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Comment by sytelus | Hacker News Reader

The often used counter argument is that top 1% pays almost 50% of total federal income tax.

https://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fed...

I am never sure what to think of these claims when Social Security and Medicare (both employer and employee parts) taxes aren't counted as income taxes. Seems a bit deceiving not to include those taxes as income taxes as they are based on a percent of your income (and only a part of your income if you make over about $100k for Social Security).

They aren't counted because basically they're forced savings. Typically everything you put into SS you'll get back. Lower income folks end up getting more back than they put in. And the same for Medicare. It's a forced insurance payment of sorts.

Not while the general fund is allowed to steal from SS and then declare it as "debt".

The vast majority of the US debt is owed to SS recipients.

Are you sure? From what I can tell, it's not close. Total debt is $19.4T; intergovernmental debt is $5.4T: https://www.treasurydirect.gov/govt/reports/pd/mspd/2016/opd...

And given that the total trust fund appears to be $2.8T, I'm not sure how it could hold the majority of the debt: https://ycharts.com/indicators/us_oldage_and_survivors_insur...

Who owns the US Nation Debt [1]. I stand corrected, the vast majority is owed not just to Social Security, but to retirees in general (though SS is the largest debt holder).

[1] https://www.thebalance.com/who-owns-the-u-s-national-debt-33...

Again, I would like you to show your numbers, because I am not seeing the vast majority being owed to retirees, either.

No, the truth is they aren't counted because correctly counting them would undermine the bullshit conclusion they're pushing.

To count Social Security and Medicare withholding as part of federal income taxes would be incorrect, as neither are income taxes (they are payroll taxes.)

I think to correctly frame what proportion any income group (or wealth group) pays, you have to look not just as federal income taxes, but at all taxes.

I think you are arguing past me on the first part. They are "payroll taxes", yes. And there is a "US federal income tax" of which they are not, yes. Technically they do also fit the definition of what an income tax is (wikt:"A tax levied on earned and unearned income"; wikipedia "Retirement oriented taxes, such as Social Security or national insurance, also are a type of income tax, though not generally referred to as such").

More to the point, and I think we agree here, the deception is by framing the discussion only about the "us federal income tax" when that is only 60% of the total federal income/payroll taxes collected. If you tell people that the top 1% makes 22% of the money and pays 40% of federal income taxes it makes them sound oppressed. If you tell people that the top 1% makes 22% of the money, has 35% of wealth and pays 25% of federal income and payroll taxes, the oppression disappears.

True, but you also get paid back based on your Social Security payments (should you live so long). To the extent that it's a forced-savings program, it isn't exactly an income tax.

The government has borrowed and spent the entire trust fund. There are no savings, it's funded year to year from taxes.

(the left hand of the government says it has $2.8 trillion and the right hand of the government thinks that is a cool story https://www.ssa.gov/oact/TRSUM/index.html )

This is true, but on the other hand it hardly makes sense for the government to save and borrow at the same time.

Oh, I'm not trying to sensationalize it, I just think it is fair to peak at the actual cash flows when people start talking about Social Security as a savings program.

As a retirement savings vehicle, it has a pitiful rate of return, and the payouts may decrease, or taxes thereon increase, before you retire, since they're only "invested" in extremely low yielding, not-legally-enforceable bonds.

It’s money that’s taken from me by the government whether I want to or not. The fact that it goes into a separate bucket used for a particular program doesn’t somehow make it not a tax.

Especially since it’s very much not a forced savings program. If it were, we’d pass on the remainder to our heirs if we died early, and we’d run out of money if we lived too long. It’s more like a forced annuity.

One loop hole that should be closed in the USA is the $1 salary which many SV founders and board members do to avoid paying social security.

Are they that petty that payroll taxes are really part of the calculation?

(It's ~$10,000-$15,000 for valley salaries... https://www.ssa.gov/oact/cola/cbb.html )

Yes they are that petty. Steve Jobs parked in handicapped parking spots because he couldn't be bothered to walk as far as normal people. Zuckerberg rolled up to Hawaii, bought some land, and tried to sue all the locals off of the rights they had enjoyed for generations before he showed up. Bill Gates, for all the good he does now, was a giant dick to everyone he did business with at every chance he got. The super rich are the pettiest people on the planet because unlike regular people, they don't deal with the consequences.

