OMB: Top 20% pay 95% of taxes, middle class 'single digits'

[Anti Federalist]

OMB: Top 20% pay 95% of taxes, middle class 'single digits'

http://www.washingtonexaminer.com/om...rticle/2638746

<snip>

It came in a discussion before students of the school's Institute of Politics and Public Service at the McCourt School of Public Policy. The discussion was directed by Cathy Koch, a tax expert and former Senate aide.

When the two turned to the taxes the rich pay, Mulvaney declared, "The top 20 percent of folks who file a tax return, the top 20 percent, pay 95 percent of the taxes."

OMB later cited internal data to the Washington Examiner that said the top 20 percent of people to pay income taxes account for 94.8 percent of those taxes in 2016.

That appears to be a jump from just a few years ago. In 2015, the Wall Street Journal reported that the top 20 percent of income earners paid 84 percent of income taxes.

Mulvaney explained:

If you break the income tax universe into what we call quintiles, so equal sized 20 percent columns, the first two columns, the first quintile and the lower quintile, don't pay any taxes at all. In fact they net positive. We pay them when they file a tax return.

That middle quintile, which you might describe, some people do, as middle class, pays an effective rate in the low single digits. And all of the taxes are paid by folks in the top two quintiles, and that last quintile pays almost fully, 95 percent I think, of the taxes.

People always ask all the time, ‘Why do you want to give a tax cut to the rich?' Here's the math. We have a progressive tax system, which means that if you make $1 million and I make $50,000, we both pay the exact same rate on the first, let's say, $20,000. And then, from the next $20,000 up to my $50,000, and her next $20,000 to her next $50,000, we pay the same, I think it's 12 percent of 15 percent, I can't remember where the brackets are right now. And then she goes on to pay her higher rate on the stuff that she makes and I stop.

Well, if you want to give me, the middle class, a cut, take my 15 percent rate down to say 10 percent, and that gives the middle class a cut. Guess who else benefits from that, she does. She pays that same rate on the way up the brackets.

His conclusion, "You could sit there and do nothing but lower the rates on the middle class, and all other things being equal, you're giving the rich a tax cut.

[spudea]

I read another figure that if your gross income is ~$77k, congrats you are part of the evil top 20% that gets all the benefits of tax cuts!


Another thought I had was why do we need tax deductions anyways if the basis is a progressive income tax system anyway, then couldn't you graduate the percentages and income brackets in a sufficient manner to make the same outcome without any need for deductions?

[Danke]

BS. FICA is part of the income tax. You pay over 15% of your earnings up to around $115,000 to it.

[Krugminator2]

BS. FICA is part of the income tax. You pay over 15% of your earnings up to around $115,000 to it.

That doesn't change the general thrust of what Mulvaney said at all. Upper income earners pay all the taxes. Probably more like the top 20% pays 75-85% of taxes.

And it is good that Mulvaney pointed out that any tax cut is going to disproportionately affect upper income earners.

[otherone]

The only equitable tax rate is 0%.

[Mike4Freedom]

BS. FICA is part of the income tax. You pay over 15% of your earnings up to around $115,000 to it.

Also, the medicare tax. State taxes, local taxes, property taxes, sales taxes, , taxes on earned interest an dividends, taxes on your phone bill, the inflation tax, the cops writing a ticket tax. If you add them all up its higher then taxes in most of Europe.

To the OPs post, if they cut taxes without cutting spending we just get screwed the other way.

[Krugminator2]

Also, the medicare tax. State taxes, local taxes, property taxes, sales taxes, , taxes on earned interest an dividends, taxes on your phone bill, the inflation tax, the cops writing a ticket tax. If you add them all up its higher then taxes in most of Europe.

To the OPs post, if they cut taxes without cutting spending we just get screwed the other way.

Pretty much all of that is untrue. If you add up all taxes at the federal state and local level, the rate comes to 26%. The only European country with lower overall taxes is Ireland. http://time.com/money/4862673/us-tax...ecd-countries/ http://www.taxpolicycenter.org/brief...nternationally

It still makes sense to cut taxes even without spending cuts because lower taxes encourage more production. That is the supply side argument.

[KrokHead]

My household makes 110 k, in a suburb of nyc. We're poor as f. Childcare and rent are 3000 a month after taxes of course. That tax cut can't come fast enough.

[Anti Federalist]

Pretty much all of that is untrue. If you add up all taxes at the federal state and local level, the rate comes to 26%. The only European country with lower overall taxes is Ireland. http://time.com/money/4862673/us-tax...ecd-countries/ http://www.taxpolicycenter.org/brief...nternationally

It still makes sense to cut taxes even without spending cuts because lower taxes encourage more production. That is the supply side argument.

