Sharing the Tax Burden

Chris Edwards at CATO illustrates how Americans currently share the tax burden (h/t). First, the shiny graph:


Then Edwards’ analysis:

1990 was before the Clinton tax increases of 1993. 2000 was after the modest tax cuts of 1997, but before the Bush tax cuts of 2001. 2005 was with the Bush tax cuts in place.
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Folks at the top pay about 25% of their income in federal income taxes, which compares to less than 5% for half of the population at the bottom end.
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The Bush tax cuts substantially reduced tax rates for people in every income group. Indeed, those at the bottom had the largest relative reductions in their tax rates.
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Those at the bottom have paid little, and now they pay even less, due to legislation under both Clinton and Bush. Indeed, these data do not include the tens of billions of dollars sent to lower-income families as a result of the earned income tax credit, and thus it overstates taxes paid by the bottom group.

Then we hear from James Pethokoukis that Wall Street (Goldman Sachs, to be precise) is predicting tax increases when (not if) a Democrat is elected President. Some of what they say, as reported by Pethokoukis:

  • Marginal tax rates on high-income earners are likely to increase…through a combination of allowing the 33 percent and 35 percent brackets to revert back to 36 percent and 39.6 percent respectively, and increasing the rate paid under the alternative minimum tax for higher income earners, which is currently set at 28 percent.
  • The tax rate on dividends is likely to rise.
  • The capital gains rate will rise as well, but may be lower than the dividend rate once again. The long term capital gains rate looks likely to rise from its current level of 15 percent. … An increase past 20 percent is possible but less likely. If it were to increase further, the next natural stop would be 28 percent, which was the rate that applied to long term capital gains before President Clinton and Congress agreed to lower it in 1997.
  • Tax changes could become effective in 2009, but are more likely in 2010 or 2011. Although it seems fairly clear that an all-Democratic government is likely to let some of the expiring tax rates expire, it is much less clear that they will proactively raise tax rates before they are scheduled to reset at the end of 2010. … A tax hike in 2010 is more likely, but could also present political problems.
  • I’d guess that the Democrats will try to pin the tax rates of the highest 10-25% of wage earners back to 2000 levels. And they’ll still excoriate these highly taxed, high-earners for not paying their “fair share.” The class-warfare game plan seems to work, after all.
    Then again, maybe “over paid executives” will welcome higher taxes.

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    Pat Crowley
    Pat Crowley
    13 years ago

    Pay no attention to those things like deduction, exemptions, or taxes on , or lack there of, on wealth.
    This is like the argument saying teachers make $100 per hour because they only work 6 hours a day, you know.
    Bad math, conservatism is thy name!

    Greg
    Greg
    13 years ago

    Is that you analyze-ation of the situation, Ducky?

    Marc Comtois
    13 years ago

    The numbers are from the IRS, via the Tax Foundation :

    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.

    cjritter
    cjritter
    13 years ago

    Pat
    Deductions and exemptions phase out at higher income levels. Also, many are snared by the AMT. You won’t complain about the latter until it hits enough of your members. That will occur soon, if it hasn’t already.
    Our tax is transaction based except for local property taxes. I thought you didn’t like local property taxes; why would you like a similar tax on wealth (which would surely drive a great many people out of this tiny state).

    Monique
    Editor
    13 years ago

    “This is like the argument saying teachers make $100 per hour because they only work 6 hours a day, you know.”
    Yes, normally a person’s hourly rate of pay is calculated by dividing the total compensation by the number of hours worked. Have you been in charge of payroll projections at the State House all these years, Pat?

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