Related: 61% of Americans paid no federal income taxes in 2020
https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-...
https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-...
> Remember, this reflects only those who pay no federal individual income tax. TPC estimates that while the number of households paying neither payroll nor income taxes also rose significantly, roughly 4 out of every 5 did pay one of these two taxes.
The trick is that "income tax" is used as a technical term in the headline, while the colloquial use of it is quite different (average readers would probably consider their payroll tax to be "income tax").
[0]: https://www.taxpolicycenter.org/taxvox/covid-19-pandemic-dro...
Based on the headline, I would have assumed that 57% of people had enough deductions/low enough income to be below the bottom income tax bracket. Which is correct, based on what you said.
So its very easy to use this to your advantage and appeal to emotion, when convenient, or pass tougher tax laws that never affect you, which is even more convenient.
I did an anecdotal test with a few people near me. They read this as those people pay no taxes. Most people aren’t thinking about the specifics of state, federal, FICA (SS + Medicare), sales, property, and more.
I can’t think of any good faith reason this is done.
Because the majority (50%) of the money spent by the US Federal government is mainly from federal income tax.
https://www.taxpolicycenter.org/briefing-book/what-are-sourc...
[1] - https://www.taxpolicycenter.org/model-estimates/tax-units-ze...
It doesn't make a lot of sense, but the fact of the matter is that the phrase "income tax" as commonly used does not include payroll taxes. "Income tax" refers only to the tax on "taxable income", i.e. your net income after deductions and credits. Payroll tax, by way of contrast, is taken from the very first dollar you make, so the only way you can avoid paying that is if you are unemployed. Saying that "61% of Americans do not contribute to the pool of money that is spent by the federal government as a result of their income" is tantamount to saying that 61% of Americans are unemployed, which is plainly not the case. (BTW, "income" in the sense of "income tax" does include dividends and capital gains, which are not subject to payroll taxes. So it is possible to make millions while unemployed and pay no payroll taxes. That is actually not uncommon. In fact, it's the norm among retired people.)
But I respect your opinion, and I hope you are able to forgive me.
Like the sibling said. It should be an update or edit. Not a change of the comment entirely.
Hope you can make that change as there are a lot of comments that have replied to you.
Cheers for acknowledging you made a mistake. Like many others. That is sometimes hard for me to admit.
EDIT: This to me is another indicator of the narrative pushing and stat specifying that muddies the waters.
—-
It would be quite helpful if the net worth/wealth of individuals who don’t pay either is given as well. When that 43% figure is pointed out. Generally people only think of lower economic class people. Not situations like the previous president not paying taxes for a number of years.
Otherwise all these stats still do not change my original point that they all muddy the waters and people assume the stats are only referring to lower income individuals or “leeches” who are of lower socioeconomic levels too.
The 43.3% was the % of tax units that had a net negative income and payroll taxes (thought I doubt this included the employer side of the tax which for economics purposes falls on the worker). But that was also the Covid year.
Most years it's 25%-22%, which doesn't seem high for the poor, the disabled, and the retired.
The question I have is how to have policies that don’t hurt that 16.5%. It seems unfair to go after the elderly and take away the money they have worked hard to save. They are already being hurt by inflation, which sits at about 5%.
That’s fairly important context. 43% is not a typical number, and as you can see in the report, it is expected to return to baseline quickly.
Your total tax liability can become zero, even post the 7-ish% Social Security and such, due to the EITC and so on. For example, if you make $20,000 / yr but have two children (made up numbers), you probably end up with a sum of zero.
So I do not understand your first sentence. Maybe you can clarify.
> They do not pay Federal Payroll Taxes, because those are considered Federal Income Taxes. Why would they be different? Taxes come out of their paycheck, of which they get back from the government when their taxes are due.
> The point is that 61% of Americans do not contribute to the pool of money that is spent by the federal government as a result of their income (though they do pay as a result of sales and other taxes).
Payroll taxes are paid by the employer.
Half of payroll taxes are paid by the employer. The other half are paid by the employee.
