January 6, 2009 11:27AM
Tax Rates by Income Ranking
By Brian Sullivan
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Thanks to the following from the always excellent blog by Harvard Professor and former White House Council of Economic Advisors Chairman Greg Mankiw for finding the data behind the tax debate. Pretty clear where the “shares” truly lie.
Here is a link to the official report from the Cogressional Budget Office
Here are the total effective federal tax rates for 2005, the most recent year available. Note this is NOT the percentage of taxes paid, but rather the effective tax rate not including property and other state taxes.
Lowest quintile: 4.3 percent
Second quintile: 9.9 percent
Middle quintile: 14.2 percent
Fourth quintile: 17.4 percent
Percentiles 81-90: 20.3 percent
Percentiles 91-95: 22.4 percent
Percentiles 96-99: 25.7 percent
Percentiles 99.0-99.5: 29.7 percent
Percentiles 99.5-99.9: 31.2 percent
Percentiles 99.9-99.99: 32.1 percent
Top 0.01 Percentile: 31.5 percent
Wondering what the percentages mean? The CBO report (page 17 of 34 if you are looking at the report) shows that the 81st percentile - where the real tax burden begins to grow - starts at a median household income of $67,400. The 91st percentile begins at $92,400.
$92,400 is nothing to sneeze at, but keep in mind that is median household income, indicating it could be a two-income family where each spouse earns less than $50,000.
Feel like a risk taker? Go tell a family with two income earners in California, New York or Massachusetts or other high cost states making $92,000 that has to pay for housing, property taxes and childcare that they are “rich.” You may want to wear a helmet when you do.
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WHAT HAS A GOOD GRIP ON THE THINGS THAT MATTER. OTHERWISE WHY WORK SO HARD TO ACHIEVE MORE THAN OUR PARENTS DID.
I agree…. fire them ALL start with new people.
Of all the proposals I like the Fair Tax the most, but the solution is NOT in taxation, but smaller government and independence from government at every level.
Look at the price of oil/fuel …. what caused it…. a cessation/severe reduction of consumption and a move to alternatives that breaks the monopoly.
Pay off all debt and don’t go in debt. Then stop using credit cards. Purchase that which increases independence and breaks monopolies.
Purchase only from the best of the best those with the utmost integrity and pride of craftsmanship. Yes, you will have less quantity but you will inspire quality and faithness.
Other than national defense, if we “do the right thing” we don’t need much government and government is overhead as it produces almost nothing.
What’s more valuable and missing here is a chart showing tax rates from say - 1940 onwards.
I observe in 1960 ? Lyndon Johnson then Reagan a bit- but under both Bush’s - tax rates hit the 30’s - STARTING from near 90’s iirc in 1940’s for top percentiles.
so, we went from 90% to 60, 50, then under Johnson, Bush I and Bush II iirc, it hovered in the 30’s - MAYBE it did under Reagan too. Either way, I ALWAYS found those BLIPS on high percentile dropping to - well- no lower than 30 to date.
Now, seeing it THAAAAYAT way, on a time line, you will see three blips if I recall, where taxes hit low 30’s. This last admin was one of them.
I have to interest one way or the other other than I recall seeing the entire SPAN of history on tax rates, and political office, it’s interesting to note Bush I and II both reach 30’s where in all of US history to the 40’s - I think we only have 3 real big blips.
doesn’t matter.
no jobs, or higher unemployment - OFTEN is to no funds to employ with - or maybe credit - who knows what drives the unemployment, but no jobs = less taxes coming in to pay for the companies that got the loans to ? extend to the consumer ? eventually ?
or has it come to this…
Real tax payers money/monies against paper debt on throw the dart at the board losses on derivatives.
I suppose it’s important to follow through and realize that tax money backing TARP, depends on jobs certainly to follow through with backing it to have taxes to pay income on from anyway.
Finally, #5) This need not be true, in fact it probably isn’t: how many businesses right now go out of business due to the fact they pay onerous taxes? Businesses don’t pay taxes anyway- they simply pass the cost on to their clients. Businesses already charge sales taxes, use taxes, SALT, etc. to clients and clientele has not dried up.
