> They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began.
It may be reading the book for the full detail on methods and results. I plan to.
A lower tax payment is a different thing.
So, for example, if someone makes most of their money on dividends, then they pay capital gains tax, and it appears like they are unfairly paying a lower rate than everyone else. ...but that's not a fair comparison because it's a different sort of income, with a VASTLY riskier risk profile. Taxing it at the income rate wouldn't make sense.
In the past, in the US, capital gains wasn't taxed at all because it was considered double taxation (since the investment was already taxed). ...and in some other countries, there is no tax on capital gains.
I've seen people claim that country XYZ has higher tax rates than the US, but then when you look closed, they have zero capital gains taxes.
PS: Either lower taxes on capital gains or allowing people to deduct losses is reasonable in the name of risk, but we do both.
Or just use a consumption tax, which is largely the same thing but a lot less complicated.
Yes, I've come to this conclusion too. The long-standing argument that capital gains rates should be low is about what happens, for example, if your gain on an investment exactly matches inflation: you'd pay taxes on it, but you haven't made any profit in real dollars. The right fix for that is not to divide your paper gain by some amount before taxing it; it's to subtract the loss due to inflation. In times of low inflation, as we have now, this won't make much difference, but if inflation picks up again at some point, it will make quite a large difference.
Of course, such a plan raises the question of exactly what inflation estimator one should use. I'm not enough of an expert to have a strong opinion, but the T-bill rate [0] seems like a reasonable first cut, since it's a good estimator for the risk-free rate of return. Paper gains from holding T-bills would thus not be taxed at all.
Whatever the inflation estimator used, the more important (and likely more controversial) aspect of the proposal is that gains beyond that amount be taxed as ordinary income. The argument is one of simple fairness: once the inflation problem is handled, how can one justify doing otherwise?
[0] https://www.investopedia.com/terms/t/treasurybill.asp -- Okay, I see there isn't just one rate, since the rate depends on the maturity interval, but we can go with the highest one, which is the one for the 52-week bill. This creates the oddity that holders of shorter-term bills will actually get a tax credit, but it will be small; I think we can live with this.
This means you don't get an interest free loan from the government to continue to invest in an asset just because you haven't sold yet.
Having the government give people de facto interest free loans of their own money in order to continue to investing it is also optimal anyway, because the government borrows at an interest rate significantly lower than the average market rate of return. They actually come out ahead by lending the money to investors who are then collecting taxable interest on it, because the tax on the interest can be more than the rate the government pays to issue bonds in the meantime, not even counting the overall economic benefit of stimulating investment (i.e. more/better jobs for people who are themselves paying taxes).
One thing that complicates the above is that the US does tend to run a larger deficit than Canada.
Yes, earning the money with labor is vastly riskier. Telling a financial advisor where to put money incurs no risk to your life.
Compare that to being a welder, tree feller, home builder, where your health or life is a daily concern.
I really don't understand why those who go out and work hard every day have to pay more in tax (as a percentage) than those that just sit on the couch and watch their wealth grow.
Ah yes, the riskiest activities of them all: investing in fortune 500, government bonds, index funds and inflating real-estate prices. They all count as capital gains.
RB2 Is the form you fill out if an employer goes bust, to get some cash from the government.
The risk of investing is, in the large, "my £10,000 might be worth £9,500 tomorrow", not "tomorrow I might lose my job through no fault of my own and suddenly have to make a major lifestyle change".
The same thing can be said about every tax ever. Every time you tax money as it changes hands, that same money has changed hands before and was probably taxed then.
We have a marginal tax system so effective rates should be higher for those that make more. Them paying lower tax rates (like Buffet said) is them having more loopholes in the system.
But they don't. That's the point. Your conventional wisdom is wrong.
The USA has a large number of regressive taxes, which tax the poor more heavily than the rich. These have been steadily expanded. And it has one, only one, progressive tax - the federal (not state) income tax - which has been steadily made less progressive in recent years to the point where overall taxation is at best flat and more likely slightly regressive.
The wealthy pay in absolute terms, more dollars, but they pay a lower rate than others.
There's so many technically correct but misleading definitions it's very hard to know what the "real truth" is in these discussions.