And if the employer wasn't paying that half, they might pay at least some portion of that to the employee. And employers don't pay any payroll tax for non-employees.
This _isn't_ true at the state level, where payroll taxes may be paid by an employer and not the employee.
In the end it is a wash.
That's not true in my state.
>In the end it is a wash.
Not even close.
Show me a state that has combined (employer/employee) payroll taxes of 15.3%. What's that? No state comes anywhere close to that?
Not a wash by a long shot.
15.3% is the FICA factor (assuming not above income cap), split evenly between employer and employee. Add on top how the state, municipalities, school districts extract their payroll/income taxes, which can be 100% on employee, 50% on employee, 0% on employee, or none of the above. In Texas, it is 100% on employer. In Ohio, the split mixes and matches with some of the entities charging the employer and employee. Ergo, it's not always a 50/50 split between employee and employer.
In the end, it is a wash whether applied to employer or employee. FICA extracts the same amount, and other entities will extract their amount. Reduction by the employee or employer via credits are typically not feasible or are strongly engineered against.
Thanks, and this is my last comment on this thread. Have a good day.
The 36% on that chart is labeled "SOCIAL INSURANCE (PAYROLL) TAXES". Are you suggesting the employer pays these taxes?
There’s no breakdown of capital gains taxes. Or how much taxes are not captured because of loopholes or tax benefits that go to this segment or that segment of income level or wealth.
OTOH, I don’t know how many services come from local government that isn’t the federal government.
These are simplified examples/points. The point remains both the original stat and this one portray a skewed narrative.
I don’t think this changes anything for my original comment. One could say it even bolsters the case as it is another example of how misleading a quick stat can be.
I don't know, if you just redistribute ALL the wealth by murdering the 10% to the rest, what do you think will happen to the taxes ? What will happen to all that "the rich don't pay enough", when actually they paid everything, when it's time for YOU to pay ?
I think that's what all these people in the thread hint at.
Who do you think does most of the work across the country?
Stock owners aren’t actually doing much. They also aren’t paying high rates of taxes.
why wouldn’t one of these people think why is income tax different than capital gains tax to the extent it is.
Or why their limited money doesn’t allow them to earn money just for having money. While those top 10% can avg close to 10% a year on their saved money in the form of investments (before inflation, fees). Yet there’s no wealth tax or any other way to not make things seem illogical that the mere fact of having money begets more money.
Can these questions not be asked before either thanks or fuck you.
Do you have any sources around this info?
Agreed, and so is the title of the thread we are discussing.
> The wealthiest 10% of Americans own a record 89% of all U.S. stocks
are you sure that corporate taxes are paid by the employee and lowering taxes results in higher pay and lower prices?
As far as corporate tax incidence, the literature is pretty clear that they reduce wages. They reduce return on capital too, some estimate that a $1 corporate tax costs capital 60 cents and labor 40 cents from what I've read. Some estimates are 50/50 though. https://www.aeaweb.org/articles?id=10.1257/aer.20130570
https://www.sciencedirect.com/science/article/abs/pii/S00142...
Daddy Warbucks learns that the government is raising corporate taxes. He goes and tells his workers the government has cut their pay. He has no choice. Business necessity.
Daddy Warbucks learns that the government has cut corporate taxes. He pockets the windfall.
There is some business logic behind this: if the windfall is temporary, he doesn't want to raise salaries. That would be difficult to undo if the tax rates go back up. And whether this is the logic that actually motivates his decision hardly matters. Who can know what is in his heart? Even he doesn't. This helps him sleep at night. When he harms others his hand has been forced. When he helps other it proves his essential goodness. Fundamental attribution error FTW!
The local governments seem to focus mostly on K-12 schools, and police/fire; plus some one-off errands like the DMV and liquor laws.
The amount of federal taxes I pay is a life-changing amount if I were to get it back in a single check every year, whereas the state/city taxes of sales+property+stateincome is maybe a quarter as much.
Of course, in addition to the lying by omission, the true irony here is that the "lack" of "federal" taxes paid by the masses is more so a symptom of a deeply inequitable economic system than the counterbalancing endorsement of the status quo the OP likely envisions it to be.