The flat tax IS the best way to go, but the political will to implement it is not there.
Bob, a flat tax need not be a consumption tax (although as a matter of principle, it is more efficient to tax consumption instead of taxing production). On to your points:
1) As mentioned above, a flat tax can be taxed on production, but at a lower level, without deductions, exemptions, credits and exclusions. A 10% tax on ALL citizens (that’s right, ALL. It is not right nor fair that the poor are exempted from paying taxes even though they consume more of the public goods that are being paid for) would be efficient and predictable and eliminate much of the waste that is associated with tax planning at all levels.
2) This point is moot, as a sales tax is levied in many states that affect the poor, as well as a gas tax. However, a sales tax is flat and predictable and it consumes a share of the price of the good being purchased relative to the price of the good that is being bought (i.e. a $1 million home would yield a higher tax than a $100,000 home, thus proportionately causing the rich to pay a higher tax).
3 & 4) An amendment to #1 to address 3&4: give low to middle income individuals tax credits to offset the cost of state and local taxes such as income taxes and property taxes. However, this one can be optional because of the total cost savings that the taxpayer would incur at the national level would translate into real wealth for the taxpayer at the private level.
Here is California, we are in trouble because of the illegal immigration problem. There have been numerous reports here about illegals taking nieces and nephews into the welfare office claiming them as thier own. Unfortunatly they cant be turned away because that would be “inhumane”. Our political correctness here on the “Left Coast” has given nothing but opportunities to these people who are here specifically to take advantage of the Liberal generosity. I pay my taxes as every working american should but fprgive me if I get REALLY upset when these people get an “Earned Income Tax Credit” and they dont even pay taxes!!!! And the looney Libs defend this by saying “they pay taxes when they buy good” well so do but am I allowed to check that little box marked EIC on my tax return? NOPE! If these idiots would use the money the way it was intended, we wouldnt be in this mess but greed has enveloped ALL of Washington. Absolute power corrupts absolutely. If I am hired to do a job and I dont do a good job, I get fired…shouldnt Congress? Lets clean house and start over.
The “IRS Resctructuring and Reform Act of 1998″ was enacted to level the playing field for families with two(household wage earners)spouses working, so as not to over-burden them from contributing to over-whelming payroll taxes, and consumption cost appreciation. Unfortunatly this has create the “creeping bracket” caused by inflation,and the IRS continuous tweaking of the tax code, basically causing/effecting one contributing spouse(member household)to cut back. It makes no sense for two members to work,if the added income is greatly dimenished by the tax burden(inflation)of “crawling braket inflation” for a net negative return.I’d also like to mention the near non-existence of the “Corporate Payroll Tax” contributing to our GDP revenues,since the “WTO” “Fair Trade incoporated new language. The benefits of #1)Senate Bill(S.1637)10/2003,and#2)House Bill(H.R. 2896)10/2003 inacted to save more than $50Bn in new tax cuts to corporations. The ratioale was an attempt to satify competing business interest,these bills offer dozens of targeted tax breaks for US manufacturers,and multinational corp.’s : tax breaks targeted in this manner can create economic inefficiencies by favoring certain activities over others that may be economically superior but less profitable once the tax break is favored in. Both of these measures also provide a temporary tax reduction for the “Repatriation of Overseass Profits”! Finally, my point is that we have a dynamic economy needing continuous oversite.
Hey Joe Biden…..is this “fair enough” for you?
How can you have a democracy when the Presidency (and other elected positions) have been bought?
I’m up past my 9:00 bedtime here in rural Mississippi because it’s hard for me to sleep while I see this wonderful country of ours sink to new lows day after day. My 4 year old daughter is asleep in the room next door. These days I feel the need to watch over her more. As you guys debate who should pay the taxes and who will get the handouts,guess what? It’s not about you! It’s about all of us. All of us will have to give more. But for me, I give up. The system has been broken by greed. And here’s how it’s going to go down. People like me, educated and trained soldiers,(5 generations of soldiers in my family) that in the past came to this country’s rescue…… give up! Let it burn along with all your millions. You can leave the U.S. Good luck. Without America you’ll need it.