However, if you look at the data in this chart, you can see it's not true any longer. The actual combined rate paid by most Americans is between 22-28%. (It's on the lower end for the poorest Americans, and for the wealthiest as well) Fundamentally, the total taxes paid is flat.
I think most people think that the taxes paid chart looks like what it did in the late 70s/early 80s. In that chart, the poorest Americans pay about 20%, and the richest about 45%. That's where we should be, instead of where we are now.
By undisclosed I mean negotiated. When you are trying to get somebody to spend a ton of money to open a business, donate to charity, bring a bunch of jobs, etc is there a negotiation that happens to provide lower tax options to encourage that spending?
As I posted elsewhere in these comments:
Everyone expects a discount on goods and services when purchase in bulk.
Why should taxes be any different?
Some would argue that taxes are different because of the issue of fairness in society, and for the fortunate who have vastly more than needed to survive, more should be expected to help everyone else. This is in the self interest of the wealthy, as economic growth is actually stunted by inequality.
There are other ways to balance fairness other than progressive taxation, but those too are often anathema to ruling economic policy makers.
Perhaps I should have prefaced by previous comment with “playing devils advocate”.
There’s at least one perspective where this makes sense:
Everyone expects a discount on goods and services when purchased in bulk.
Why should tax be abt different?
2011: The rate is mostly flat, especially above the 80-90%ile. The 99.99%ile pays the highest.
2018: The 99.99%ile pays the highest, the Top 400 appear to be paying a lower rate than almost anyone.
Somewhere between 2003 and 2011, the 0-10%ile began paying more than the immediately higher percentiles.
Citation needed. Saying the US has "only one" progressive tax is a bit ridiculous. The income tax is by far the largest tax almost anyone pays. It's certainly the largest tax I, and everyone I know, pay. And that only increases as you get richer.
Correct. Which is why income is such a miniscule fraction of the 1% (and above's) earnings. It's all out there in the open. Pick any CEO in the top-100 corporations. Look at their income. Then look at their overall earnings. The bulk falls under capital gains due to stock. Then there is deferred compensation, where taxes are lowered even MORE if you agree to postpone being paid. There are so many clever ways for the very very rich to avoid taxes it boggles the mind.
So go ahead and keep talking about the income tax, they've got you distracted.
The top is about 3.5 millions people. Being one of the top-100 CEOs is very, very different from being a random one percenter.
Warren Buffet is probably the easiest person to look at here. A quick google says that [0] he made $11m in 2016, and on that he paid $1.85m in federal income tax, and he claims a large portion of the remainder was paid in state tax. Even ignoring his state taxes, yes he paid a marginal rate of 16%, but he still paid more in income tax than the average 1%er's salary. I'm certainly not a right wing advocate, but the spin associated with the "rich are not paying enough tax" doesn't really help the conversation much.
[0] https://fortune.com/2016/10/10/presidential-debate-donald-tr...
The amount he made in 2016 is the point of contention. Sure he made 11m in income, but for that same year, BRK.A increased a staggering 25% in share price. Even if Buffet owns a 1% of BRK.A, that represents a paper gain of 4 Billion dollars.
Now, sure, he might not have sold any stock so that won't count against his capital gains tax, but to me, its a bit deceptive to say that Buffet only made $11M.
(California is not one of those states, due to Proposition 13, which is also very controversial and is argued to be one of the causes of California's rising housing costs)
When it comes to "if the rich are being taxed enough", you bring up a good point - if my home rises in value I pay more - however Buffet makes several billion in paper gains, and his taxes are largely unchanged.
> However, the day Cook was awarded his multi-year payday Apple immediately withheld and sold 656,117 of Cook’s shares to cover his tax bill. All told, Apple sold $70.9 million in Cook’s stock at a price of $108.03, equivalent to or 52.1% of Cook’s total $135 million performance award.
You’re talking about a relatively small number of investors who derive most of their income from capital gains. (Capital gains account for just about 6% of total personal income.) It just so happens that many prominent examples (Trump, Buffet, Romney) happen to fall into that group. But even among CEOs, professional like Jack Welch (who pays over 30%) will take a lot or most of their compensation as ordinary income.
* FICA, which is strongly regressive at the higher end.