Just as I thought, that Fed study based that figure on total tax burden compared to national GDP, not on an individual level.

https://www.chicagofed.org/publicati.../2017/382#ftn7

An individual, or a family of four, pay over 50% of their income every year in combined taxation.

[EBounding]

My household makes 110 k, in a suburb of nyc. We're poor as f. Childcare and rent are 3000 a month after taxes of course. That tax cut can't come fast enough.

Do you benefit from the state and property tax deduction?

[Madison320]

Do you benefit from the state and property tax deduction?

It's not much of a "benefit" when you pay 20K to save 5K.

[TheTexan]

I read another figure that if your gross income is ~$77k, congrats you are part of the evil top 20% that gets all the benefits of tax cuts!

If you're making $77k you're super rich and deserve to be taxed like crazy.

You don't get that kind of salary until after you've been with the TSA for 15-20 years

[Sonny Tufts]

BS. FICA is part of the income tax. You pay over 15% of your earnings up to around $115,000 to it.

FICA and the Medicare tax aren't income taxes, but are employment taxes governed by a different subtitle. Unlike income taxes they don't include any deductions and aren't refundable.

[NorthCarolinaLiberty]

FICA and the Medicare tax aren't income taxes, but are employment taxes governed by a different subtitle. Unlike income taxes they don't include any deductions and aren't refundable.

Oh look; it's another RPF contrarian; one not interested in discussion, but just to be contrary.


in·come
ˈinˌkəm/
noun
noun: income; plural noun: incomes
money received, especially on a regular basis, for work or through investments.


tax
taks/
noun
noun: tax; plural noun: taxes
1. a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.



Ergo--income tax.

But please, enlighten me with your tax lawyer technicalities.

[CaptUSA]

So, I feel like I have to reiterate this since I've often pointed out the same thing on the other side.

The top 20% are really just people in the highest earning time of their lives. Meaning, that the individuals who are in the top 20% this year will not be the same individuals 5 years from now. In fact, there is a large percentage of these people who are only in the top 20% for one year - when they receive an inheritance or a settlement payment of some sort. Then, when you factor in geographical differences, the numbers get even more mushy. We're really talking about the same people as those in the lower brackets.

Those class warriors on both sides always seem to forget that we are not talking about the perennially wealthy when we use stats in this way.

[Brian4Liberty]

Top 20% pay 95% of taxes, middle class 'single digits'

That's the kind of statistic that wealthy high income talk show hosts like Hannity like to quote.

Never really saw the purpose in bringing up a redundant statistic that tells us that people who make more money pay more income taxes. Apparently someone like Hannity brings it up to make it sound unfair that he pays so much. On the other hand, the exact same statistic is evidence of the growing income and wealth gap that can be used as evidence of "unfair" distribution of wealth.

Both sides seem to ignore the fact that the wealthy can afford tax lawyers to make their effective rates lower, and the cuts in business rates will disproportionately benefit those at the top who can use that as a tax shelter. And no one wants to address a root cause of government cronyism that often benefits the connected few at the top.

The progressive income tax is often talked about, but as others have said, there are plenty of regressive taxes which effect the lowest income levels (think cigarette, alcohol, gas, sales taxes, etc.).

[Brian4Liberty]

And Sarah Huckabee just gave a long winded analogy related to the OP and how the top pay the most. Video should be available soon.

[Zippyjuan]

Pretty much all of that is untrue. If you add up all taxes at the federal state and local level, the rate comes to 26%. The only European country with lower overall taxes is Ireland. http://time.com/money/4862673/us-tax...ecd-countries/ http://www.taxpolicycenter.org/brief...nternationally

It still makes sense to cut taxes even without spending cuts because lower taxes encourage more production. That is the supply side argument.

Really? From your link:



Besides income and state and local taxes most European countries also have a Value Added Tax which in most countries is the maximum of 25%.

A research paper published this week by the Federal Reserve Bank of Chicago includes the above chart, highlighting the tax burdens of all 35 OECD countries as of 2014. With a tax burden of 25% — a measurement that includes income, property, and various other taxes — the U.S. is near the very bottom, well below the overall average of 34%. It ranks below all the measured countries except Korea, Chile, and Mexico.

Trump and other Republicans are right about one aspect of U.S. taxes, however. When it comes to taxing corporate profits, the U.S. does indeed have one of the highest nominal maximum rates in the world, at 35%.

The new study’s authors looked in particular at how the U.S. tax regime stacks up against Germany’s — a nation they chose because its economy resembles that of the U.S., and because Trump has said Germany’s trade surplus with the U.S gives it an upper hand economically.

And U.S. corporations are in fact paying higher income taxes than German ones. As it happens, deductions and other tax strategies mean relatively few U.S. corporations actually get stuck paying the maximum nominal 35% rate, instead paying about 20% on average. But that is still higher than the comparable 15% effective rate that German corporations pay, according to the Chicago Fed estimates.

