even leaving that bottom quarter out you’re still taxing more than 90% of the income that’s earned in the US. |
djinn You are misreading the chart. Specifically the last item refers to tax rate, the per centage of income that goes in taxes Simply put, the bottom quintile earns 9.8% of income and they pay 13.0% of their income in taxes. The top quintile earns 45.0% of the income and pays 34.5% of that amount in taxes. Now I do NOT want anyone to assume this justifies the Rush Limbaughs who want us to shed tears for the poor wealthy people. Specifically 1. These figures do not deal with real income. The income for the wealthy is growing and the income for the poor is declining. The middle class is starting to lose members to the upper lower class and struggling to stay even. 2. Job Growth under the Bush years: .28%, the lowest figure of the 10 Presidents since WWII. The tax cut did not create jobs. 3. There is a concerted attempt to reduce the wages and benefits for the working class: Get rid of unions and thus lower wages, greater share of medical costs or eliminate health benefits for workers, lessen social security, privatise medicare, eliminate medicaid. All this while calling for less taxes for the wealthy. 4. The new jobs that are created are in the main low paying service jobs. The good, high paying jobs are going overseas |
Stan Beale, the numbers are not the tax rate but the percentage earned by households and paid by households to the government and by the government to households. Yes, the rich pay less of their income in total tax than the poor. |
The major provisions in the 2001 tax cut is phasing out estate taxes–only paid by the extremely wealthy–and dropped the marginal tax rate on the highest earners. The way the tax cuts phased in, with the tax cuts to the wealthiest ramping up slower than the tax cuts to the peons allowed, essentially, lies to be printed about the effect of the 2001 tax cuts, but the top 1% is receiving about 50% of those tax cuts. Here’s the most comprehensive chart I could find:http://www.ctj.org/html/gwb0602.htm Here’s the nyt on the subject:”The budget office offered little commentary on its new estimates, but many of its numbers spoke for themselves. The report shows that a comparatively small number of very wealthy households account for a very big share of total tax payments, and their share increased in the first four years after Mr. Bush’s tax cuts.” |
Kristine N., those not owing federal income tax are not all below median earners. In my own case, income is well above median, but I owed no federal income tax last year or the year before that and likely won’t for the next three years. In fact IRS sent me thousands of dollars this year and last. I like receiving money, and in a decade when most of the children have left the house my tax will go up a lot, but I think we have overdone it with a $1,000 refundable child tax credit. Half that, $500, like it used to be seems more appropriate, and some limits on deductions for mortgage interest would be healthier too. |
How about raising the capital gains tax, John Mansfield? The deduction for mortgage interest is one of the few tax breaks for the non-wealthy. |
Actually, part of the mortgage interest deduction is for the wealthy. I think it should be limited to a single home (instead of two), and only cover $500,000 (if I remember correctly, it currently covers $1,100,000). I wouldn’t be opposed to it being cut out entirely, as long as other deductions that favor the wealthy are cut too. |
I really think the answer is a robust economy. That is the underlying issue. All of these issues will go away if there is robust economic growth. What I describe as the Bush/Obama economy of the last few years simply does not provide enough economic growth to facilitate enough cash inflows to the US treasury. Makes me yearn for the Clinton years….. |
kristine N, I grant that it is possible, but that it is unsustainable with anything resembling the current tax system, and has several other negative characteristics aside. Medicare and Social Security were not sold as welfare systems – they were sold as insurance programs. Over time these programs grew to require substantial contributions from every wage earner. If we move (which we have) to a system where a quarter of all households don’t pay anything for twenty plus years of retirement benefits, we have made it clear that neither program is an insurance program, let alone a savings program, but rather simply a form of welfare for old people, a non-means tested form of welfare. There is a secondary problem – if a quarter of the population contributes not one dime in federal taxes, and half contribute nothing in federal income taxes, how can they expected to act rationally when weighing the costs vs benefits of various federal programs? That sort of thing leads to bad public policy, like 1.6 trillion dollar deficits, a trend that is not going to end well. |
djinn, of course relatively well off people receive the most total (measured in dollars) benefit from almost any tax cut – they pay far and away the most taxes (measured in dollars). The data I linked to above are not about tax revenues (total dollars) they are about tax rates (percentages of income). The average tax rate for the bottom quarter of households is negative, and that is not accounting for any actual transfer payments other than the EITC itself. In Mormon terms, would it be a good idea if we exempted all households earning less than $50,000 a year from paying any tithing at all? I mean after all, compared to tithing from the well off, all of their contributions might not add up to much. Or maybe we could just be more conservative and say if you don’t have a full time job, please don’t pay any tithing. Tithing – a universal law for everyone – except children, students, and the underemployed. |
