But it will benefit ALL Americans

“What this country really needs is an upper income tax cut coupled with a middle- and lower-income tax increase a week and a half before Christmas!

Stop that moaning! Just remember: If you're not with us, you're against us!

Bush studying whether wealthy bear too much of tax load

Tuesday, December 17, 2002, By Jonathan Weisman
The Washington Post

WASHINGTON — As the Bush administration draws up plans to simplify the tax system, it is also refining arguments for why it may be necessary to shift more of the tax load from wealthier taxpayers onto lower-income workers.

Economists at the Treasury Department are drafting new ways to calculate the distribution of tax burdens among different income classes, which are expected to highlight what administration officials see as a rising tax burden on the rich and a declining burden on the working poor and middle class. The White House Council of Economic Advisers is also preparing a report detailing the concentration of the tax burden on the affluent and highlighting problems with the way tax burdens are calculated for the poor.

The efforts would thrust the administration into a debate that until now has lingered on the fringes of economic policy: Are too few wealthy Americans paying too much in taxes for too many, and should the working poor and middle class be shouldering more of the tax burden?

”

“I'm ok with a progressive tax, it makes sence!”

“ha ha”

“Tom Tomorrow does great stuff! The website is a scream.”

“In the name of fair and balanced coverage:”

“"America divided by Democrats: "The Non-Paying Class"

Wall Street Journal | Nov 20, 2002 | Editorial

The stars look to be in perfect alignment for tax relief. With a GOP majority in both houses of Congress, the Bush Administration is making eager and energetic noises, and the economy is in what Fed Chairman Greenspan calls a soft spot.

But as the Republicans construct their tax plan, there is a large and under-appreciated fact they would do well to keep in mind. Over the past decade or so, fewer and fewer Americans have been paying income taxes and still fewer have been paying a significant percentage of income in taxes. While we would opt for a perfect world in which everybody paid far less in taxes, our increasingly two-tiered tax system is undermining the political consensus for cutting taxes at all.

Even the barest of glances at tax data reveal a system that is steeply progressive. Tax revenue has been increasingly squeezed out of top earners. According to the most recent data, from 1999, the richest -- with income above half a million dollars -- constituted 0.5% of taxpayers but accounted for 28% of total tax revenue. Simply put, a tiny group of people (553,380) were responsible for more than one-quarter of the income tax take of $877 billion.

Well, maybe you're saying -- so what? They can afford it. Then take a look at those who aren't Richie Rich. The most recent data from the IRS, in 2000, show that the top 5% coughed up more than half of total tax revenue. Specifically, we are talking about folks with adjusted gross incomes of $128,336 and higher being responsible for 56% of the tax take. Eyebrows raised? There's more. The top 50% of taxpayers accounted for almost all income tax revenue -- 96% of the total take.

These numbers are more arresting when compared with the situation 14 years earlier. In 1986, the top 1% paid 26% of revenue, the top 5% was responsible for 42% and the top half contributed 93%. And what about the bottom half of taxpayers? They accounted for 7% of the total in 1986 but only 4% in 2000.

This skewed reality is the result of a growing number of absolutely legal escape hatches. Consider what happens to those in the lowest bracket. Say a person earns $12,000. After subtracting the personal exemption, the standard deduction and assuming no tax credits, then applying the 10% rate of the lowest bracket, the person ends up paying a little less than 4% of income in taxes. It ain't peanuts, but not enough to get his or her blood boiling with tax rage.

Of course, lower-income workers are on the hook for the payroll tax -- but a sizable group slip free from even that net tax liability via the refundable earned income tax credit. ("Refundable" means that even if your net income tax liability is zero, the government still writes you a check.)

These numbers represent only people who have a positive adjusted gross income. In 1999, there were 127 million tax filers, 94.5 million of whom showed an income tax liability. That is, 26% had no liability at all. The actual number of people filing without paying comes to 16 million (after subtracting those getting earned income tax credits and thus, presumably, still somewhat sensitive to tax rates). So almost 13% of all workers have no tax liability and so are indifferent to income tax rates. And that doesn't include another 16.5 million who have some income but don't file at all.

Who are these lucky duckies? They are the beneficiaries of tax policies that have expanded the personal exemption and standard deduction and targeted certain voter groups by introducing a welter of tax credits for things like child care and education. When these escape hatches are figured against income, the result is either a zero liability or a liability that represents a tiny percentage of income. The 1986 tax reform, for example, with its giant increase in the personal exemption and standard deduction, took six to seven million people off the tax rolls.

This complicated system of progressivity and targeted rewards is creating a nation of two different tax-paying classes: those who pay a lot and those who pay very little. And as fewer and fewer people are responsible for paying more and more of all taxes, the constituency for tax cutting, much less for tax reform, is eroding. Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else. They are also that much more detached from recognizing the costs of government.

All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.”

“Low-Income Taxpayers: New Meat for the Right


By E. J. Dionne Jr.
Tuesday, November 26, 2002; Page A29; The Washington Post

Prepare yourself for the latest cause of the political right: You are about to hear a great deal about how working Americans at the bottom of the economy are not paying enough in taxes.
I am not making this up. The Wall Street Journal's editorial page always provides important clues about the Next New Thing among conservatives, and there it was last week assailing "The Non-Taxpaying Class."