If an average person starts doing everything they technically are allowed to do, they will be shunned socially. When that happens, beyond feeling bad, you lose your support network and can get into serious trouble in life. The rich don't have that problem. They don't need to rely on the good will of others to watch their kids, or to give them time off to go handle bank issues or medical problems.

You are describing anti-social behaviors, not really addressing my question. Do you think that keeping $15,000 out of the Social Security system is an animating reason for them to take the non salaries?

I think it is more like a few hundred thousand dollars not really being a relevant amount of money to someone with hundreds of millions of dollars of stock on the line and the symbolism being useful.

Its the perception that they are doing petty tax avoidance doesn't make their ethics look very good and those on average salaries will see rich people avoiding $15k in a negative light

The symbolism of paying your taxes is also useful. Possibly only exceeded by the actual benefits of the government revenue.

> Seems a bit deceiving

It's more than a bit deceiving. It's part of a systematic disinformation campaign. It goes hand-in-hand with the outrageous lie that the estate tax harms family farmers.

But cutting taxes on the rich is indefensible on the merits, so deception is the only option if you're rich and you don't want to pay taxes.

The percentage of taxes paid by the highest income earners is lower when you include all taxes, but still pretty significant.[1] These numbers do not include state taxes, only federal.

Income percentile - % individual income tax paid - % all taxes paid

Top 10% - 83.4% - 65%

Top 5% - 69.4% - 53%

Top 0.01% - 26.4% - 19.2%

Note that anyone in the bottom 50% actually has a negative income tax contribution since they get tax credits.

For the top 0.01% of income earners, the average total tax rate is 46.3%. Much higher than I originally thought.

[1]https://www.treasury.gov/resource-center/tax-policy/tax-anal...

I don't see capital gains on that chart. Is it part of income? I think most rich people grow their wealth with capital gains that are only taxed when realized and even then are taxed at a lower rate than regular income.

Read the footnotes, it's lumped into individual income taxes.

" It's part of a systematic disinformation campaign. "

Oh, no, I'm sorry but it's the other way around.

The 'mass lie' is on the employer payroll tax side of the equation.

An employer payroll tax is for all purposes the same thing as an employee tax, but it's 'hidden' (i.e. you don't see it as a deduction) - but it's equally as oppressive.

Politicians love it because they can increase it without any visibility and no uproar.

It's about 30% in Sweden.

Also - up to ~50% income tax.

And then 25% VAT.

Can you imagine if Google had to take 30% of your salary off the top before they paid you?

And then you're effective rate wast 10% higher (like 40%?).

And then everything you bought was 25% taxed?

And the other form of 'hidden tax' - in many places, prices have to be quoted with VAT to hide the 'hit' they take.

Admittedly you get healthcare for that.

It's very reasonable to call this confiscation of wealth.

If you're a professional, you're giving by far and away most of your earnings to the government to have them manage it on your behalf.

> and only a part of your income if you make over about $100k for Social Security

More precisely, 6.2% on a wage base limit of $127,200 for calendar year 2017, which amounts to $7,886.40 per person; 1.45% for Medicare without a cap, and an additional 0.9% withholding in excess of $200,000.

For the unindoctrinated, the IRS publishes these (and other related) details under Notice 1036[1] every year circa December.

[1] https://www.irs.gov/forms-pubs/about-notice-1036

Plus, I believe, the employer part which is another 6.2% on a wage base limit of $127,200. A bit hidden away so you don't think about it too much.

Yeah, employer pays the same 6.2% and 1.45%, respectively...except for the additional 0.9% Medicare conditional, which is withheld from the employee only. The self-employed effectively pay double out of pocket.

People presumably benefit from those directly in old age, should we count how much people spend in groceries too?

Here you go!

https://www.treasury.gov/resource-center/tax-policy/tax-anal...

This is selective accounting, there are many non-income Federal taxes that are ignored as well as who receives the benefits. Fortunately, the government has published data on total Federal taxes, not just income, as well as Federal transfers to households.[1] Among other things, it allows us to understand what percentage of the population pays net taxes to the Federal government, after all taxes paid and transfer income received is accounted for.

