Tag Archives: Income Tax

New CBO study: top 40% of earners paid 106.2% of net income taxes collected

CNS News reports on a new study by the Congressional Budget Office (CBO).

Excerpt:

The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.

At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.

Taxpayers in the top 40 percent of households were able to pay more than 100 percent of net federal income taxes in 2010 because Americans in the bottom 40 percent actually paid negative income taxes, according to the CBO study entitled, “The Distribution of Household Income and Federal Taxes, 2010.

[…]When the the negative 9.1 percent in federal income taxes paid by those in the bottom 40 percent is subtracted from the 109.1 percent paid by those in the top 60 percent, federal tax revenues net out to an even 100 percent.

[…]The households in the bottom 40 percent of income—which on average paid negative federal income taxes—were on average receiving many thousands of dollars in what the report calls “government transfers.” These transfers included, among other things, benefits from unemployment insurance, Medicare and Social Security, as well as from means-tested programs such as the Supplemental Nutrition Assistance Program (food stamps), and Medicaid.

“Government transfers increase income in all groups, but those increases, both in dollars and as a percentage of market income, are larger for groups with lower market income,” says the report.

According to the CBO, households in the bottom quintile received an average of $22,700 in government transfers in 2010 (including $14,300 in payments from Medicare and Social Security and $8,500 in payments from other government programs); and households in the second quintile received an average of $15,200 in government transfers (including $10,300 in payments from Medicare and Social Security and $4,900 from other government programs).

Now I have been reading articles like this one in National Review by James Pethokoukis, which talk about Obama’s rhetoric about “income inequality”. And I think that when the President goes on a rant about how much he wants to fix “income inequality”, you have to keep in mind what he is actually fixing. He thinks the people who earn the most need to be taxed more and he thinks that the people who earn the least need to be given more benefits. That’s what he is trying to fix.

Christians and social justice: is redistribution of wealth good for the poor?

Discovery Institute fellow Jonathan Witt pens this article in the American Spectator on the Gospel, business and social justice.

Excerpt:

The third term, social justice, is unlike the other two in its having a justifiable raison d’être. It stretches back to 19th century Catholic social thought and was used in the context of nuanced explorations of law, ethics, and justice. Unfortunately, this nuance and precision usually falls away in popular usage, and the term has been co-opted by the left to imply that ordinary justice is a mere tool of the ruling elite, with the real deal being “social justice.”

This impoverished meaning needs to be addressed. If a society extends justice to the rich and well-connected but allows the poor to be bullied and swindled by corrupt players inside and outside of the government, the problem isn’t unsocial justice but a lack of justice. If the poor in many developing nations can’t get access to credit or the courts because they can’t register their businesses, and they can’t register their businesses because they don’t have the bribe money and connections to navigate a byzantine regulatory maze, the problem is injustice, plain and simple. Such a society doesn’t need a social brand of justice any more than a poor neighborhood without stores needs a social grocery store. The neighborhood needs an ordinary grocery store, and the unjust society needs basic justice. Grocery stores and justice are already intrinsically social.

More than accurate semantics is at stake here. Often the popular call for “social justice” boils down to an ill-conceived call for coercive wealth transfers — for instance, getting rich countries to transfer more of their tax revenues to the governments of poor countries as foreign aid. It’d be nice if this approach actually helped the poor, since we’ve been using it for the past 60 years. Unfortunately, the statistical and narrative testimony on this strategy hovers between mixed and scandalous.

The reasons for this are complex but not so complex as to excuse the status quo. Much of the aid money gets quietly funneled into the pockets of corrupt politicians. In other cases the aid money reaches its intended target but, since the aid money is fungible, it still supports bad actors. It does so by freeing a regime of the political necessity of paying for the schools, road projects and emergency relief already covered by the foreign assistance. This, in turn, allows the regimes to spend more of their tax revenues for enhancing their own wealth and power.

Worse, the small fraction of aid money that actually reaches its intended destination often puts indigenous producers out of business, since it’s difficult to compete against free goods from abroad. Haiti’s rice farmers, for instance, once exported rice, but today their livelihoods have been all but wiped out by subsidized U.S. rice dumped on the country as foreign aid.

Add to all of this international “social justice” the devastating cultural effects of America’s welfare state. The neighborhoods flooded with 50 years of this domestic “social justice” now face far higher levels of criminal injustice and anti-social behavior than before the justice arrived.

Much of the problem stems from welfare’s effect on the institution of the family. The percentage of children being raised by both of their biological parents in America’s poorest neighborhoods used to be low and fairly comparable to what was found in middle and upper class neighborhoods, but the Great Society programs of the 1960s changed that.

As George Gilder put it in Wealth and Poverty, the underclass husband and father was “cuckolded by the compassionate state,” a violation which has incited “that very combination of resignation and rage, escapism and violence, short horizons and promiscuous sexuality that characterizes everywhere the life of the poor.”