[PierzStyx]

It still makes sense to cut taxes even without spending cuts because lower taxes encourage more production. That is the supply side argument.

Ah, Keynesianism. Krugman would be proud. Cutting taxes without cutting spending will give a temporary boost to the economy, a bubble if you will, that will collapse as the inflation required to maintain national spending devalues the "extra" money now in private hands. A tax cut without spending cuts is no tax cut at all. It just obfuscates the tax by monetizing it.

[Madison320]

That's the kind of statistic that wealthy high income talk show hosts like Hannity like to quote.

Never really saw the purpose in bringing up a redundant statistic that tells us that people who make more money pay more income taxes. Apparently someone like Hannity brings it up to make it sound unfair that he pays so much. On the other hand, the exact same statistic is evidence of the growing income and wealth gap that can be used as evidence of "unfair" distribution of wealth.

Both sides seem to ignore the fact that the wealthy can afford tax lawyers to make their effective rates lower, and the cuts in business rates will disproportionately benefit those at the top who can use that as a tax shelter. And no one wants to address a root cause of government cronyism that often benefits the connected few at the top.

The progressive income tax is often talked about, but as others have said, there are plenty of regressive taxes which effect the lowest income levels (think cigarette, alcohol, gas, sales taxes, etc.).

The net amount people pay is irrelevant but the percentage sure is. I think the progressive tax system is THE biggest injustice in the US. Everyone should pay the same rate. And the idea that gas and cigarette tax is "regressive" is BS. Laws should be the same for everyone. If there's a gas tax, everyone should pay the same %. If there's an income tax, same percent. That's like saying we should have certain murder laws for people who make under 50k and certain laws for people who make over 50k.

[Brian4Liberty]

The net amount people pay is irrelevant but the percentage sure is. I think the progressive tax system is THE biggest injustice in the US. Everyone should pay the same rate. And the idea that gas and cigarette tax is "regressive" is BS. Laws should be the same for everyone. If there's a gas tax, everyone should pay the same %. If there's an income tax, same percent. That's like saying we should have certain murder laws for people who make under 50k and certain laws for people who make over 50k.

The "progressive" system makes the greatest number of people happy. The low income social justice warriors think they are taxing (redistributing) the rich, and the rich know that they have enough loopholes to pay less than the middle class. It's win-win.

I would rather no one pay incomes taxes, but without that, I'd be happy with a progressive system that is zero all the way up to $1,000,000/year. Pretty sure that was the original sales job to get income tax passed in the first place.

[Brian4Liberty]

Ah, Keynesianism. Krugman would be proud. Cutting taxes without cutting spending will give a temporary boost to the economy, a bubble if you will, that will collapse as the inflation required to maintain national spending devalues the "extra" money now in private hands. A tax cut without spending cuts is no tax cut at all. It just obfuscates the tax by monetizing it.

Not that I would defend supply-side economics, but IIRC, it's not really considered Keynesianism.

Supply-side economics developed in response to the stagflation of the 1970s.[6] It drew on a range of non-Keynesian economic thought, including the Chicago School and New Classical School.

[Zippyjuan]

The "progressive" system makes the greatest number of people happy. The low income social justice warriors think they are taxing (redistributing) the rich, and the rich know that they have enough loopholes to pay less than the middle class. It's win-win.

I would rather no one pay incomes taxes, but without that, I'd be happy with a progressive system that is zero all the way up to $1,000,000/year. Pretty sure that was the original sales job to get income tax passed in the first place.

A couple of reasons. One, is to get people to agree to taxes, convince them that they will pay little to nothing themselves. Somebody else will pay (which is also why some here like the idea of tariffs- they think others, not them, will pay the taxes- though they ARE paying- the tax will be in the price of everything they buy- they would probably end up paying more in these hidden taxes than they currently pay in income taxes since half of all income tax filers end up not owing any net income taxes). "We won't tax the average Americans, just a few rich ones!"

Second, if you want money for the government, you need to get it from people who have money. Tax people making $20,000 a year, and you won't be able to collect very much revenue. Tax people with $1 million and you can get more money since they already have 90% of the money.

[Zippyjuan]

My household makes 110 k, in a suburb of nyc. We're poor as f. Childcare and rent are 3000 a month after taxes of course. That tax cut can't come fast enough.

$133,445 would get you into the "Top Ten Percent" club. You earn twice the median income (median meaning half the population earns less than that). Poor? http://www.investopedia.com/news/how...ou-top-1-5-10/

The top 5% of households earn an annual income of $214,462 or higher, according to the Census Bureau. That’s nearly four times the 2015 nationwide median household income of $56,516. The average income among those in the top 5% climbed to $350,870. Overall, this group lays claim to a 22.1% share of total household income in the U.S. Source:

To be certified as a one-percenter, you’ll need to bring in even more income each year. According to statistical data from the Internal Revenue Service (IRS), the top 1% had an adjusted gross income of $465,626 or higher for the 2014 tax year. The Washington Center for Equitable Growth put the average household income for this group at $1,260,508 for 2014.

