Tax Cuts: The Noise Before Defeat

No, I wasn't wrong.  The top marginal income tax rate in this country is 39%.

But like I said, that doesn't mean that "No one in America pays more than 39% in taxes," which is what you said before.  Just because your marginal income tax rate is 39% of your taxable income doesn't mean that you aren't paying more than 39% of your income in taxes.

For your statement to be accurate, you would have had to say, "No one pays higher than 39% of his income in income taxes."

What percent of the total tax revenue collected comes from what percent of the population is irrelevant.  No one pays more in income taxes than the top marginal tax rate.  The real issue is that the top 5% make a LOT of money compared to the rest of the population.

Why is that "the real issue"?  Did they all have to do something nefarious to make more money than the other 95%?  Are those 5% spending that money to hurt me?  If so, you have my attention, but if not, the fact that they make more than I do is not alarming to me.  Even if they make a LOT more than I do. 

Are they buying things from me?  Are they buying things that my neighbors produce?  Are they investing that money somewhere?  Are they just enjoying themselves more than I am?  I don't begrudge them that.

This misleading "60%" Heritage Foundation and AEI point is usually used as an argument to support the premise that the top earners pay more than "Their Share" of taxes.

I'm not really alarmed to action by their number, either.  But I don't see why you think the 60% figure is misleading.

I looked at the Berkeley study you linked.  Here's what doesn't make sense: the point of measuring inequality is to show how some people have it so much better than others, right?  Some people, after all, believe that inequality of consumption is morally wrong in itself.  But this study explicitly excludes government benefits and taxes, and it disregards employment benefits, and it excludes wealth.  Why?

If you're interested in what people are actually consuming, and if you're interested in what people can afford, you shouldn't be comparing income before taxes or benefits.  You should be comparing consumption, including some measure of wealth.  Because of different tax treatment, employer-provided benefits like health insurance have become a very large portion of total employee compensation, so comparing incomes alone is immediately suspect; low-income and middle-income people are intuitively going to have a higher percentage of their compensation in the form of benefits than high-income individuals.  But even if I accept an income-only assessment, here's a scenario that should throw some doubt on comparisons of income as a measure of inequality.

• A college student might make little or no income at his part-time job at the supermarket, but he's pulling in many thousands of dollars' worth of government benefits (grants and subsidized low-interest loans) and, like a lot of people his age, he's staying at a relatively high consumption level (including eating out at restaurants, wearing nice clothes, buying lots of electronics and other entertainment) by building up debt -- after all, he has a long time ahead of him to pay it off.
• Later on, he's a middle-aged man at the height of his career, maybe grossing $250,000 a year as an independent contractor, only to see most of it melt away through various taxes.  He's spent a lot of money paying down his debt, and he's got a pretty good chunk of property, but he's still paying his mortgage.  And like most people his age, he's also supporting his own kids and sending them to college.
• Later on he retires, and although he doesn't receive nearly as much from his pension as he did from work, he receives thousands of dollars' worth of income transfer payments (Social Security check) and benefits (health care, subsidized housing if he wants to move, etc.) and owns a lot of property (including a fully paid-off home) that he built up over the course of a lifetime.  And he doesn't stress himself out all day at work -- in the afternoon, he takes his time making a square meal.

Sure, these periods of his life were all unequal in consumption, but they're a lot more equal than pre-tax, pre-benefit income would have you believe.  If these were three different people instead of one person, the study would have you believe that the man grossing $250,000 a year is 10 times better off than the retiree drawing $25,000 a year from his pension, and the retiree is 5 times better off than the college student with a $5,000 annual income from his part-time job.

in 2005 the top 1 percent of all Americans, some 3 million people, received their largest share of the national income since 1928: 21.8 percent, up from 19.8 percent only the year before—a 10 increase percent in one year.

Again, should I be alarmed?  Just because it's "national income" doesn't mean it's a finite pie from which they greedily took a bigger slice.  I'd be willing to bet that total compensation for the bottom 99 (and 90, and 50) percent rose from 2004 to 2005, too, despite the fact that the bottom is constantly being filled in with new entrants into the workforce, like kids fresh out of school and low-skill immigrants. 

I'd also be willing to bet that the study you quoted didn't take into account that inflation is significantly greater for high-end items than low-end goods, which is just one way that their "real income" figures aren't accounting for differences in consumption, which in turn means that low-level incomes aren't rising as slowly as they first appear, and high-level incomes aren't rising as fast as you'd think.

If someone in there is deriving their income from stealing, then I share your concern.  But the statistics don't tell me that much.

I was limiting my discussions to  Income Taxes, not excise or estate or local taxes and fees or "seignorage".  If you are going to include those in the discussion, then you should also include in your discussion the fact that income is not the same in all cases.  Certain income, such as capital gains or dividends or interest from municipal bond redemptions are taxed at wildly different rates, and payroll taxes cease to be collected from earners at $96K.

That's exactly the kind of discussion I'm looking for.  I'd go much further, frankly: money goes a lot further in some places than in others.  And people naturally make less money when they are young than they do when they've established a career.  So we should be careful who we include in the percentiles: I'd wager that the lower levels of income are dominated by the very young and the very old; I'd wager that people with higher levels of income are much more likely to be supporting other people, especially children.  I'd wager that higher-income households are not only likely to have more children, but are much more likely to have more people working.

When a corporation pays taxes, the corporation pays taxes.  The Rush Limbaugh speculation that tax costs are passed on to consumers iin the form of higher prices is pure speculation.  That reasoning would have all costs of doing business passed on to consumers, at which point they cease being costs and become pass-throughs.  Companies that minimize Cost-Of-Goods-Sold maximize profits in a free market.  Raising prices usually lowers sales and makes you less competitive.  See, you find a balance.

I won't argue that all taxes are passed on to consumers.  I would argue, however, that they are always borne by people and not by abstract "institutions."  If it's not higher prices for consumers, it may be lower quantity or quality for consumers.  It may be lower compensation for people who work for the company, or fewer jobs available in those companies.  It may be lower returns for shareholders (including mutual funds and other retirement investments), which discourages the investment of capital that creates new products and new jobs.  It may be less research and development, which means fewer superior products for consumers.  But people always bear the costs.  That was what I was getting at when I asked what the assets and income of a corporation represent.

And yes, taxes on American corporations limit the competitiveness of the very corporations that would otherwise be providing employment opportunities for Americans.  The "balance" there may be that we encourage people overseas to do jobs that would otherwise be done in the US.

And economically, it's just not necessarily true that "Companies that minimize Cost-Of-Goods-Sold maximize profits in a free market."

Do I know the sum of taxes collected from corporations? Yes, most studies place it at around 2.2% of GDP, compared to about 3.4% of GDP for foreign corporations in the 30 biggest trade partners according to the US Treasury

Again, you're comparing the US to its trading partners.  What is the significance of those comparisons?