Posts Tagged ‘wealthy’

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Who Really Pays Taxes?

October 7th, 2012

Let’s explore the misconceptions and realities about who pays taxes.

Republicans love to paint the rich as the minority-victims who pay most of the taxes in this country. Mitt Romney’s recent video gaffe is a perfect example of this view. They will say things like, “86% of all income taxes are paid by the top 25% of income earners” (source). Or in the case of Romney, he claims that 47% of the country does not pay taxes and mooches off the system; these people are therefore entitled and will not take responsibility for their lives. These claims are wildly inaccurate. Their point is to paint the rich as victims and force more of the tax burden on the poor and middle class. They have despised our progressive tax system for decades, favoring a flat tax that would dramatically harm the poor and middle-class to the benefit of the wealthy (go learn about “regressive taxes“).

The Center on Budget and Policy Priorities provides some important insights on this topic.

“The notion that ‘half of Americans don’t pay taxes’ not only overstates the share of households that do not pay federal income taxes in a typical year.  It also ignores the other taxes people pay, including federal payroll taxes and state and local taxes.  Policymakers, pundits, and others sometimes overlook this point.” Source: bit.ly/iWtaO0

“The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only tax that matters.  Some 82 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to 1.6 percent of income for those in the top 1 percent of the income distribution.” Source: bit.ly/iWtaO0

See also: http://economix.blogs.nytimes.com/2009/04/13/just-how-progressive-is-the-tax-system/

“The liberal Citizens for Tax Justice says the highest overall tax rate (this includes federal, state, and local taxes) is 32.2 percent. The top 1 percent pay even less—30.9 percent. They include employer-paid FICA taxes as income, which seems wrong to me. But the conservative Tax Foundation reports that the top 0.1 percent pay an effective federal tax rate of 21.5 percent. The last total tax rate I see from them is 2004, when it reported that the top quintile of earners paid an average total tax rate of 34.5 percent. They don’t break out the top 1 percent, but their rate would actually be lower than that of the top 20 percent as a whole.” (Source)

 

And: http://morallowground.com/2011/11/21/u-s-billionaires-paying-1-tax-or-why-the-buffett-rule-makes-sense/

 

 

 

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There’s a War Going On!

December 10th, 2010

In his recent speech on the Senate floor,  Senator Bernie Sanders passionately declared, “There is a war going on…a war being waged by some of the wealthiest and most powerful people in this country, against the working families of the United States of America, against the disappearing and shrinking middle class of our country” (see his video speech below). There are a number of data points that indicate the truth of Senator Sanders claim. Let’s look at a few of these:

  • Corporations are enjoying record profits (source)
  • Unemployment is at a 30-year high (source)
  • The unemployed tend to be out of work longer than ever before (source)
  • US hit the highest poverty level in 15 years (source)
  • Top earners’ income continue to grow while wages are stagnant for everyone else (source)
  • Union membership has declined from one-third of the labor force in 1960, to 10% by the year 2000 (private sector union membership)(source)

We need to think about what is causing these trends and how they can be countered. We know they are not countered by extended income tax cuts for the wealthy or raising the estate tax exemption amount. Republicans seem to be doing everything in their power to speed up these trends; and taking the House this year will give them some power to continue the status quo. It it worth think about what kind of country we end up with if they have their way. It is not pretty for anyone, not even the rich. These trends need to be reversed if we are going to preserve our way of life.

Senator Bernie Sanders really says it all:

See additional graphs by clicking “read more.” » Read more: There’s a War Going On!

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“Death Taxes” are for the Living

August 6th, 2010

“We can have concentrated wealth in the hands of a few or democracy–but we cannot have both.”
–Supreme Court Justice Louis Brandels

Since the 2001 tax cuts, there has been a slow phasing-out of the estate tax until the tax was fully repealed at the beginning of this year. Absent any further legislation, the Bush tax cuts will expire at the end of 2010, including the estate tax. (We’re going to see a lot of dead grandparents this year!) There will inevitably be a political storm over extending the Bush tax cuts. Although Obama himself made tax cuts part of the economic stimulus in early 2009, he is widely expected to allow the Bush tax cuts to expire at the end of the year. This should be good news for deficit hawks. If we are going to get back to a balanced budget, the additional tax revenues will be necessary (although not sufficient).

The estate tax (AKA, the inheritance tax) is one of the oldest forms of taxation. It has been in place since 1916 in the U.S., until it was repealed earlier this year. According to the Brookings Institute, the estate tax only affects the wealthiest 2% of the U.S. population (i.e., the majority of those paying the tax had fortunes in excess of $5 million). Of the $550 billion that is transferred from one generation to another, the estate tax brings in $20 billion each year to the U.S. treasury (other sources say that the federal government lost $56 billion in 2010 because of the tax repeal). Estate taxes have rarely contributed more than 2% to federal budget. But this tax is not just about finding another revenue stream for the government. It is a wealth control program that lies at the very heart of American values.

In many ways, America was born out of the idea of rejecting aristocratic power and privileged (even if those forces have always been present). Since our founding, we have sought to put power in check (even–perhaps especially–our government), and to allow equal opportunity for all. We also value “the self-made man,” who earned his/her way to success through hard work, not through nepotism or privilege (in other words, not Paris Hilton!). In short, we wanted a society based more on meritocracy than aristocracy, and inheritances leads to an unequal material starting positions for members of society. Without a control mechanism, family dynasties of the ultra-rich are a threat to these values.

Political commentators, such as Robert Frank of the Wall Street Journal, want to believe that the rich earned their own way. But when $550 billion is passed on each year, with only $20 billion collected, there are plenty of people getting a free ride. When the ultra-rich hand off their fortunes to their descendants, we have a situation where a dynastic ruling class emerges, made up of people who did not earn most of what they have (or at least didn’t get there under the same rules that the rest of us do), and these people are now on the boards of our businesses, buying our elections, and funding lobbyists.

» Read more: “Death Taxes” are for the Living