The data is somewhat surprising but I'll sum up: the top 20% of households are net tax producers, the next quintile pay their own way, and the bottom 60% are net tax consumers. In other words, the top 20% are subsidizing the bottom 60%, and 80% of the population effectively doesn't contribute to funding the government. Most of the middle class that thinks it pays Federal taxes doesn't, from a balance sheet perspective.

[1] https://taxfoundation.org/60-percent-households-now-receive-...

The transfer income numbers on their graph don’t match the ones in the CBO report they cite. Am I missing something?

Edit: the numbers come from a supplemental table, not part of the main link. They did make this clear, I just missed it. Looking at that table, I’m highly suspicious of the conclusion that 80% of the country isn’t paying their own way. That particular table organizes households into quartiles by “before-tax income” which includes transfers and capital gains. That means a retired household receiving $50,000/year from a combination of social security, Medicaid, and capital gains gets lumped in with a working household receiving $50,000/year in wages. The retired household pays little tax and has massive transfers, while the working household pays more and gets much less.

Yes what you're missing is that the CBO is trying to give people relevant and accurate information and the Tax Foundation is a think tank founded by wealthy businessmen whose goal is to generally protest all tax increases and work to make people think that the US needs to greatly reduce taxes on the wealthy and on businesses.

They also hold over 40% of all of the wealth so it's not that out of proportion. The bottom 90% also have close to 75% of debt. It's not a super convincing counterargument when you look at more than that single vector.

So, the bottom 90% hold less debt and pay less than their fair share of taxes? Is that the lesson here?

With how much income they earn, it makes sense. You can't tax people who don't have much money to start with.

Yes it does get annoying hearing them bitch about how the rich aren't paying enough when they contribute nothing though.

Its the marginal utility of money. I'm about to pick numbers out of a hat for demonstration. If it takes 18k to live at a bare minimum each for everyone, then the guy making minimum wage and pulling home 20k a year and the guy pulling home 100k a year have a completely different calculus. That 2k surplus for the minimum wage worker could easily be killed by a single week of illness just between medical bills and not working. The guy bringing home 100k a year can survives problems that are magnitudes more expensive. This gets more egregious as income inequality scales. Its not like billionaires who are earning millions of times more than a janitor can eat millions of more burgers or need millions of more houses

I understand the marginal utility argument. That argument assumes there is any moral right to steal from one person and give to another in the first place. I disagree there is. This is an analogy NOT a comparison... but its like saying its ok take the heart of an old person to give to a child because they would get more use out of it. Yes, that's true, but its a non starter due to the deprivation of the rights of the old person.

Which is, of course, extremely misleading because income tax is hardly the only tax people pay...

First, the article was discussing the top 0.01% not the top 1%. So your factoidlette is off by a factor of 100 or if you prefer, two magnitudes. Second, even at that level of apples and oranges, the top 1% got 21.2% of the income in 2014.

http://equitablegrowth.org/research-analysis/u-s-income-ineq...

Funnily enough, this is close to a flat tax with the total amount offset by the poverty line (so that the amount paid is zero or negative when income is low).

Added: Something along the lines of 0.16 * income - 0.16 * 12000 or (income - 12000) * 0.16.

This article is about tax evasion in Denmark, Norway and Sweden.

Very little to do with US tax policy. It helps to click before commenting.

I wonder why American commenters on a website hosted by a U.S. tech company incubator would discuss how a thing in another country relates to themselves.

Mods changed the article title from "A new study shows how little tax the super-rich pay".

"The often used counter argument is that top 1% pays almost 50% of total federal income tax."

But ^ is a discussion of "how a thing in another country relates to themselves?" I must be missing all the well-written nuance of how tax evasion is justified due to income inequality.

it just shows how much inequality there is.

The important question is what impact do tax rates have on the economy and the society as a whole. The conservative argument is that allowing the rich to keep most or all of their money will allow them to invest and grow the economy and make everyone's living standard rise.

However, that hasn't worked for decades in the US and a great many other countries.

The veiled argument is that government is very inefficient, more than investments and donations. It is often thought that the 1% would redistribute to the rest, but the government takes quite a commission on that money.