How about turn your question around and ask why the top CEOs (especially in tech) pay $0 federal income taxes claim they did pay taxes when they are referencing having paid sales tax, as if not paying sales tax is even a real issue, is in good faith.
This points to the larger problem of inequality and how the water is beyond muddy now.
On paper, the super rich (and even just merely "very" rich) can even show negative incomes [1] because they can a take very low interest-rate loan (which is in a way kind of tax, but paid to the bank) backed by their assets to pay expenses thus they can show no income and no realized capital gains.
But, if you think about it, the practice is not all that different than taking out a home equity line on a house, for example.
So whomever writes that law better be really careful or else the only ones who are going to get caught in that net are the middle class.
Here is a nice article on the subject. https://www.bbc.com/news/business-57383869
[1] They would never actually do that because one needs to harvest that loss. They want to show $0 so they would sell something the balance the negative income out.
They are tax strategies that aren’t available to the rest of us, otherwise everyone would have a s-Corp/LLC pay themselves $0 salary and take everything they make as a distribution of profit to avoid payroll taxes/Medicare/SS on income, when the little guy does that it’s called tax fraud.
The fact that you took it that way is evidence of how the original comment is misleading to many people.
Here's a page which talks about the effective tax rates of, as far as I can tell, all taxes people in the USA pay:
https://itep.org/who-pays-taxes-in-america-in-2020/
This is far more useful for the discussion about how we pay for common goods than "61% of Americans pay no federal income taxes".
(Never heard of ITEP before this, but they claim to be non-partisan, FWIW.)
In practice most countries have a few hubs where most of the wealth is created (typically coastal cities), and the taxes collected there fund the rest in the form of redistribution of wealth.
It's 100% absurd and untrue to say "a very large portion of Americans don't pay for any of government" when most of us pay something every time we get a box of crackers or put gas in our tanks.
And if you're going to follow up and clarify with a much narrower way that your statement could be taken to be true, then I'd like to know why you opened with "a very large portion of Americans don't pay for any of government" instead of that much more specific -- and much less "the poors are getting a free ride" -- statement.
If you look at the second quintile and do the same math, you also get a negative result. Only at the middle quintile does it even become possible for them to spend so much locally that their local taxes offset the amount in transfers and services.
I stand by my statement that a very large portion of Americans don't pay for any government. Assuming you consider ~40% of Americans to be a very large portion. I didn't say a majority, just a very large portion. Though it is possible that a majority of households don't pay for any government, depending on the specifics of their local tax rates and spending habits. If the middle quintile doesn't spend ALL their money at a local average tax rate of 12.8%, then they don't contribute either.
0. See page 31, table 1 of 2013 Distribution of Household Income and Taxes [pdf], https://www.cbo.gov/sites/default/files/114th-congress-2015-...
The narrative in general for the statistic is about lower socioeconomic people. If this was a good faith caring about tax evasion. Why would the focus be on the people with the least income and wealth?
I don’t think it would be if that was really the problem being cared about.
And yes the sales tax is part of the point. To give nuance to such a simple statistic.
I included them to counter that narrative and the you RAN with my intent.
EDIT: To that point, you can absorb statistics from an organization but still disagree with their editorializing.
Nobody on earth would ever read "not paying federal taxes" as meaning also not paying social security, medicare, sales or property taxes.
You agree not everyone knows what payroll taxes specifically go toward or that there’s even a separation of federal income taxes and payroll taxes as distinct things, right?
It's like responding to "Joe didn't pay for his main course at the restaurant" with "yeah but he paid for some of the appetizers."
The benefits of society as a whole are not equally shared. The wealthiest in society benefit the most from a functioning and stable federal bureaucracy.
That's not anywhere in my metaphor.
> The benefits of society as a whole are not equally shared.
This is true but not relevant to my point.
> The wealthiest in society benefit the most from a functioning and stable federal bureaucracy.
This is less likely to be true and also not relevant to my point.
