Saturday, February 4, 2012

Random charts - Income and taxes

A number of charts re taxes:

Source: The Struggling Middle Class

Source: Table H-2. Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households


Source: Summary of Latest Federal Individual Income Tax Data

Source: Misconceptions and Realities About Who Pays Taxes

And some articles:
Who Pays the Taxes in the USA ?
Class warfare: Who pays their fair share of taxes?
9 Things The Rich Don't Want You To Know About Taxes
By the Numbers: What the 47 Percent Who Pay No Income Tax Look Like
Millionaires Don't Pay Taxes? 1,470 of America's Richest Didn't, According to IRS

Aah, the sound and fury resulting from arguments and disagreements about taxes! Terms like "fair" and "unfair" are bandied around.... It's a very complex subject and you can 'slice and dice' the numbers many different ways. Be a little vague about exactly what you are quoting or comparing (when it comes to contrasting the rates and/or amounts paid by folks at different levels in the economy), and you can selectively "prove' almost any proposition... Is it magnitude or rates that you are citing, and when you talk about taxes are you referring to federal incomes taxes, all federal taxes (i.e. including payroll taxes, etc.), or the total tax burden (e.g. including state taxes)?

You also can throw in a little sleight of hand - talk about a certain level and then when it comes to making tax law changes you can "extend" your solution. Thus Warren Buffet in his famous editorial sets the stage by referencing the "super rich", penning 873 words about himself, the "top 400" and his "mega-rich" friends, then proposing increased taxes for those who have total incomes of less than 14% of what he pays in total federal taxes. Similarly, following all the talk of "millionaires" the tax rate increases proposed by the President kicked in at the individual level of $125,000 and the family level of $250,000!

The President and politicians of all stripes bemoan the state of the nation's tax laws that allow the various examples of "unfairness" that they like to point out. Every one of them act as if the tax code miraculously appeared out of the blue and that they had no role in its provenance, when in reality it is their creation. They shed tears about rich people and companies abusing the existing tax code at the same time that they propose the layering on of new changes encourage or discourage outcomes that they favor.

So President Obama in his latest State of the Union can decry "... loopholes and shelters in the tax code..." while simultaneously proposing to tweak the tax code a) to remove breaks for companies moving jobs and profits overseas, b) to redirect them to companies that insource jobs, c) to add a tax cut for manufacturers, which doubles if the company is in a high-tech sector, d) to include financing help for companies relocating to hard hit communities, e) to support retraining programs, f) to extend the tuition tax credit, g) to expand tax relief to small businesses that are raising wages and creating good jobs, h) to pass clean-energy tax credits, and so on...

As suggested on TaxVox "... We seem to have forgotten that the fundamental purpose of our tax system is to raise revenue to fund government. The current system is riddled with tax provisions that favor one activity over another or provide targeted tax benefits to a limited number of taxpayers. Whether permanent or temporary, these provisions create complexity, impose enormous compliance costs, breed perceptions of unfairness, create opportunities to manipulate rules to avoid tax, and lead to an inefficient use of our economic resources. The tax code has become less stable, increasingly unpredictable, and more and more difficult for taxpayers to understand..."

However, I'm not holding my breath...

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