The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.
Thomas Jefferson
Simplify yes, Flat Tax No. 1) Otherwise named “consumption tax”, this tax is levied on goods at every point of sale so goods purchased by consumers would already be higher priced because they would have already been taxed at least twice. 2) A consumption tax puts a disproportionate hit on the middle and lower middle income people because the purchase of goods obviously consumes more of their disposable income, and consider also that it would apply to goods such as gasoline, utilities, prescription drugs and HOUSES. 3) State and local taxes would be levied on the purchase of goods AFTER the consumption tax has been applied so it’s easy to see the multiplier effect. 4) The consumption tax is a federal tax. States with income taxes will still soak their residents based on their income. 5) Any tax that penalizes consumption results in bankruptcy for small businesses, higher unemployment, a decrease in the GDP, and more people on welfare.
Corey, how can anyone possibly believe it is ethical to charge a higher rate (%) to one person over another on the basis of income? When you buy groceries, does the store look at your BMW keys and increase the prices? Hey, you can afford it right? Bottom line, you or the “collective” have no right to take from me disproportionately to others. I live in rural MS. Both my wife and I started with nothing and after 20 years of hard work and a lot of sacrifices, we are doing okay, now considered in the top 10% wealthiest in the state. That still doesn’t make it right I pay double in state taxes (by percent) than someone who makes half my income. Does he use the roads less than me? Sleep less safer at night? No.
Our country was founded mainly because of excessive taxation without representation. If the government believes it is “fair” to “progressively tax” then I think it is time to revolt and demand representation proportional to taxation. If I pay more, I get more say. Not fair you say. One voice one vote! Then tax me the same as everyone else. In every other aspect of our lives, we pay the same for goods and services regardless of our race, sex, height, weight, and even incomes. But for some unfathomable reason, some believe it is okay to remove more hard earned money from one man than another.
Hold a gun to my head please. I’d feel much better about being robbed!
People choose to live in California and live an expensive life. That is their choice. Are you saying that a family who lives in rural Mississippi and makes $50,000 should pay the same as a family living in Beverly Hills and making $500,000? (That’s probably about the pay level to equate the home size.) No, you base taxes on actual income, and if people don’t like to pay higher taxes to live in a similar size house, they can move to a lower cost area.
I would love to live in a smaller town than metro Atlanta and pay much less for a similar sized house. However, my wife needs to work for her sanity, and Atlanta is unfortunately on the smaller side of cities with her line of work in any abundance.
So I choose to live here, make more with 2 incomes, and yes, pay more taxes, than I would given a choice. I understand my tax rate goes up because of this choice and I accept that the higher cost of living is part of the choice I made to live here.
Guess what. So do Californians. Even if they were raised there, they could move. My wife and I were both raised in Florida, but Miami cost of living is too high, so we chose to move to Georgia.
How about FairTax with a steep tax (like 70%) on income above 20 times the national average? (Maybe 40% on capital gains to limit the penalty for investment gains.) That might reduce the propensity for CEOs on company boards to increase CEO pay rate to such absurd levels.
Looks like a great debate to use to get rid of all this IRS tax confusion is to go to a simple FLAT tax on goods purchased!
You earn it… you CAN keep it. You spend it… you pay the taxes.
Gets rid of personal income taxes which even the IRS cannot give you the right answers and even state they are not responsible for any advice they give you…
Ron Paul actually has this one right. Some please hang the “Out of Business” sign on the IRS!
Socialism and Communism do NOT work! They have been tried over and over in every area and every time have failed. Even the fall of Rome was primarily due to the Social programs that continued to expand.
Even in these “percentiles” what is the level of income from each?
Does this also include all the “underground” labor that is not documented? If I hire someone to mow my yard and pay $30, they do not necessarily claim this as “income” for IRS purposes; yet they do spend it on purchasing goods and services. Though waiters and waitresses are “supposed” to count all tips… do we really believe they are?
Now are we to believe that even drug dealers file income taxes as well…. but they still purchase goods and services.
How much more complicated can the IRS make things? Let’s simplify something somewhere!