At this point I’m not sure what your point is if its truly your assertion that none of my assumptions were valid. (My assumptions being that we are talking about who assumes responsibility for paying for the benefits of society/governance)
This has essentially already been decided. The topic is tax avoidance, which I compared to skipping out on a bill that ought to be paid.
It's a pretty standard free rider problem. It doesn't change the problem to point out that the free rider benefits from the ride (which, of course they do) or that they benefit more from it than others, or that they paid unrelated bills.
I’d need to see some proof before assuming the statistic is a matter of avoidance rather than of explicit tax policy. If you’re claiming people who are in alignment with official tax government policy (again in the spirit not just the letter of the law) are free riders, then we are back to who should assume the responsibility for paying. As stated in my previous post.
Sure, I agree with this assessment up to first order. But this is a bit slippery because of second order effects where you can pay to have a favorable tax code created (or at least pay to substantially increase the odds of such a policy being created).
> Taking the standard deduction or simply claiming straightforward deductions like the mortgages interest deduction is not tax avoidance when done in the spirit of the law, which, anecdotally, is the case for most middle to low income filers.
I agree with this.
> I find it extremely implausible that majority of people who don’t pay income tax are doing so as a result of complex financial schemes.
For the short-term Covid-related spike of people not paying due to unemployment and temporary tax credits, sure I agree. In general case, though, the schemes don't have to be very complex and you can just pay people to set them up for you.
Also, the number or percentage of people who don't pay income tax is an indicator of how easy tax avoidance has gotten. That's why that number is quoted. But since the distribution of wealth is so skewed, what really matters in the free rider context is the amount of money not paid into the system.
And for this I don't think it's at all implausible (and is in fact consistent with what we know) to say that the wealthiest Americans pay extremely low income tax rates because of tax avoidance. (Here I am including the creation of favorable tax policy as tax avoidance if it's contrary to the spirit of the US's policy of progressive income tax.)
If that’s the case then there’s no disagreement from me.
I don't know the motives of the original poster. Since the article was about how the top 10% own ~ 90% of the stock, I assumed the relevance of the income tax figure was that it was related to its impact on wealth inequality.
Your profile is blank. If you’re up for it. Look at mine and send me an email. Every other comment I saw where I knew the comment was not logically sound but couldn’t quite word it right. You were there already having written a great response.
I haven’t updated my HN in forever. It is updated now.
If you ever reach out as someone who discovered the community I co-founded or even just try it out. I nor any one else would ever know you are this current handle. Since there’s a few inquires a week and they range a lot.
It turns out that only about 20% of taxpayers send more money to the government than they receive in aggregate across all forms of taxation and transfers. Another 20% of taxpayers roughly pay their own way, providing about as much tax revenue as they receive in transfers. 60% of taxpayers receive more in transfer payments and other distributions than they pay in taxes (not that surprising with things like Social Security).
tl;dr: across all Federal taxes and transfer payments taken as net, 20% of taxpayers are paying taxes that are transferred to 60% of taxpayers.
Individual States have diverse taxation structures, so the net taxpayer statistics likely vary widely.
This isn't much different than Rome, which of course the US is modeled on.
The only solution is a wealth tax for the next 10 years which dovetails into more sensible taxation on capital gains to prevent this from happening again.
The thing is that most CEOs of Fortune 500 companies aren't even in the 1%, which requires $11.1MM in assets:
https://www.investopedia.com/financial-edge/1212/average-net...
[1] https://www.equilar.com/reports/83-equilar-associated-press-...
Basically, Fortune 500s are probably minting about 100-200 1 percenters a year. A drop in the bucket compared to inherited and capital gains wealth.
Do you have a source for either of these claims? I can’t seem to find a clear one, especially for the latter claim.
Influenced. Not modeled on. Every republic since Cæsar has been influenced by Rome, including but not limited to its discussion on the relative benefits of monarchy, oligarchy and democracy.
There were very few republics between the fall of Rome and 1776. All basically local governments and very feeble.
Not a republic, not technically, but the English Parliament, no doubt. Bicameralism, impeachment, an executive cabinet--these did not exist in the Roman Republic.