Mark D., people pay for their social security and medicare. Income tax does not include social security and medicaid deductions. Your figures are wrong. There is no “quarter of all households that don’t pay anything for twenty plus years of retirement benefits.” workers pay 6.2% of their income to SS taxes, with employers chipping in another 6.2%. However, at $106,800.00 of income, social security contributions end. It’s the people on the top of the scale that are not contributing their share. Where did you hear these dangerous lies? |
Mark D, the numbers I gave were percentages. Rich people pay less as a total percent of their income in all taxes than poor people do. Your premise is wrong. The real Mormon corollary would be if rich people were allowed to pay less than 10% of their income by virtue of their being wealthy. Actually, anecdotally, I believe this at least sometimes happens through the magic of gross/net. |
djinn, If you feel the numbers are not accurate, then I’m happy to be educated, but according to the numbers put together there, a retired couple that lives for a couple decades on SSI and Medicare will collect $1million in combined benefits. We do not have to work the math to understand that the average citizen has not paid in $1million in taxes. And with life expectancy increasing for the average citizen I think we can expect more and more people to live in retirement age for a couple decades. So Djinn, it would be correct to say, there are some now, who are receiving benefit for what they did not pay in, as what they paid in now as long since run out, and with every passing year, more and more will be hitting that milestone. Now, you might say, let’s just remove the 100k cap… in that case you still have wealthy people funding the retirement of people who never reach the 100k limit anyway, and still end up living for a couple decades. So the point would still be true that a percentage of households did not pay to fund for their retirement benefits — unless we want to make the stretch that paying to fund your retirement benefits means you pay $1, and I pay $10, and you draw $50 and I draw $50, and therefore you paid to fund your benefits. I suppose we can stretch the language to mean that, but it’s not very useful. |
djinn, It would help if you would actually read my comments, and what they link to. I got those “dangerous lies” from the Treasury Department, by way of the New York Times: http://economix.blogs.nytimes.com/2011/06/21/are-taxes-high-or-low-a-further-look/ Maybe if you read it, you can say something intelligent about it. And if you are wondering why the figures for total income and payroll taxes can possibly be negative, it is due to the effect of the EITC, which is a refundable tax credit, meaning that the households concerned receive more back from the IRS at the end of the year than was withheld from their paychecks. |
As far as percentages go, it is true that wealthy people have lower marginal rates than those who are not well off – a fact which is largely accounted for by the maximum amount taxable in Social Security benefits, a maximum set under the pretense that Social Security is retirement insurance, not welfare. However, if you refer to the link I posted above, you will see that average tax rates for the well off are much higher than those with median incomes, while net tax rates for those with half median incomes are actually negative. Those with low incomes face very high effective marginal rates as the EITC phases out, but that is not surprising, because they were not paying anything to begin with, but rather receiving more in tax refunds than they actually paid in taxes. |
If you look here: http://en.wikipedia.org/wiki/Social_Security_(United_States) way way down to the graph http://en.wikipedia.org/wiki/File:Fig._168_-_Single_men_with_different_wages_and_retirement_dates.JPG you’ll see that the wealth take out disproportionately more from social security than they paid in. People whose income is under 50K currently break even in what they take in and what they pay out. Raising the ss rates on the richest would not only be fair but would balance the books. |
Mark, those figures are deceptive, to say the least. The graph gives the level of taxation for a hypothetical 1/2 median income family perfectly positioned to take advantage of all available tax credits. The game is given away by that marginal rate though–46% is the number on the tax policy center chart. This compares to a marginal rate of 30% for those earning twice the median income. Also, this tiny handful of cherrypicked data does not tell you what is happening in the aggregate, as I have done. Also don’t forget the last sentence of the article you cited: “Those who assert that taxes are rising or are at confiscatory levels simply do not know what they are talking about.” |
From djinn’s links in comment 73: “For example, the graph below (Figure 168) shows the impact of wage level and retirement date on a male worker. As income goes up, net benefits get smaller – even negative.” Djinn, how to you come up with your interpretation opposite the apparent meaning of your graph and the interpretation that came with it? |
Woops. You’re right, John Mansfield; I misread the graph. Plus, negative; not a good thing to mix up. And I managed to make an own goal! Wow. Opposite point. The more you pay into Social Security, the less you take out. |
Truth be told, though, it’s the rising income inequality (if the bulk of the country doesn’t have the money to buy stuff then the companies that make and sell stuff to the average person go under) and the failure of the rich to pay their fair share of the money that it takes to run our country that’s driving our current financial crisis. So, I’m fine with the inequality in the Social Security chart; though I did misunderstand it. |
Forgot my link: |
