Droopy's False Prophets: Inflation that never was

[_krose]

Our government is going to have to raise taxes on everyone

Not really. They just need to do nothing, and the Bush rates will finally expire and go back to 1999 levels, which they were scheduled to do two years ago.

According to IRS data for 2008, when accounting for Adjusted Gross Income, the bottom 50% only pay 4% of all income taxes

Letting the Bush cuts expire will also change that. (By the way, the bottom 50% only make about 12% of all income.)

[_MeDotOrg]

(According to IRS data for 2008, when accounting for Adjusted Gross Income, the bottom 50% only pay 4% of all income taxes)

The top 400 people in the United States about 50% of the wealth.

The top 1% has over 90% of the wealth.

Now that's wealth, not income, but it gives you a sense of the disparity. The gap in income between rich and poor has been widening steadily since the 1980s. The rate of income increase is nearly 3 times as much for the Top 5% as the bottom 20%.

[_Analytics]

You make an excellent point and I agree with you. I also understand your question and would agree that unemployment is worse. However, my overall question is, can we continue down this path? Sooner or later, people will lose all trust in government currency, nobody will buy U.S. debt, and there will be massive unemployment in both the private sector and the public sector.

Of course we can’t continue down this path forever, but there are two sides to the debt issue. There are a ton of government bonds out there. You see a ton of debt—I see a ton of assets. Long-term interest rates are determined by the free-market, QE3 notwithstanding. Those long-term rates are very low. This is because while there is a huge supply of U.S. government debt, there is an even bigger demand for U.S. government debt. Investors literally have trillions of dollars they want to invest in safe bonds every year, and after looking at all options available, they decide U.S. treasuries are their best bet, and they bid against each other trying to get them, driving down yields.

Are people losing confidence in the U.S. dollar? The free-market prices of long-term government treasures answers the question with a resounding no. And even if they did, what are their other options? The Euro? The Pound? The Renminbi? The Yugoslav dinar?

Given the demand for U.S. debt, hyperinflation isn’t just around the corner. The U.S. is now more like Japan than like Yugoslavia.

One last point:
Our government is going to have to raise taxes on everyone (I hate admitting this being a moderate, fiscally conservative sort of guy). Even the bottom 50% needs to share this burden. (According to IRS data for 2008, when accounting for Adjusted Gross Income, the bottom 50% only pay 4% of all income taxes)
http://www.irs.gov/uac/SOI-Tax-Stats--- ... ares#_pagi
Our government is also going to have to cut spending in both the military (which they are about to do hopefully) AND in entitlements.

Do you realize how misleading your statistic is that the bottom 50% only pay 4% of all income taxes? It's a meaningless statistic--after all, what if the bottom 50% only make 4% of all the income?

Additionally, income taxes are only one part of the tax burden. Yes, income taxes are progressive, but the payroll tax is very regressive. Somebody who makes $10,000 a year pays about 15.3% of their income to the federal government in FICA and Medicare tax (including the employer contribution). Somebody like Romney who makes $20,000,000 a year only pays about 3%. Is it fair that the working poor have a payroll tax rate 5 times higher than that of the rich? While it’s true that the working poor pay little income tax, it’s misleading to suggest they are paying much less than their fair share. If you include payroll taxes and all other taxes into the equation, the working poor pay a higher percentage of their total income in taxes than most people with high incomes.

[_Analytics]

Our government is also going to have to cut spending in both the military (which they are about to do hopefully) AND in entitlements.

In principle I agree with this. I was a bit harsh in my last comments to you. Republican tools—both the elected tools and the tools in their vast propaganda industry—are hell-bent on spreading disinformation for their political and economic purposes, and I took some of my frustration with that out on you.

[Guest]

Additionally, income taxes are only one part of the tax burden. Yes, income taxes are progressive, but the payroll tax is very regressive. Somebody who makes $10,000 a year pays about 15.3% of their income to the federal government in FICA and Medicare tax (including the employer contribution). Somebody like Romney who makes $20,000,000 a year only pays about 3%. Is it fair that the working poor have a payroll tax rate 5 times higher than that of the rich? While it’s true that the working poor pay little income tax, it’s misleading to suggest they are paying much less than their fair share. If you include payroll taxes and all other taxes into the equation, the working poor pay a higher percentage of their total income in taxes than most people with high incomes.