Of course, English democratic tradition was influenced by Rome's. As was America's. But it's a stretch to say the U.S. was "modeled" on the Roman Republic. It was a new system of government. (If one were to claim it was modeled on anything, it would have to be the English government.)
That said, there was some debate over the influence of Rome on early American political debates, with others citing either "classical republicanism" or the pre-English Civil War debates on the English constitution as more important influences (for example, JGA Pocock or Gordon Wood).
Assuming you mean non-discretionary expenses. If so, that describes a third of Americans, down from half in 2002 [1]. A strong majority of Americans (a) get more money from the government than they put in, (b) own assets or (c) route discretionary income to consumption over asset accumulation.
We have an inequality problem. But the facts paint a more moderate, and thus addressable, picture than the pundits.
[1] https://www.marketingcharts.com/industries/financial-service...
Your source is from 2007. I don't have that particular figure; but in 2019, the bottom 50% of the wealth distribution continue to own almost nothing, the top 10% of the wealth distribution own 71% of all assets and the middle 40% own about 28% [1].
> A strong majority of Americans get more money from the government than they put in
This is literally the point of taxes: to redistribute resources.
> (b) own assets
See above, but ownership of assets is distributed incredibly unequally.
> (c) route discretionary income to consumption over asset accumulation
This argument that poor people remain poor because they make bad choices (formally called "culture of poverty") has been heavily criticized. Most economists and sociologists now reject it and have done so for over 30 years.
[1] https://wid.world/share/#0/countrytimeseries/shweal_p50p90_z...
Not sure where it was called a bad choice. It's simply a preference for consumption today over asset accumulation. For most people, that's a fine and comfortable way to live.
The difference between earning $100K and $500K for most developers, for example, is [most] of that extra income going into investment assets; that's because the first $100K covers most of the fixed costs, and short of luxury purchases, there's not much more you need day-to-day. The gap between earning $30K a year and $100K a year is way bigger in terms of QOL than between $100K a year and $1M a year.
(I'm in between both worlds in a way since I have friends making < 30K a year and > 200K a year and I have two careers, one high income and one relatively low income and have thought about the issues quite a bit)
Which is not a paramount motivation for everyone.
It's very simple.
As a nearby comment said better than I could (thanks whakim! for https://news.ycombinator.com/item?id=28907429 ), the "culture of poverty" idea has been discredited for decades, yet it persists because it's certainly easier to blame individuals than change a system that so severely disfavors them.
Your link just says "most economists and socioligists agree" btw, it didnt source it. Also it said the point of taxes is to redistribute resources which us heavily contested and a lot of ppl disagree, stating that as fact not opinion makes the other stuff it says look less credible because clearly it has an agenda.
So does suggesting that a poor person could join the moneyed elite by foregoing their $13.99/mo Netflix to purchase assets -- if that isn't an agenda, I don't know what is.
Why, by saving that $168 a year, they could easily afford a single share of Alphabet (currently at 2,846.31) in, what, 16 years?
Im saying that some people who dont have enough could be in a better spot with better choices and that some personal finance education might help. Not everybody privileged enough to have parents who can teach them to be financially savvy. So high schools probably should.
Salary, salary, salary. If you're making $200K, none of the above even register (saving $200 a year? or even 2K by forgoing a latte every day - who cares? it won't make an iota of difference). If you're making $30K / year, you could do all of the above, forgo every single pleasure in life and you've still got a huge uphill battle.
But that's not really the point, I think. The idea that (most) people remain poor for reasons _other_ than their choices is difficult to credit. Obviously their choices are only the _proximate_ cause; there may be structural factors causing those choices in the first place, but most people who are poor (as in, do not have assets) are not poor because they are being literally robbed at gunpoint. Imagine two people living in the same neighborhood:
Person A makes $30k/year and saves nothing. Person B makes $35k/year and saves nothing.
Person B is _making choices_ that are different from Person A - they are spending an additional ~5k/year on _something_. You can come up with all sorts of reasons why those choices are reasonable - I sure as heck understand not spending the bare minimum on life's necessities - this isn't a moral judgment! But those choices are being made and they have fairly predictable long-term consequences. If it's possible to live on 30k/year in some set of circumstances, anyone who then occupies comparable circumstances and earns more than 30k/year has a choice to either live below their means... or to not do that. You don't need to call them "bad choices" for this to be true.