Of course the same people make the argument that humans are naturally greedy and selfish and that's a good thing, so I'm not sure how they reconcile these two opposing concepts.

I don't see the dichotomy you are talking about. Can you elaborate?

Allowing people to keep their own money does raise the standard of living for all parties involved, but that’s a marginal benefit and not the core ‘argument’ why the wealthy should be allowed to keep what they make.

Why should the government, or the masses, or society be allowed to take people’s money at all in the first place?

Because you didnt earn it in a vacuum. You used the roads, the educated populace, the borders, the civil society that is largely free of crime, etc. to "make" the money you made. Because of that we say you owe some of it back.

If it helps you could think of taxes as society user-fees. Your Society as a Service bill.

I love it when people use examples like education, road, the legal system to justify taxes. Most of the tax burden is entitlement payments. Educations, road, the legal system is a small fraction of the total tax burden.

And military.

Adam smith mentions that war should be a direct tax on people's incomes, as opposed to long term bonds. It would thus make people very much against any kind of war, realizing how expensive they are.

I realize that a large portion of every US tax dollar goes it the military - that's why I mentioned the borders - without some military spending it's doubtful the borders of the US would be the same as they are today. I think we should all agree that too much money is spent on the military, but that's not an argument about "should we pay tax" - that's an argument about how we should spend taxes.

"entitlement payments" is what, a euphemism for social security et al? There is no doubt in my mind that the quality of the social safety net plays into everyone's ability to make money and take risks.

But you've already ceded the point that taxes make sense - we're just arguing about how much and how to spend them.

Because that money/income/wealth was generated from the sum total effort and infrastructure of society as a whole.

Consider the utility derived from a roadway for two different people. For the average American, they're a way to get conveniently across from point a to point b. For the wealthy their factories are able to ship goods and services to markets all over the country. Their employees are able to drive to the factory. The factory itself was built because there was road access for construction vehicles to reach the site and transport raw materials there.

The SEC is a great example. We all benefit from having a market for securities that is stabilized by regulation and oversight. For someone with no securities their utility derived ends there. For the wealthy, they derive the maximal utility from that same situation since they have wealth to protect from unscrupulous actors.

Is there any case you can make that the wealthy don't derive more utility from society and so should face a greater burden in maintaining it via taxes?

Because otherwise, there would be no society, which means no police to prevent the masses from brutally slaying the rich, which is what used to happen when things got this far out of hand.

Because it's not their money. They can't make money where a functioning society does not exist. This is a very old news.

You'd be grunting and chortling without a society. Even in remote places, they have a language and a bit of knowledge to pass along if you're halfway decent to the group.

No, it really is their money. Property ownership is a core tenet of any civilized society, and you'd be "grunting and chortling" without it.

Try telling that to someone whose had their assets frozen. Ill gotten gains are frozen all the time in a civilized society, that includes not paying for upkeep (taxes), lest we descend into savagery.

If you've done something illegal you can be assessed all sorts of penalties. But if you've come by your money legally, it's your money. It's not society's money. And it doesn't belong to your fellow citizens because, well, they want it.

Well it does belong to them, because it's only through them that money has meaning. Society may decide they don't owe you anything, if you don't feel you owe them anything.

Well, I suppose you could have a society peopled by thieves.

Because it's not their money.

That's pretty counter to how America operates. The gov't operates at the behest of the citizens of the US. Any income you make is yours, thus the gov't has an obligations to spend it in a responsible manner. I think that's why so many Americans complain about taxes. If it was spent wisely and people felt they got good value for their tax dollars I'm sure the complaining wouldn't be as loud.

> The gov't operates at the behest of the citizens of the US.

Then why are lobbyist surrounding the capital with wads of cash? If wealthy interests didn't get a return on investment, they wouldn't keep investing. And since they are coming back and they do get a return on investment, then the government isn't serving the citizens but rather the patrons.

For this reason, the citizens won't get a great return on their tax dollars. The problem seems to be getting worse rather than better.

That's how America operates. We can still turn it around though, I hope.

Invest in what though? The stock market? Who does buying an S&P 500 ETF benefit other than other people who own an S&P 500 ETF?

Wow making a ton of money sounds awful.

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