Hello Analytics, no worries. No offense taken. I'm just trying to get to the truth here.
Regarding the above quote, are you confusing payroll taxes with income taxes? It's my understanding that payroll taxes are paid by the employer. [This could be my confusion and I apologize if that's the case.] Income taxes are the portion withheld from your income. It's true, however, that the payroll tax burden on the employer could equal less money they can pay you the employee. I'm sure that's factored into their cost to employ you. I've always been against payroll taxes and corporate taxes because they are a hidden tax on the employees and consumers. Companies just pass the cost onto you the employee and the consumer, so I can agree with you on the fact that payroll taxes are too high, or at least they need to be just added to the income tax and not hidden. Corporate taxes are just a hidden sales tax. Let's stop hiding it and add them to the sales tax. [ I did more reading on this and you are correct that the payroll burden is considered regressive. For my own curiosity, could you provide a reference to your data? Again, I'm trying to learn here.]

Also, Romney actually paid about 15% in taxes, which is what everyone pays in capital gains taxes. Romney pretty much only has income on his investments. Everyone has that opportunity to invest and only pay 15% on investment income. It just so happens that Romney has a lot more money to throw around. Now, if you want to tax somebody like Romney higher based on their total wealth when it comes to their capital gains tax, I can understand that. However, it would also be fair to say that the top 1% of income earners pay low taxes because they already have their wealth and don't need incomes. They live off of their investments.

Now going back and looking at personal income taxes paid by the bottom 50% for 2009, they only paid 2.25 percent of their total income if a family makes around 32k in annual gross income. Again, you have to account for adjusted gross income. This is important, otherwise the data is misleading.

According to 2009 IRS data for adjusted gross income, the top 5% of income earners earned 31.7% of all income, but paid 58.7% of all income taxes.

http://taxfoundation.org/article/summar ... tax-data-0

Since 2001, the IRS has also been presenting data on a small subset of the top 1 percent, the top 0.1 percent (the top 10 percent of the top 1 percent). In 2009, this top 0.1 percent filed 137,982 tax returns, reporting 7.8 percent of all adjusted gross income earned and paying approximately 17.1 percent of the nation's federal individual income taxes. The average income for a tax return in the top 0.1 percent was $4.4 million in 2009, while the average amount of income tax paid was $1.07 million, indicating an average effective individual income tax rate of 24.3 percent.

I guess my question to the left would be, how much is enough for the top 5%? 60%? 70%? 90%? They never say. They always call for higher taxes. Even when Clinton raised taxes on them, it wasn't enough. It's always more. This is insanity to me. It's not a moderate position at all to just call for more taxes and not state a limit that is fair.

The bottom 50% account for 13.5% of all income. The average tax paid in this bracket is around 1.85%.

My argument isn't that we should grossly increase taxes on the bottom 50%, but surely they can stand another 1% tax increase. Also, even if you raised taxes 100% on the top 1% of income earners in this country, it wouldn't even put a dent in just the interest payments we have on our debt. So, our country has an annual tax income of around 2.5 trillion. Let's say we tax everyone across the board and raise that to 3 trillion. We still wouldn't meet all of our obligations. So, I would argue that we have both a tax problem and a spending problem in this country.

Also, surely you must see a huge conflict of interest problem where half the voters in this country are either paying no taxes or are part of a government union and both groups overwhelmingly votes for the populist politicians.

In conclusion, I'm only arguing that, yes the rich should pay more taxes. However, we should find out a percent that is fair and not just continue making calls to 'soak the rich'. Also, the bottom 50% should share in the burden of supporting this nation. Otherwise, you have a situation where politicians who can promise the most money to this group or that group out of the national treasury is the one who will win the election every time. I've always been under the impression that this is what leads to tyranny.

[_krose]

When people talk about "payroll taxes," they mean withholdings for Social Security and Medicare taxes. But only the first $100K or so of income is taxed.

Therefore, someone who makes $110,000 per year pays the same amount as a CEO who makes $7 million.

[_mledbetter]

When people talk about "payroll taxes," they mean withholdings for Social Security and Medicare taxes. But only the first $100K or so of income is taxed.

Therefore, someone who makes $110,000 per year pays the same amount as a CEO who makes $7 million.

Same percent or same amount? IF it's the same amount, then this is a regressive tax. If it's the same percent, and you have an income of >=$110,000 per year, then this is neither regressive nor progressive, is it?

In either case, I can see what Analytics means by this being a regressive tax on the bottom 50% of income earners. However, it was my understanding that this burden disappears when one applies the adjusted gross income data and 'earned' income tax credits. Am I wrong on this?

[_Analytics]

Same percent or same amount? IF it's the same amount, then this is a regressive tax. If it's the same percent, and you have an income of >=$110,000 per year, then this is neither regressive nor progressive, is it?