Certainly there is a non-trivial number of people whose starting circumstances were such that they truly had no good options, but that's not most people who could reasonably be described as "poor".
https://www.investopedia.com/terms/m/marginalpropensitytocon...
At a median wage of 50k a year...is there discretionary income or are large amounts of people living paycheck to paycheck in America?
The issue is that there are too many people earning less than x.
https://taxfoundation.org/publications/latest-federal-income...
Why do you think that if they receive 47.7%, they should pay 90% of the taxes?
Also if you haven't figured out by now that the investor class has figured out how to shelter almost all of their income from taxation, you haven't been paying attention. Time to make them work for their tax dodging ways again IMO.
I am also aware of previously badly implemented wealth taxes that hit just about everyone because of their very low threshold. So have a high threshold this time, say 10 or 50 million $$$, problem solved.
Maybe I would feel differently if I were one of the lucky few with a bug out bunker/castle/estate in New Zealand or inside a dormant volcano, but alas.
While I always enjoyed having that extra ~6.25% in my paycheck after I hit the limit every year, it didn't make any material difference in my spending/saving or quality of life.
I expect that's the case for most (if not all) folks who exceed that limit.
And since removing those limits would keep the US social security and medicare chugging along nicely for the next 50 years or so, while not doing so will require cuts in benefits within a decade or so.
While it's not a certainty, it's more likely that we'll come up with better ways to fund healthcare in 50 years rather than in ten.
As such, it makes sense to remove those wage limits on FICA[0] payroll taxes.
It seems so wasteful. Its a terrible deal for everyone involved, really. Those who made a lot of money and had to pay a lot into SS made terrible returns and would have been better off investing the money. Those who only made a little, and only paid in a little, do not get paid enough to live off of anyway and would have been better off seeing that money in their paycheck.
The only people who benefited from SS were the people retiring soon after is was implemented. Everyone else is worse off, but nobody wants to get rid of it because then they won't get to collect.
It means their income is very low: OP is just pointing out how US society is very very polarized between a small group rich owners (10% that own almost all the stocks) and and a big group of poor people (60% of the population).
> Federal income taxes do not include payroll taxes. The Tax Policy Center estimates that only 20% of households paid neither federal income taxes nor payroll taxes. And “nearly everyone” paid some other form of taxes, including state and local sales taxes, excise taxes, property taxes and state income taxes, according to the report.
Nice cherry-picked, but meaningless, statistic you've got there.
That would be true if it were a credit, but it is a deduction.
From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.
"Trends in Income From 1975 to 2018" https://www.rand.org/pubs/working_papers/WRA516-1.html
Also the 2020 tax code changes allowed for 100% deductions against your income for donations to some kinds of non-profits. That plus being able to withdraw from 401ks, plus having large drops in income, means many people would not have anything to pay. You can always spend more than you earn (on certain things) and nullify your taxes that year. You just have to have more than you earn already, whether its savings, credit card debt, or other capital. So it should be obvious thats not an experience most people ever have, if they are barely making ends meet to cover living costs monthly. But its always available.
https://static01.nyt.com/images/2019/10/04/us/tax-trump-weal...
Is there a particular point you are trying to make, here?
Almost half of americans have no federal "income tax" liability. They still pay a ton of federal tax on every paycheck they receive. Their income is absolutely taxed.
(many people get confused and interpret social security and health insurance withholdings as taxes).
I would probably even go so far as to call insurance a tax as well since I am legally required to pay it. I may have my choice what company administers my policy but they're effectively private arms of the government.
We won't know for at least another five years at a minimum.
Then, of course, there's unearned income -- very much so related to the topic of "stock ownership" that started this thread -- which, by definition, is acquired not through any meaningful contribution of labor to the "economy", but instead as a reward for the incidental private claim to profits our economic system happens to allow to people.
Do you expect to squeeze blood out of a stone as well?