Just how progressive does the U.S. income tax code need to be to satisfy the redistributionists?
Not only do the top 20% pay almost all the taxes, but the share of taxes paid by the top 1% has increased from 18.4% in 1979 to 38.7% percent in 2009. And as the Tax Foundation also points out in a new study, the share of income taxes paid by the bottom four quintiles has decreased since 1979, particularly since 2007. Finally, according to TF, the share of income earned by the top 1% is now back to where it was in the mid-1990s.
For more great charts, check out the report.
Good data, but here’s the problem:
‘Individual Taxes’ are about 50% of the revenue of the Federal Government.
Payroll Taxes are about 36%. The rest of the revenue comes from corporate, excise, customs & duties, etc.
The government right now extracts another over $1Trillion by deficit spending.
It makes those on the right look just as slippery as those on the left when all the numbers are not crunched to come up with a true representation of the tax burden in this country. Payroll taxes are very regressive. The effect of deficit spending is a tax that is very regressive. And we have yet to consider all the local taxation, sales tax, etc.
Truth is that we are just way, way overtaxed, and that is the problem.
It’s the spending.
Government spending (federal, state, local) is equal to 40% of GDP, and regulations are perhaps another 20% of GDP (amazing that we do not know exactly). Government runs the economy by its sheer size alone, and also more directly by the force of laws and regulations. We are no longer a free nation. In 1950 we did just fine with half the amount of government relative to GDP. In 2012 we are Europe, headed toward national bankruptcy.
An honest portrayal of the tax burden in America? Nada, zilch, zippo! What matters is overall taxes paid. State, and local taxes, property taxes, sales taxes, excise taxes, and many others when added to the Federal income tax paint a very different picture of what group actually pays what percentage of taxes.
All forms of taxes collected in the U.S. amount to about 28% of GDP. The wealthy pay in the neighborhood of 30%, the middle class in the mid twenties, and the poor in the upper teens. The rich pay taxes out of their abundance, the poor pay out of their necessity.
http://www.washingtonpost.com/blogs/ezra-klein/post/the-taxes-americans-really-pay-in-two-graphs/2012/04/16/gIQA6o4yLT_blog.html
Any tax reform should bring forth the question what is this tax for. Generally I see two responsibilities of federal grovernment:
1. Protect the citizens – Military, FBI, EPA, FDA etc fall in this category.
2. Create an equal opportunity framework – Education grants, medicaid, Social Security, Medicare etc fall in this category.
I think seperate kinds of taxes should be collected to address these categories.
When it comes to protect you can argue people should pay in proportion to their net worth, because what we protect is really ourselves and our tangible and intagible properties. Now for technical problem we may not be able to tax the estates, but we can say what is our worth was actually earned/inherited/capital-gained. So there should be income tax calibrated such that it tracks our worth. Top 20% of Americans own 93% of wealthe while paying even by the right-wing estimate mere 80% of income taxes. That needs to change – they need to pay more as a percentage. All incomes should be treated as same and there should be only income tax deductions for true-charity and deferred income.
Now comes the other part – equal opportunity. Now this is the part where expenses get more charitable type. While it is important to educate a poor child, a rich person does not directly get benefited out of this. But then you can argue that the sole purpose of opprotunity is to allow you to thrive and eventually consume your produce. So may be a flat consumption tax will take care of this kind of expenses. Generally I would prefer a federal sales tax or even better a value added tax (VAT) to replace both corporate, export/import and sales taxes.
Of course whenever possible Governement should charge fees for the services it provides, should only be used to pay for that exact service.