In either case, I can see what Analytics means by this being a regressive tax on the bottom 50% of income earners. However, it was my understanding that this burden disappears when one applies the adjusted gross income data and 'earned' income tax credits. Am I wrong on this?

Same amount. To the penny.

"Payroll Taxes" specifically refers to the taxes that show up on your pay stub that are labeled FICA (or SOC) and MED (or Medicare). The rule is that half of these taxes are shown on your paycheck, and the other half aren't. They total about 15%. Thus, if somebody gives you a job that pays $10,000 a year, you really made $10,750. But that unseen $750 goes to the government behind your back, and another $750 is deducted from your check.

This is totally different from the income tax, which is what is withheld under a different line (FITW or Federal Income Tax Withheld), and then settled-up with a refund or more taxes due on April 15th. For example, somebody that makes $1,000 a month will owe little income tax, but he'll pay 15% ($150) every month for payroll taxes.

In comparison, say somebody makes a cool $100,000 a month. He'll end up having $15,000 withheld in January, and then only $3,000 withheld for each of the next 11 months. Why? The FICA tax only applies to the first $100,000 of income--once you pay FICA taxes on $100,000, the rest of your income is FICA-tax free.

Thus, somebody who makes $10,000 a year pays 15% of their income in payroll taxes. Somebody who makes $1,000,000 a year pays 4.2% (($100,000 * 15% + $900,000 * 3%)/$1,000,000) in payroll taxes. Payroll taxes are flat for the first $100,000, and are then highly regressive thereafter—the higher your income, the lower percentage of your income goes to the taxes.

Throw in sales tax, excise tax (e.g. tax on gas), and property tax, the working poor pay a higher percentage of their income in taxes than most of the rich.

[Guest]

Same percent or same amount? IF it's the same amount, then this is a regressive tax. If it's the same percent, and you have an income of >=$110,000 per year, then this is neither regressive nor progressive, is it?

In either case, I can see what Analytics means by this being a regressive tax on the bottom 50% of income earners. However, it was my understanding that this burden disappears when one applies the adjusted gross income data and 'earned' income tax credits. Am I wrong on this?

Same amount. To the penny.

"Payroll Taxes" specifically refers to the taxes that show up on your pay stub that are labeled FICA (or SOC) and MED (or Medicare). The rule is that half of these taxes are shown on your paycheck, and the other half aren't. They total about 15%. Thus, if somebody gives you a job that pays $10,000 a year, you really made $10,750. But that unseen $750 goes to the government behind your back, and another $750 is deducted from your check.

This is totally different from the income tax, which is what is withheld under a different line (FITW or Federal Income Tax Withheld), and then settled-up with a refund or more taxes due on April 15th. For example, somebody that makes $1,000 a month will owe little income tax, but he'll pay 15% ($150) every month for payroll taxes.

In comparison, say somebody makes a cool $100,000 a month. He'll end up having $15,000 withheld in January, and then only $3,000 withheld for each of the next 11 months. Why? The FICA tax only applies to the first $100,000 of income--once you pay FICA taxes on $100,000, the rest of your income is FICA-tax free.

Thus, somebody who makes $10,000 a year pays 15% of their income in payroll taxes. Somebody who makes $1,000,000 a year pays 4.2% (($100,000 * 15% + $900,000 * 3%)/$1,000,000) in payroll taxes. Payroll taxes are flat for the first $100,000, and are then highly regressive thereafter—the higher your income, the lower percentage of your income goes to the taxes.

Throw in sales tax, excise tax (e.g. tax on gas), and property tax, the working poor pay a higher percentage of their income in taxes than most of the rich.

If you are correct ( and I have no reason to believe otherwise ) then you are certainly correct that this is a highly regressive tax, and I apologize for not understanding this. Thanks for showing me the light. :-)

About my last question though, aren't these kind of burdens offset by earned income tax credit? Also, isn't the FICA tax accounted for in adjusted gross income calculations (the taxable gross income)? I always thought that this was factored in when I did my taxes. If so, the data I provided was based on adjusted gross income, after all writeoffs, deductions, earn income tax calculations, child credits, state tax credits, and so forth. That's what adjusted gross income represents, I thought, and included FICA, as well. I'll do more reading on this, but that was my understanding.

[_mledbetter]

Regarding Earned income tax credits.
http://en.wikipedia.org/wiki/Earned_income_tax_credit

This tax credit is provided, in part, to offset the burden of social security taxes and to maintain an incentive to work.