* Sales taxes, which are also strongly regressive since (citation needed) the poor likely pay more of their income on taxable goods. ("There's only so much filet mignon you can eat," according to a government professor I once had.)
* Property taxes.
* Fees.
Try sales taxes. The poor aren't excluded from them, yet someone who is poor is far more likely to spend a larger percentage of their income on them than anyone with enough income to save and invest.
The estate tax is very progressive, at 40% for estates over $11.4m, and 0% for estates worth less.
One of the most important things to understand about tax discussions is that there are two broad classes of "rich" -- high paid salaried employees vs. wealthy investors.
When you see claims like "the top 20% of people pay most of the taxes", that's mostly the high paid salaried employees. Cardiologists making six figure salaries pay high tax rates, and there are a lot of doctors and lawyers and engineers in the population, so they pay most of the taxes.
When you see claims about rich people paying low tax rates, that's corporations and wealthy investors hiring accountants to minimize their taxable income.
The distinction is really important because it means the problem isn't marginal rates, it's the complexity of the tax code which allows people with large fortunes to game the system. A simple VAT with some kind of dividend/UBI to make it more progressive would eliminate most of those games. It would also mean that individuals wouldn't have to file tax returns at all, which would save hundreds of millions of man hours every year.
If you have a product that goes from mine to mill to factory to wholesaler to retailer to consumer, the tax is paid five times. But if the same company owns the mine as operates the retail store, it's paid only once.
That's an insurmountable advantage for vertically integrated companies, so no others remain and tax-wise you end up with the same result as sales tax or VAT (i.e. the tax is paid on the total final value) except that you've needlessly destroyed every non-vertically integrated business.
That is the problem that VAT solves, by giving longer supply chains the same tax treatment as vertically integrated corporations.
The difference can be explained by this completely made up example: A steel mill buys iron ore for $1 a kilo and makes steel of that. A nail factory buys steel for $1.50 a kilo and makes nails of that. A distributor buys those nails wholesale for $2 a kilo. A hardware store buys those nails from the wholesaler for $2.50 a kilo. A contractor buys those nails from the hardware store for $3 a kilo. The subcontractor bills $3.50 a kilo for those nails. The general contractor bills you $4 a kilo for those nails.
With VAT you/the general contractor/all businesses involved pay taxes on a total of $4.
With a transaction tax, it would be paid on $17.50.
But the above is a simplified example. In the real world there are probably a lot more businesses (each specializing in their own niche) and therefor transaction involved in getting that nail into your wall.
Because it would seem to me that consumption of low-income earners will trend toward below-the-median while consumption of the wealthy will trend toward above-the-median, giving you an additional handle to make this taxation progressive.
IMHO it’s easier to construct a “fair” tax system on the income side than on the expenditures side, provided you count all income equally. Currently income from labor is usually taxed higher than income from investment, and that’s not fair.
Yeah, nor do most people.
The date he announced that? September 10, 2001. The section of the Pentagon hit? The accounting wing with all the records.
They could have just like not said shit.
It's amazing how often conspiracy theories rely on the Illuminati DMV
EDIT: According to other comments who explained what's wrong, the "facts" are wrong and belong into the realm of "911truther" propaganda.
Pretty much every 9/11 truther cites "facts" but then has trouble when the facts turn out to be not true or are willful, limited misinterpretations of reality.
The NYT article claims that’s the absolute value of cooked assets and liabilities rather than the net amount but in truth it’s misappropriation so many levels deep (and recursive in parts) that you can’t even tell whether dollars are being made or lost. Purposely, I can only presume.
Perhaps if your goal is peace of mind rather than correctness. All crazy things are not necessarily coincidences.
The 10th of September, 2001 was a Monday. What percentage of announcements are delayed until the start of the business week? How close did this particular announcement come to being delayed to Tuesday (in which case it wouldn't have even happened)? There are so many factors that pivot on the most tenuous or whimsical of things that it actually is borderline ridiculous to read too much into any one single aspect of it.
¹ I mean that I don't believe in the average conspiracy, but I love reading about them for the entertainment value
As for what I infer is an implication of the 9/11 attack being motivated by a desire to cover this up, I can't find any reference to the outer ring of the west wing of the Pentagon being "the accounting wing". Even if it were, I can't imagine that we're doing our federal accounting in the 21st Century on paper that's stored only in one central location.
