It’s tax day. Celebrate! It’s still more than likely that you (of our Stateside readers) are one of the few left supporting the government, feeding the beast whose stated goal is to eat you. A sort of inverse delicious irony.
Anyway, various news reports are stating that about 47% of all Americans will pay no federal income tax. This is true, but the statistic is slightly misleading because most in the half that don’t pay income tax do pay social security tax, health (a.k.a. medicare) tax, gas taxes, and various other revenue-raising fees thought up by our leaders.
Even that is misleading, because a good chunk of the half that don’t pay income, but do pay those other federal taxes, receive a socialistic redistribution of wealth through the mechanism of the “earned” income credit. Which goes to show you that marketing is everything: for this “earned” income is, of course, unearned. It is money taken from those that have earned it and given to those who have done nothing to earn it. Except live.
The true federal tax burden (ignore states and municipalities) is difficult to calculate for any individual because gas taxes and other federal fees are not reported to the IRS; they obviously vary significantly from individual to individual.
However, we can crudely guess that about 10% of all Americans end up with zero—or even negative—federal tax liability. The “negative” comes from the welfare they receive via the EIC, the excess of medicare and social security benefits they have received, and so on.
This share of folk must be increasing, as the following picture suggests:
This is the percent share of federal income taxes paid by the bottom 50% of income earners, as defined by the IRS. The light red and blue shading indicate the Republican or Democrat presidencies, respectively. These colors are deemphasized because, as is obvious, the downward trend is independent of administrations (as it is of Congresses).
We can look at more than just the bottom 50%: here’s the same thing but for the bottom 99%, 95%, 90%, 75%, and 50%.
Income redistribution is progressing nicely, thank you very much. Show these pictures to your socialist pal next time he complains that the rich have too much money. Also show him this next picture, which is the burden on the top 1% of income earners.
It’s hard to guess the precise number, but it appears that the top 1%, generous souls that they are, will have paid just under 45% of all taxes in 2010. And, of course, with Mr Obama’s stated policy of tax increases for the rich, this will rapidly approach 50%.
There is a possible objection to this analysis. The top 1% of earners could have increased their income at a rate higher than those in the bottom 99%. Both groups could have increased, but if the top 1% increased faster, it could account for their increased tax layouts.
Here is a picture that helps answer that—but only “helps” because that IRS data is (purposely?) flawed.
This is the ratio of adjusted gross incomes of the top 1% to the bottom 50%. In 1987, for example, the total adjusted incomes of the bottom 50% equaled the total adjusted incomes of the top 1%. This ratio held roughly until 1996 when it increased in the top 1%’s favor. As of 2007, these folks made an adjusted income about 1.9 times the adjusted incomes of the bottom 50%. The dip from the last recession and the Bush tax cuts is obvious.
The huge problem lies in the word adjusted. The IRS mysteriously does not report actual incomes, but only adjusted gross incomes, which are the amounts made after subtracting various (standard and variable) deductions from the actual income.
We can’t tease out from these numbers how much greater are the real incomes of the top 1%, but it does appear they have grown somewhat proportionately higher. The picture is exaggerated in the top 1%’s favor, because deductions are a much higher and growing proportion of the incomes of the bottom 50%.
Dear Socialist Pal, those bottom 50% have grown richer, too! This picture shows the total adjusted gross incomes for both the top and (artificially deflated) bottom groups.
It’s clear that what happened was that the “poor” grew richer steadily, but the “rich” in the Great Internet and Stock Boom of the late 1990s, grew faster. Those richies were, of course, the folks with the capital. The post-2001 retrogression in the economy is more obvious for the top, as is their accelerating income in the Great Subprime Mortgage Boom of the late 2000s. The current recession is not in this data.
Another common mistake is to think that the top 1% in 1986 were the same people in 2007. They were not, obviously. A great many of those rich folk in 1986 are dead and now earn nothing. Others will have retired, and many new faces will have appeared.
Oh, my: so many reasons to be unhappy. And we haven’t even touched on the VAT! Another time; another day.