You'd think the tax-cutters on that page would be happy with a policy begun under Ronald Reagan to lift the income tax burden from Americans struggling to get by on modest paychecks. But no, it seems that because of our tax structure, the favorite causes of supply-siders -- big tax cuts for wealthy Americans and investors -- are just not popular enough. "While we would opt for a perfect world in which everybody paid far less in taxes," the editors write, "our increasingly two-tiered tax system is undermining the political consensus for cutting taxes at all."

The editorial writers are roiled by the fact that the richest Americans, those with incomes of more than $500,000 a year, account for 28 percent of total tax revenue and that the top 5 percent "coughed up more than half of total tax revenue." The Journal contrasts these unfortunate souls with the thriving person who earns $12,000 a year and ends up "paying a little less than 4 percent of income in taxes."

Worse yet, various tax credits, mostly aimed at helping families raise children, further reduce the income tax burden on low-income folks to the point that "almost 13 percent of all workers have no tax liability and so are indifferent to income tax rates. And that doesn't include another 16.5 million who have some income but don't file at all."

Then comes this remarkable sentence: "Who are these lucky duckies?"

"Lucky duckies"?

Now, I credit my friends on that editorial page with strong principles and powerful feelings of compassion toward high-end taxpayers. But it will certainly come as news to low-income families getting by on two small paychecks that they are lucky duckies.

And the truth is, low- and middle-income people do pay a lot in taxes. They just don't happen to pay the taxes that supply-side conservatives want to cut.

The Journal's editors make only a passing comment on payroll taxes. But the basic FICA tax takes a much bigger share from middle and low incomes than from large ones. The 6.2 percent tax applies on incomes up to $84,900, meaning that if you make that or less, you pay the full 6.2 percent. But Richard Sims, the policy director of the Institute on Taxation and Economic Policy, took the recently published example of a top CEO who earned $122.5 million in 2000 and calculated that his FICA tax rate was 0.00043 percent. Lucky ducky.

Sims also notes that sales and excise taxes hit hardest at low- and middle-income people who have to spend most of their earnings on taxable items, can't save a lot, and don't put much of their money into financial, accounting and legal services, which generally aren't taxed.

According to Sims's figures, the bottom 20 percent of Illinois residents pay 10.8 percent of their income in sales and excise taxes, compared with only 1.4 percent paid by the top 1 percent of earners. In California, the comparable figures are 7.4 percent and 1.0 percent; in Arizona, 8.1 percent and 1.2 percent; in Colorado, 5.1 percent and 0.8 percent.

Yes, the wealthy are paying more in federal taxes, but for reasons that are good news for the wealthy -- "largely because they receive a much larger share of the total income in the nation," says Isaac Shapiro of the Center on Budget and Policy Priorities. Between 1979 and 1997, the last year for which figures are available, the average after-tax income of the top 1 percent of households, adjusted for inflation, rose by $414,000 -- a 157 percent gain. For the middle fifth of households -- the middle of the middle class -- the comparable gain was 10 percent, or $3,400. The bottom fifth was stagnant.

Over the past generation, the federal government's best deed for the working poor -- it started with Reagan and gained momentum under Bill Clinton -- was to reduce federal taxes on their labor and give low-income families an additional boost with the Earned Income Tax Credit. If the goal of welfare reform is to encourage work, we ought to be thinking of more ways of lifting the fortunes of the poorly paid. That's not class warfare. It's good policy. The last thing we need to worry about is whether poor Americans are taxed too little.”

“Tom Tomorrow comics are real cool!

Increasing the tax burden on the lower classes IS CLASS WARFARE!

The lower classes have been falling behind inflation for years.....THAT is class warfare too!”

“The richest made "his" money off the poorest.

He didn't just conjure up that money.

Its a symbiotic relationship.
If the parasite(the ambitious and agressive) sucks too much out of the host(the rest of society), the body will perish.”

“Assuming that's accurate, it's still only part of the picture, Fritz.

I'd like to see that thought experiment run again including payroll taxes, sales taxes, property taxes, income taxes... ALL taxes.

You might want to toss in User Fees as well. The Corps of Engineers is going to DOUBLE the entrance fees at the local parks they manage in my area as of January 1st. Are they doing that where anyone else lives? or am I just lucky?”

“No one else just you.”

“96% of income taxes are being paid by people that make over $30,000 per year. Sounds fair to me.”

“Well, thats where the money is.”

“We need to legalize prostitution, and start taxing the hell out of pimps.”

“The funny thing is that the WSJ article points to how the tax burden has increased disproportianately for the rich. It doesn't mention the fact that this is become income has risen disproportionately for the rich.”

“i'm going to tell Raddy and Tarpy you said that, Buddha!!”

“What is considered "Rich" ped? Folks that make over 30K?”

“damn, i must be loaded!”

“The WSJ article defined rich as those individuals with adjusted gross incomes of $128,336 and more. Maybe not 'rich' but pretty comfortable.”

“damn, violin must be loaded!”

“Well... it is after lunch.”

“Between 1979 and 1997, the last year for which figures are available, the average after-tax income of the top 1 percent of households, adjusted for inflation, rose by $414,000 -- a 157 percent gain. For the middle fifth of households -- the middle of the middle class -- the comparable gain was 10 percent, or $3,400. The bottom fifth was stagnant.

what that is saying is that between 79-97 the top 1% received a %157 pay raise, the middle 5th %10...”

“I laugh to myself at your worthless capitalism.”