The Tax Foundation and Neil Downing on Income Tax Progressivity

I’ll add the most recent Tax Foundation analysis (released October 5) to the discussion about incomes and tax rates being batted around in the comments section…

This year’s numbers show that both the income share earned by the top 1 percent and the tax share paid by the top 1 percent have reached all-time highs. In 2005, the top 1 percent of tax returns paid 39.4 percent of all federal individual income taxes and earned 21.2 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of AGI and paid 36.9 percent of federal individual income taxes.
The IRS data also shows increases in individual incomes across all income groups (see Table 3). Just as the highest earners lost the biggest percentage of their incomes during the recession of 2001, so they have prospered the most as the economy has continued to rebound. For example, from 2000 to 2002, the adjusted gross income (AGI) of the top 1 percent of tax returns fell by over 26 percent. In that same period, the AGI of the bottom 50 percent of tax returns actually increased by 4.3 percent. However, since 2002, as the recession has ended, AGI has risen by 61 percent for the top 1 percent and 10.7 percent for the bottom 50 percent.
I’ll also add this: if the high-tax ideologues out there believe that the primary purpose of the income tax is to level incomes, rather than to pay for government services, then they’re going need to advocate a very draconian system to reach their goal, since the already progressive system we have doesn’t seem to be doing the job they want.
Also, in today’s Projo, business columnist Neil Downing notes that income-to-tax ratios in Rhode Island’s state income tax data are similar to the national figures…
For 2005, the latest period for which figures are available, the overall Rhode Island income tax totaled about $961 million. Of that, $392 million was attributable to those with incomes of $200,000 or more.
In other words, the state’s highest-income taxpayers are responsible for about 41 percent of Rhode Island’s overall income-tax burden — even though they represent only about 2 percent of all income-tax returns filed.
You can quibble with those numbers if you like. For example, the report I looked at doesn’t make clear whether the income-tax figures I’ve listed above are before or after taking credits into account.
But look beyond those numbers, because they’re limited in scope. They focus only on income tax.
They don’t reflect what higher-income people pay in local property taxes, or what they wind up paying — one way or another — as a result of Rhode Island’s death tax (also known as the Rhode Island estate tax).
So no matter how you slice the numbers, the overriding point is indisputable — although higher-income Rhode Islanders represent only a tiny portion of all taxpayers, they carry a huge chunk of the state’s overall tax burden.
Finally, I came upon the original Tax Foundation item via Instapundit, who adds these thoughts worth considering…
I think that everyone should pay at least some tax, and it should vary each year with how much the government spends, and should be enough to give people an incentive to care….A reader emails: “The optimal tax code for the political class is one where more than 51% of the voters pay no taxes at all and where the politicians and their friends receive exemptions from most of the taxes. Explain how this differs from the current system.”

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Greg
Greg
13 years ago

‘Progressive’ tax form:
1. How much money did you make last year? _________
2. Send it in.

Thomas
Thomas
13 years ago

Marc-
“high-tax ideologues?” Do your really believe that there are people who are zealously in favor of high taxes? I’d be grateful if you would name one, because i’ve never seen one.
I know there are low-tax ideologues, and ideologues for causes that might require high(er) taxes, but I’ve never heard of anyone supporting high taxes for their own sake.
Greg- That joke is soooo old! (but still good)
http://www.getamused.com/jokes/029817.html

Monique
13 years ago

Thomas, if your deliberate, official actions – excessive spending – lead to high taxes, which you then proceed to levy, it is safe to say that you are “in favor of” high taxes.

Tom W
Tom W
13 years ago

>>”high-tax ideologues?” Do your really believe that there are people who are zealously in favor of high taxes? I’d be grateful if you would name one, because i’ve never seen one.
Have you ever read any of “Klaus’s” posts?
Have you ever heard a Democrat talk about forcing the “rich” (always undefined) pay their “fair share” (always meaning “more” but likewise always “undefined”)?
Have you ever heard “progressives” talk about “justice?”
Also, the Democrat / “progressive” / Marxist (but I repeat myself) reflexive demands for ever larger and more expansive government for its own sake is by definition a concurrent call for high taxes for its own sake.

Thomas
Thomas
13 years ago

Monique- An “ideologue” is someone enthusiastically in favor of something. A “high-tax ideologue” would be someone enthusiastically in favor of high taxes. I know nobody who this describes.
Someone may support high taxes because the taxes produce things they want. That does not make him an enthsiast of high taxes, ie a “high tax ideologue”. I may support the death penaty because I think it produces more good than harm. That does not make me a “death penalty ideologue”
I think the phrase is either silly or dishonest.
Similarly, the equation “Democrat=Marxist” is either ignorant, dishonest, or (let’s hope) simply a deliberate provocative by someone who is not interested in serious debate with those he disagrees with.
Where is George Orwell when we need him?