If you want to cross the top 10% mark, you’ll still need a six-figure income but the numbers aren’t quite as high. The IRS sets the adjusted gross income cutoff required to be in the 10% group at $133,445, based on 2014 tax data. Once again, the average household income for the top 10% of earners is higher, at $295,845.

[Brian4Liberty]

$133,445 would get you into the "Top Ten Percent" club. You earn twice the median income (median meaning half the population earns less than that). Poor? http://www.investopedia.com/news/how...ou-top-1-5-10/

Which is why in general any fixed amount at the national level is ridiculous. Percentage solves that. I suppose the best substitute for a fixed amount would be an amount adjusted at the very local level. Perhaps based on the average cost of a single family home in the given city. Too complex though, and as usual, prone to manipulation.

[Krugminator2]

Ah, Keynesianism. Krugman would be proud. Cutting taxes without cutting spending will give a temporary boost to the economy, a bubble if you will, that will collapse as the inflation required to maintain national spending devalues the "extra" money now in private hands. A tax cut without spending cuts is no tax cut at all. It just obfuscates the tax by monetizing it.

Cutting tax rates, which is what is being proposed, is not Keynesianism. There is a good chapter on supply side economics in the Economic Way of Thinking which is a very easy to read introductory economic text. The book is almost free on Amazon. It is worth learning basic economics.

https://www.amazon.com/Economic-Way-...ay+of+thinking

And just in case you don't make the effort, I'll put it very simply. A tax is a disincentive. Income comes from production. Income taxes are therefore a disincentive to production. Lowering and flattening rates encourages more production.

[Swordsmyth]

SPENDING IS THE PROBLEM, WE MUST DRASTICALLY CUT SPENDING SO WE CAN CUT ALL TAXES

[Zippyjuan]

SPENDING IS THE PROBLEM, WE MUST DRASTICALLY CUT SPENDING SO WE CAN CUT ALL TAXES

What items would you cut? Social Security and risk getting blamed for putting grannie out on the streets and making her eat catfood and losing your re-election? Medicare/ Medicaid? Again, making it tough on grannie (Ron Paul said he would not cut those but "honor commitments" to those who have qualified for benefits)? Maybe the Department of Defense? Gotta take care of those terrorists. Can't be soft on them. That would cost Republicans votes. They are big on defense. Leave those off and the maximum you can cut is about $500 billion in a $4 trillion budget.

Talking cuts is good- people like that idea. Until you tell them the things you want to cut. Then they start getting upset.

You are right though, it is more important to cut the spending than to cut taxes at this time. Cutting taxes only piles on more debt (proposals for tax cuts total some $4.5 trillion over the next ten years- the budget resolution would allow them to try to pass $1.5 trillion of those). Details of tax cut proposals are supposed to be out later this week.

[Krugminator2]

SPENDING IS THE PROBLEM, WE MUST DRASTICALLY CUT SPENDING SO WE CAN CUT ALL TAXES

You should do both. To me, they are both issues of efficiency. My thinking.\:

Government spending diverts resources away from the productive private sector which means the economy will grow slower over time.

Progressive income taxes with high marginal rates lower production on the margin. High rates also encourage people to shift income to places with low rates. The US has the highest marginal corporate income tax rate so companies shift operations on the margins away from the US which makes the country less productive.

[Krugminator2]

Really? From your link:

The second link show Ireland lower and it uses 2015 data. The chart you showed used 2014 data, so I went with the more recent data.

What items would you cut?. Social Security and risk getting blamed for putting grannie out on the streets and making her eat catfood and losing your re-election? Medicare/ Medicaid? Again, making it tough on grannie (Ron Paul said he would not cut those but "honor commitments" to those who have qualified for benefits)? Maybe the Department of Defense? Gotta take care of those terrorists. Can't be soft on them. That would cost Republicans votes. They are big on defense. Leave those off and the maximum you can cut is about $500 billion in a $4 trillion budget.

Medicare is the budget and is the most important thing to cut. It is underfunded by infinity The most politically feasible thing to do would be to means test SS/Medicare. The Dems can "stick it to the rich" and Republicans can be fiscally responsible. Then the age of eligibility should be aggressively raised. People are living much longer than the when the programs started and it should be explained that the programs are in horrible shape.

And it is horribly immoral to "honor commitments" to people who left the programs in such bad shape. The programs are bankrupt and that should be the mentality for those getting benefits. They should get a fraction of what is promised. The easiest way politically to dothat would be to cut benefits for people who need them least.