That said, the military is in fact missing a ton of money and is not in compliance with laws that require annual audits of all federal departments. That's a huge problem that should be addressed, but I see no evidence whatsoever that it's in any way related to 9/11.
You don't orchestrate an elaborate cover-up, and also publicly announce the thing you're trying to cover up.
https://www.c-span.org/video/?c4623026/donald-rumsfeld-speec...
https://www.cbsnews.com/news/the-war-on-waste/
https://www.quora.com/What-does-the-missing-3-trillion-dolla...
But the section of the Pentagon that was hit was not the "accounting wing". There is (and was) no "accounting wing". The specific areas that were hit were mostly "Naval Command Center" and "Defense Intelligence Agency", but even then, the area was relatively unoccupied due to renovations that started in 1998.
https://en.wikipedia.org/wiki/File:FirstFloor_Pentagon_Bodie...
https://media.washingtonpost.com/wp-srv/national/images/pent...
https://en.wikipedia.org/wiki/American_Airlines_Flight_77#Cr...
https://en.wikipedia.org/wiki/The_Pentagon#September_11,_200...
It wasn't "wait, wtf happened to all this money? >:( ".
It was more "ah crap, we didn't do a good job tracking all this money... :*("
The nuance is subtle and easily hand-waved away by truthers, but such is politics.
Or have, or at least have once had, a lucrative side business (military personnel can do this, legally.)
Or have inherited money.
Or have a spouse with a greater income or inheritance.
Or restore cars, such that the market value of their vehicles vastly exceeds the purchase price.
Or purchase cars that have significantly appreciated in value for other reasons (lots of high-end luxury cars that are limited run not only are pricey but limit sales to selected buyers, and the market value of the cars is almost immediately much higher than the purchase price and appreciates rapidly.)
Or a combination of the above.
Of course, it's also possible the general saved up, or made lucky investments, or married into money, or there was an exaggeration or misunderstanding.
seems like a general with a 40 year career who could (and did) save all of his money could have accumulated a few million dollars in cars without very many shenanigans, if that was their sole financial goal in life.
[0]: https://www.navycs.com/charts/2019-military-pay-chart.html
The other thing that can confuse this issue is that Generals and Admirals generally (sorry) keep their titles after retirement. So if you have "Gen. James McClinton" on your board, that doesn't speak to whether or not they're active.
From looking around, it looks like board recruitment efforts toward Admirals and Generals are targeted at those who are retired or nearing retirement: http://blogs.reuters.com/financial-regulatory-forum/2012/01/...
https://ogc.osd.mil/defense_ethics/resource_library/deskbook...
I kind of got the impression that the military isn't seen in that way in the USA and didn't have such a high social status
By no means are officers all from wealthy families, but those folks are definitely over represented.
Of academy, ROTC, OCS, and direct appointment, I'm relatively certain that, unless things have shifted recently, the academies are the least significant source of commissioned officers in the US military overall, rather than the second major entry point.
Here is their title verbatim: > IRS: Sorry, but It’s Just Easier and Cheaper to Audit the Poor
Here is the article's first sentence, verbatim: > The IRS audits the working poor at about the same rate as the wealthiest 1%.
They go on to say this: > ProPublica reported the disproportionate audit focus on lower-income families in April.
Per their own sentence, the poor and rich are audited at the same rate yet they go on to label this "disproportionate". That makes no sense.
Furthermore, they have defined rich and poor in arbitrary ways - the top 1% of taxpayers by income versus EITC recipients. The latter group is 25 million people - 7.6% of the US. So per capita, the "rich" are getting audited more frequently.
They point out that while the rates may be similar, the impact is disproportionate. The rich have the means to hire a tax attorney, probably have a CPA who kept detailed records, etc. EITC recipients don't even know where to start in responding, and as the article indicates, many don't as a result.
Audits are often driven by the type of deduction. Some are hard to get fraudulently (401k deduction) while others are easier (rental income).