Andrew
13 years ago

Thomas,
Your definition of ideologue is a little off-base. Ideologues are less about then level of enthusiasm, and more about starting assumptions. At this moment in history, high-tax ideologues tend to be people who believe that human beings are so flawed, their individual choices and voluntary associations will inevitably create conditions depriving many individuals of necessary resources and that the only institution that can be trusted to distribute resources equitably is government. In this view, government must seize and redistribute as many resources as possible, lest things become “unfair”.
Tom W. stole the line I would have otherwise used to begin this post as an example of this view.
The Projo editorial board said it very well last year…

Some folks say that taxes should always go up and/or stay up to pay for new or expanded public programs. After all, human needs and/or wants are infinite. And many people consider the very existence of rich people a moral and aesthetic affront, and would like to do away with them — to make everything perfectly “fair,” at least economically.

And I do think there’s a real difference between progressives and socialists. Socialists used to argue, at least in the ideal, that the need for any sort of intrusive government would wither away, once everyone had been purged of their bourgeoisie consciousness. Progressives have given up on that part of the dream, and come to believe that paradise on earth can only exist if it is continually and strictly managed by a right-minded elite.
These days, Democrats are closer to progressives than to socialists.

Thomas
Thomas
13 years ago

Andrew,
You’re welcome to your definition of ideologue, but I hope you’ll understand if I take my definition from the dictionary instead.
And you can define “progressive” and “Democrat” as you wish as well. But my sense is that you (and Tom W) are doing it in a way that has not a lot to do with reality, but lets you fit people into a category you like, and sets them up as straw men that you can easily denegrate.
Then, of course, the Democrats can do the same with the conservatives and the GOP (who are obviously all greedy haters of the poor, locked in a mindless exhaltation of individualism and profit over community and humanity, right?), and we will all get exactly nowhere with each other.
As if actually convincing anyone of anything instead of just smearing them was the point anyway….what a silly thought!
So go ahead an talk about “high-tax ideologues” if you like. But nobody to whom you think this term applies will be listening. You’ll be preaching to the choir which, come to think about it, is probably the real point of a blog like this anyway.

Mike
Mike
13 years ago

“high-tax ideologues?” Do your really believe that there are people who are zealously in favor of high taxes? I’d be grateful if you would name one, because i’ve never seen one.
Posted by Thomas at October 9, 2007 7:50 PM
XXXXX
Oh, many. Walsh, Reback, Paiva-Weed and many others openly advocate higher taxes. When I was in California last year I choked from laughing when I saw the head of the California Teacher’s call those opposed to ad infinitum tax increases “cheapskates”.
California already has America’s highest income taxes at 10.4%. At 9.9% want to take a wild guess as to number 2?

Andrew
13 years ago

Thomas, 1. Here’s the three definitions of ideologue that pop up at dictionary.com… a person who zealously advocates an ideology. (Based on the Random House Unabridged Dictionary),An advocate of a particular ideology, especially an official exponent of that ideology. (American Heritage Dictionary). an advocate of some ideology (WordNet from Princeton University) That’s 2-0-1 for my definition, 0-2-1 for yours, and a four-point lead for me under the old NHL scoring system (before they eliminated ties). 2. If my description of contemporary progressive ideology is inaccurate, then enlighten me as to what is the common ideology guiding the political party that believes that… The only acceptable means of education reform is a new “funding formula”, paid for with increased taxation, because bureaucrats and not parental and student preferences, should decide what schools get increased support. Social security must be preserved in its current form, at any cost, no matter how much taxes must be raised, because individuals cannot be trusted with full control of their own retirement resources. Health savings accounts and other consumer driven plans are non-starters for healthcare. The only acceptable reform of healthcare is reform funded with increased taxation, allowing the government to give people the tight management of healthcare costs and choices that they need. 3. Or to approach the issue from a more specific angle, if there’s no one who’s starting from a position that high taxes are a good thing in and of themselves, then how can a newspaper columnist like Froma Harrop praise a Michael Bloomberg Presidential bid because of his willingness to keep taxes high, without discussing what programs need increased funding. Could it be because she assumes that all right-minded people simply know that taxes need to be kept high? 4. A more effective strategy for fostering dialog than trying to declare… Read more »