djinn, you are reading the graph you linked to backwards – most of those numbers are negative. People with 2045 retirement dates who earn about $45,000 a year break even on Social Security (not counting foregone interest). People who earn less receive more than they paid in, in some cases far more. For the relatively well off, however, Social Security is an incredibly bad deal, not only do they forego an incredible amount of interest, they often pay hundreds of thousands of dollars more into the system than they receive. This is why not only technically, but practically, Social Security must be understood not as some sort of retirement plan, but rather as welfare for senior citizens. If we were honest about that, we might well indeed remove the cap and means test benefits. Secondly, the distinction between marginal rate and total (or average) rate of taxation is crucial. Marginal rate is the rate you pay on the last dollar earned, including the loss or phase out of any tax credits that only apply to those with lower incomes. The total (or average) rate is the rate you get when you divide a persons total tax bill by his or her total income. As you can see from the Treasury department figures I linked, those two numbers are usually very different. However, the total rate is the most important, and the relatively well off pay a far higher percentage of their income in income and payroll taxes than those with median or lower incomes. I should repeat, again, that the reason why marginal rates are so high for those with low incomes is that welfare-type tax credits are being phased out, i.e. they are moving from negative tax rates to positive ones. That is sometimes called the “welfare trap”, and it is a mathematical property of any system that grants welfare payments (or tax credits) in excess of taxes paid to those with lower incomes, but actually tries to raise revenue from those with higher ones. It is a transition from one zone to another. There are only two ways to lower high marginal rates on those with low incomes – one is to repeal the EITC, and the other is to extend it to everyone. A system where everyone receives money from the IRS and no one sends them any is attractive indeed. |
OK, here are the historical effective US tax rates: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456 and here are the effective state tax rates for various incomes figured by largest city in the state. http://cfo.dc.gov/cfo/lib/cfo/services/studies/City04STUDY.pdf |
djinn, those US tax rate figures only go through 2007 – there have been additional payroll tax cuts since then. There is one notable difference, however – the figures you cite are for all households, and the ones I cited are for four person households. It is the four person households (i.e. with two children) who don’t pay any net federal taxes at half percentile incomes or lower. Households without dependent children pay more, raising the average in the lower quintiles up a few percentage points. As far as other taxes go, I have a question for you. Is there any reason to tax income before it is spent? People who save their income instead of consuming it are doing the world a favor – those resources that they could have spent on outlandish homes, cars, and boats are instead financing investment and job creation. Often at considerable risk. So if you have someone who earns a lot of money on paper, but lives an ordinary, frugal lifestyle, why should he pay taxes on net income instead of net consumption? Until he or she spends it, it is essentially on loan to the rest of the world. |
42. Dan – I am not of the mindset that the Republicans are all evil, nor that the Democrats are all good. They are both very interested in their own self-interests and one piece of that is destroying the other party. I lean Democratic, but I disagree with their utter lack of willingness to cut the sacred cows of Medicare/SS when the AARP has signaled they are willing to discuss cuts. On the Republican side, I think they are stupid for not compromising a bit on taxes (as it is likely they will have to rise) as well as not compromising on defense cuts – that too will have to be on the table. So perhaps I am pragmatic, but there is plenty of crap flowing from both sides… |
Someone should send a memo to the Internal Tax Hike Service. |
“…although these are not proportionate to what one “pays”…” Correct. Generally, you get a lot more than you pay for. Your taxes pay for all government employees, in all branches of government including FEMA, NWS, NASA, SSA, CDC, NCI, etc. They pay for aid for farmers, business incentives, roads and bridges and ports and tunnels, for military bases and soldiers all over the world. They pay for science work in thousands of fields that benefit our health, our productivity, our ability to feed ourselves (agriculture), and much more. They pay for all the services and research and benefits and infrastructure many people take for granted. Yes, there is waste. But to claim you don’t get what you pay for is, frankly, rather ignorant. And it’s not confusing at all; governments raise revenue through taxes. They’re not businesses, nor should they be. Businesses are ONLY about the bottom line, and would never spend millions of dollars over tens of years researching cures for cancer, for example. |
“Businesses are ONLY about the bottom line, and would never spend millions of dollars over tens of years researching cures for cancer, for example.” Of course this is simply false. Pharma spends tens of millions on research annually just in the US. |
I meant to say tens of millions if not more on cancer research annually by big pharma. Who do you think invents most cancer treatments? Big Pharma or government researchers? |
Bbell. That is exactly what I was going to say. Pharma and biotech companies spend hundreds of millions if not billions on cancer research alone. |
Okay. Bill and I are pretty nervous about all this and so we’ve had our tiny savings converted to cash until the scare is over. We’ve been losing money on it for awhile anyway. I waver between wanting them (all, either side) to hold out until lasting consensus via a good compromise (is that possible)is reached. And another part feels a bit desperate and just wants the government to stay working, no matter what. I’ve said this so many times, but I honestly don’t know how much more taxes we can pay. Like I said, we paid more than 10% of our GROSS income this year. What the hell? |