A guy pulling in $500k in salary probably shouldn’t be audited, but someone pulling in $20k in adjusted rental income might need to be.
https://projects.propublica.org/graphics/eitc-audit
"As we reported last year, the IRS audits EITC recipients at higher rates than all but the richest Americans, a response to pressure from congressional Republicans to root out incorrect payments of the credit. The study estimates that Humphreys [County, Mississippi], with a median annual household income of just $26,000, is audited at a rate 51 percent higher than Loudoun County, Virginia, which boasts a median income of $130,000, the highest in the country."
The article doesn't define rich as "the top 1% of taxpayers"; it simply notes that EITC recipients are audited more frequently than all but that top 1%.
"The five counties with the highest audit rates are all predominantly African American, rural counties in the Deep South. The audit rate is also very high in South Texas’ largely Hispanic counties and in counties with Native American reservations, such as in South Dakota. Primarily poor, white counties, such as those in eastern Kentucky in Appalachia, also have elevated audit rates.
"The states with the lowest audit rates tend to be home to middle income, largely white populations: places like New Hampshire, Wisconsin and Minnesota. Generally, the IRS audits taxpayers with household income between $50,000 and $100,000 the least."
From the article more directly linked with the clickbaity headline, in fact, that headline is also supported if you keep reading the article:
"On the one hand, the IRS said, auditing poor taxpayers is a lot easier: The agency uses relatively low-level employees to audit returns for low-income taxpayers who claim the earned income tax credit. The audits — of which there were about 380,000 last year, accounting for 39% of the total the IRS conducted — are done by mail and don’t take too much staff time, either. They are 'the most efficient use of available IRS examination resources,' [IRS Commissioner Charles] Rettig’s report says.
"On the other hand, auditing the rich is hard. It takes senior auditors hours upon hours to complete an exam. What’s more, the letter says, 'the rate of attrition is significantly higher among these more experienced examiners.' As a result, the budget cuts have hit this part of the IRS particularly hard."
60% of 1000 is less than 60% of 2 million. The cost/benefit of auditing the poor is likely inverted at a small scale. At a large scale, it's the right call. It makes sense, from a particular point of view.
In effect what they wanted was for their citizens to be able to write off a much higher level of state and local taxes against the Federal tax debt owed. This is how high tax states in turn claw back money their citizens would other pay to the Feds, by being able to write it off Federal taxes State taxes can be increased and the burden passed along.
Not much different than some subsidies that favor wealthy households over all others in the form of "saving the environment". Watch how holier than thou a hand out is defended with to understand how money is given back to those least needing it. I am guilt of accepting the $7500 handout TWICE for EVs. I have always though that it should have been restricted to much less expensive cars to encourage their development but instead the Federal credit has no limit, car price or income level. IF you pay that much Federal Tax you got it back.
So don't just focus on how much the "rich" pay or don't pay, also focus on all the handouts to people with good to great incomes just masked behind feel good names. (education - in particular master and higher degrees is a subsidy to the same)
[0] https://reason.com/2019/10/07/federal-court-rules-against-bl...
I don't think you should feel bad about accepting the EV tax credit. The purpose of that is to help jump-start the industry; restricting it by income level would have diminished the desired effect. I haven't bought an EV (yet), but I'm glad you have.
Relevant Article: https://www.citylab.com/life/2017/09/the-rise-of-public-sect...
What yall think?
You have a strange life for that to be considered a "tip".
I'm usually ok with the Federal Reserve or Green Peace or Humane Society or whatever.
https://en.wikipedia.org/wiki/Distribution_of_the_FairTax_bu...
I don't agree with that definition of "fair", and I think it would further exacerbate wealth inequality.
And one of their roles is in ensuring the interests of those lower down the income scale (which in this case even includes senior salaried professionals and only moderately successful business owners) such that they do not have an undue burden simply because somebody with far, far greater means has decided to arrange themselves some kind of labyrinthe with the express purpose of ensuring they outwit the rest of society. In this case it of course makes sense to make them feel the burden of their own creation rather than burdening the rest of society with it.
This is not a responsibility of government as described in the constitution the united states.
At least when a wealthy person dies it's easier to count their wealth because there are strong incentives on the parts of the people who stand to inherit their wealth to make sure it's all counted correctly.