Thomas
Thomas
13 years ago

Andrew,
Let me make it clear that I didn’t comment in this thread to defend any party, policy or ideology. I only wanted to point out that I thought, and still think, that the phrase “high-tax ideologue” is a snarky pejoritive with little, if any, denotative meaning. It takes away from, rather than adds to, the value of the ideas in your post, and made me go from reading with interest to rolling my eyes. I’d like AR better if there were less of that, but no, I don’t expect you to care.
1. Keep score as you wish. Add these:
An often blindly partisan advocate or adherent of a particular ideology Merriam Webster
A particularly zealous or doctrinaire supporter of an ideology (Encarta)
A person who follows an ideology in a dogmatic or uncompromising way. (Oxford English Dictionary)
A person who believes very strongly in particular principles and tries to follow them carefully (Cambridge online dictionary)
I still don’t know anyone who could sensibly be described as being a “high-tax ideologue”.
For fun, read http://www.politicsforum.org/images/flame_warriors/flame_54.php
2. I can’t answer this because I do not know anyone who would agree with your three statements (well, maybe possibly the last because it is phrased less absurdly).
3. I’m happy to give you Froma Harrop for whatever cause you like.
4. Nobody was “trying to declare that a liberal/Democrat/progressive high-tax ideology is beyond criticism “, so I don’t get your meaning. I objected to Tom W’s equation of “Democrat” and “Marxist” because it is unhelpful, divisive and, frankly, silly. Anybody who says “if you’re a Democrat, you’re a Marxist” therefore defend your Marxist principles” deserves no more of an answer than someone who says “you’re a Republican, therefore you’re a bigot, so defend bigotry”.

Tom W
Tom W
13 years ago

>>Tom W’s equation of “Democrat” and “Marxist” because it is unhelpful, divisive and, frankly, silly
Marxism / socialism / communism are all variations of collectivism.
The post-1960’s Democrat Party has been taken over by what used to be called liberals (who since that term has been discredited have taken to calling themselves progressives) very much adheres to a collectivist philosophy, and promotes a collectivist agenda.
So whatever the subset label, they are indeed all under the same tent.

Thomas
Thomas
13 years ago

Tom W says: “Marxism / socialism / communism are all variations of collectivism.”
And, to make things clear, you have equated Democratic voters with the above three.
Yes. I get it. FDR (Johnson? Carter?)=Clinton=Mao=Stalin. I’ve seen it here a dozen times. As I said, it’s not just wrong, it’s silly.
Actually, it’s worse than silly because it prevents constructive debate. As an educated person, you should know better too, so please stop with the ridiculous labels already and stick to policy arguments.
PS: the label “liberal” has not been “discredited”. In fact, under any reasonble definition of liberal, it applies to the vast majority of American citizens. Read John Stuart Mill’s “On Liberty” for the classic statement of liberalism). It has, however, been appropriated and distorted by people who call themselves “conservatives” (but who are really radicals, so there).

Thomas
Thomas
13 years ago

Oh… and just in case any of the observers of this converation are having trouble breaking away from the manechian worldview of this blog, I am happy to say that I regard a significant proportion of the current leadership of the RI Democratic party as an appalling collection of thugs, crooks and DINOs.

Tom W
Tom W
13 years ago

>> Yes. I get it. FDR (Johnson? Carter?)=Clinton=Mao=Stalin. I’ve seen it here a dozen times. As I said, it’s not just wrong, it’s silly. Actually, it’s worse than silly because it prevents constructive debate. As an educated person, you should know better too, so please stop with the ridiculous labels already and stick to policy arguments. Silly? Really? FDR / Johnson / Hillary wanted / want to take more of my (and everyone else’s) earnings in order to pay for their vision of a “Great Society” a/k/a “village.” Hillary and her ilk wants to complete the proposals that started during the Truman administration (if not before) to socialize medicine (which LBJ started with Medicare / Medicaid). Other than the absence of Gulag camps, exactly how different is, e.g., Lenin’s and Stalin vision of a “workers paradise” from a “Great Society” from a “Village”? Individual liberty and choice is subordinated to the collective (a/k/a “society”) as directed by an elite. “From each according to their ability; to each according to their need.” Couldn’t that have been said by a modern Democrat? Isn’t in consistent with their policies and world view? As government grows larger individual liberty shrinks – whether through force in a totalitarian state or through high taxation (which limits the range of options for the individual whose earnings are confiscated). As a philosophical matter, is my working for the government one-half the year (via taxes) different from being forced to work for one-half the year on one of Stalin’s “collective farms” for the good of the state and the “workers of the world”? You can’t have the primacy of the individual and have the primacy of the government / collective at the same time. The Democrat preference is the primacy of the government … perhaps different in methodology and… Read more »

Thomas
Thomas
13 years ago

TomW says, “Silly? Really?”….”Other than the absence of Gulag camps, exactly how different is, e.g., Lenin’s and Stalin vision of a “workers paradise” from a “Great Society” from a “Village”?”
Q.E.D.

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