Do the rich pay taxes?

[CaptUSA]

What percent of income taxes would be "falr"? If a group has 70% of the wealth is paying 45% of the taxes "too much"? How do we determine "fairness"?

You could start by not looking at people as groups.

Fairness will never be achieved by categorizing someone and then determining their "fair share". Fairness is achieve when each individual is treated the same regardless of what groups one belongs to.

[CaptLouAlbano]

Look at the statistical data on the Dept. of the Treasury website. You can find the data here.

The top 10% earners in this country pay like 3/4 of the income tax burden. The top 50% pay nearly the entire income tax burden. Anyone who says 'the rich don't pay taxes' is completely ignorant.

As far as business owners passing along tax/regulatory costs... yes, they will do that as much as they can because that is a baked in 'cost of doing business'.

The rich don't pay taxes in the sense that the costs of taxes are passed onto the consumers. Yes, I write a really big check to the IRS every quarter, but that money is just a cost of doing business like utilities, etc. The only "rich" people that are paying taxes and not offsetting them to consumers are the "working rich" (i.e. people earning over 250K per year through salary only - think a husband and wife that are both actuaries, anesthesiology nurses, or other six figure 40/hr a week job)

This is something that conservatives need to point out to dispel the class envy argument pushed by the left. The people that are really hurt by "taxing the rich" are the poor and middle class because the costs of goods and services will increase and/or wages will decrease.

[Zippyjuan]

Figures I saw earlier today indicated that it only takes $140,000 a year to qualify as the Top Ten Percent. But the "rich" don't just get income from wages but from investments as well. They are also more able to take advantage of deductions and exemptions than those at lower incomes.

[jmdrake]

On another thread the topic of how much tax the rich pay came up. According to everyone but me, the rich do not pay any taxes, they simply raise the price of the good they produce to cover for the tax hike.

Here's an example:

"The rich do not pay taxes, we pass the cost of taxes over to the consumers. I am retired, and 90% of my income comes from rental income. If tax rates go up, then rents will go up - plain and simple."

I can understand the business owner would try pass the cost on to the consumer but doesn't this violate the basic laws of supply and demand? If you raise the price of a good, demand for that good will fall and your profits wil be reduced at some point, correct?

Suppose you sell widgets. Your cost is $1 and you sell the widgets for $2 and the tax rate is 0%. The demand for those widgets is 1 million in a year so you make a profit of a million dollars. Now suppose the tax rate is 50%. So you raise the price of the widget to $3 to cover the tax increase. But here's the catch. At 3$ a widget you can't sell 1 million widgets! So your profit gets reduced. So you ARE paying taxes.

All of your competitors have to pay the same amount of tax. So unless one of them is willing to cut into his profits, all versions of said widget will cost more. If the widget is something consumer either have to have or want so bad that they don't mind paying extra, they will pay extra and all of the tax will be passed on.

Here's a practical example. When gas prices go up, for whatever reason, people keep doing the same base level of driving. Sure, some discretionary driving goes away, but in the end people still have to drive to work or take public transportation which also has to use some kind of fuel or energy. If the federal gasoline tax was raise you can bet your bottom dollar that would be passed on to the consumers.

[Danan]

You are correct. Higher taxes means higher gross prices, which means less profit for the seller (even with a "fair tax" for all transactions) and fewer goods for the buyer.

Whether the consumer or the producer has to transfer the actual tax to the government doesn't matter at all.

http://en.wikipedia.org/wiki/Tax_incidence

[Madison320]

If that is the case, then I stop selling widgets and I start selling something that I can double my money on, like I did with the widgets. When I was in business full time I was in it for the money - and nothing more. My main business was seasonal Jersey shore businesses (boardwalk games, parking lots, ice cream stands, etc). If one of the entities I owned stopped making the rate of return that I wanted to make, I would shut it down and buy something else.

The same goes for me today with my real estate rentals. If I cannot raise the rents and make the money I want to make, I will sell the property and buy another one where I can make the rate of return that I expect to make. I would be foolish to hold onto the property with the increased costs and lower profit margin, when I can just as easily acquire another property that makes the margin that I expect.

So if we had an income tax rate of 99% that would not affect your profits at all? You would just switch to the appropriate business that makes the return you're looking for? I'm not following that.

[CaptLouAlbano]

So if we had an income tax rate of 99% that would not affect your profits at all? You would just switch to the appropriate business that makes the return you're looking for? I'm not following that.

Well a 99% tax rate would be absurd, so that is not worth considering. But let's look at the situation we are currently dealing with instead. If the Bush tax cuts expire ad return to Clinton era rates the 33% bracket goes to 36% and the 35% bracket to 39.6% - for me, I am looking at about 15,000 more per year in taxes (rough estimate from my accountant).

So, I have a choice to make. I can either make 15K less next year, or I can increase my rental prices to make up for the difference. Taxes are a cost, just like utilities and maintenance are costs. When costs go up, I can either eat the costs or raise my prices. I own 24 commercial units, 8 residential units and 6 vacation units that I rent out. If and when my taxes go up, I will sit down with my accountant and go over all the costs associated with my properties (maintenance, utilities, projected improvements, fees, taxes, etc) and I will make adjustments to the rental fees accordingly.

Now let's say hypothetically that if I raise rents in my apartment building, it prices me above the market, and I can no longer rent those properties out. What do I do? Well I can eat the loss, which would be silly. Or I can sell the building (which in this case I can get close to $1 million for the building) and put that million dollars into another property (or properties) where I can make the expected rate of return on my costs.

So at the end of the day, if the Bush tax cuts expire and my rates go up, I will still make the same amount of money at the end of the year. It doesn't effect me on bit at all. However, I am fundamentally opposed to this of course since I don't want to see rents go up for my tenants, nor do I wish to see the Federal gov't get more money to spend.

[awake]

The only true player who 'passes taxes on' are the governments who force them on others. Everyone else pays them. 'Business X, Y and Z just pass on the taxes' is not true, the companies pay out of lost profits. Governments are notorious at claiming the bushiness will just pass them on...businesses and consumers get screwed by the same band of crooks.

If everyone just passes the taxes on, then why don't businesses just price their goods with taxes included just like any other cost in making thier product?

Come on and default already. I love it when bureaucrats and politicians look like the frauds that they are.

[awake]

I want to tax the unjustly rich by taking away their mechanism for transferring their "riches" to themselves. Every other discussion about taxing the rich is the search for a plausible means to steal.

The discussion should be about being tax free just like the rich.

Its like a man stumbling upon a colony of lepers. The lepers seeing that he is not afflicted with their malady, in their hatred and envy, demand that this man be arrested and infected; "its only fair!" they scream. "Why should this man walk around completely healthy!".

[CaptLouAlbano]

I want to tax the unjustly rich by taking away their mechanism for transferring their "riches" to themselves. Every other discussion about taxing the rich is the search for a plausible means to steal.

That's still class envy. The better idea is to have a flat tax and a cap on spending. Then as we address the problem of spending, and reduce the size of government we can reduce the flat tax rate.

The rich will always be rich, not matter what kind of system is in place. There is a reason for that. Those who are rich are, in large part, innovative and inventive. We desire to make money and we find ways that we are able to do so. I started with very little and built for myself a multi million dollar business that lasted until the day I decided to retire and sell off everything that I owned. In good times and in bad times, high taxes and low taxes, I always succeeded and always had expensive cars, 5 star vacations and plenty of money to burn. The reason was because I knew what it took to make money and I did it.