Yale University sociologist Elijah Anderson put it almost as bluntly in a 1989 journal article: “It has become increasingly socially acceptable for a young woman to have children out of wedlock — significantly, with the help of a regular welfare check.”

The plain testimony of history is that the left’s strategy for saving the poor has been a tragic failure. It has stifled development in poor countries, bred a fatherless underclass in the United States, and all but bankrupted the European Union. Cloaking all of this in the guise of “social justice” serves only to perpetuate the tragedy.

It turns out that the very people who cry the loudest about wanting to help the poor – by redistributing wealth from those who produce to those who don’t – are the ones who incentivize people to make decisions that will make them poorer and expose them to more violence. Sure, there is a certain amount of uncertainty in life, but when you reward failure and punish success, you get more takers and fewer makers. The alternative to taxation and redistribution is to leave wealth in the hands of the individuals and businesses and trust them to make the decision about sharing. When businesses pay less in taxes, they expand – and more people start up new businesses, because they are attracted by the chance to make higher profits. Although letting individuals and business keep their own money is frowned on by the secular left, that’s because they themselves project their tendency not to give to charity and create jobs onto everyone else. They don’t understand charity and entrepreneurialism, that’s why they take money away from people who work and who create wealth.

I do want to say one other thing. I find it troubling when Christians present themselves to me as being social conservative, and fiscally liberal. There is no such thing as a social conservative and a fiscal liberal. If a person demands that the state provide cheese sandwiches to the children of single mothers in public schools, then  it creates more of an incentive to become a single mother, and less of an incentive to marry. That redistribution lowers the cost of single motherhood and raises the cost of marriage. It has been shown that single motherhood is the leading cause of child poverty – so why would we put into place incentives that encourage people to not make good decisions about sex? Why subsidize people who refuse to exercise self-control in sexual matters? Why make it encourage people to inflict fatherlessness on their own innocent children? Marriage is correlated with increased safety for women and children. Lowering the moral standards and paying people to make mistakes isn’t good for them. And it’s not good for their children.

The more you tax those who produce, the fewer of them you get. And the more you subsidize those who collect, the more of them you get. When men see themselves as slaves of the state – working only to be plundered – they stop working and they stop marrying. Why would a man work to feed the children of someone who could not even bother to get married before having babies? Why would a man get married knowing that half of what he earns will go to the state? Let families keep more of their own money, so that families are empowered – and not government. Let families keep their own money so they decide how to spend it, instead of depending on government. Let single mothers have to face the cost of their decisions. Let them ask charities for help, not the government. When people have to ask their neighbors for help, they know that they have done wrong, and that the money they get came from someone who worked for it. That is not there when government taxes and writes them a no-guilt check. Then it’s an entitlement, and they don’t learn their lesson.

Instead, let individuals and businesses make the decision to help those who they think are truly willing to try to improve their lot in life. Those are the ones who need support. When you leave wealth distribution to the government, no one is there to make those moral judgments. And it’s worse than that. When government takes over industries like health care, they are often supported by naive pro-lifers who think that wealth redistribution is compassion. But a secular government has no interest in women who stay home to raise their children – they want women to get out into the work force and pay income taxes. A single-payer health care system is always going to be pro-abortion for that reason. And any pro-lifer who votes “with their heart” for single-payer health care is a fool. They are, in effect, pro-abortion. Think before you vote.

Are people who don’t pay any federal taxes “paying their fair share”?

The top 20% paid 94.1% of all income taxes in 2009
The top 20% paid 94.1% of all income taxes in 2009

From Investors Business Daily.

Excerpt:

The proportion of those paying no income taxes continues to hit higher highs — a trend that will ultimately make lowering taxes and reducing government impossible.

For decades, “fairness” has been liberal Democrats’ outcry against demands for lower taxes. The rich, President Obama endlessly contends, don’t pay “their fair share.”

It’s about as far from the truth as you can get. As the Congressional Budget Office showed in a new report on the distribution of household income and federal taxes, the rich are getting hit by the taxman harder than ever.

As CNBC reporter Robert Frank put it, the top 1% that Obama complains about “paid an average effective tax rate of 28.9% on their income — far more than any other group, and more than twice the average effective rate of the middle class, who paid 11% on average.”

Beyond that, however, is the fact that more Americans who are nowhere near to being rich are paying no taxes at all on the money they take in — which means they have no interest in getting our ever-expanding government leviathan under control.

A new study from the Tax Foundation found the number of those filing tax returns who pay no income taxes now numbers over 58 million, amounting to a staggering 41% of all tax returns. Compare that with 1990, when only about 21% of tax returns were found to have no tax liability.

What’s more, the median income of these nonpayers has increased by 40% in just nine years. “The threshold at which a typical married couple with two children will likely be a nonpayer is now $47,000,” the Tax Foundation found.

It’s remarkable to me that people complain about the rich not paying taxes. The rich are the only ones who pay taxes. Half the country has no federal tax liability at all. The top 50% of taxpayers are paying almost ALL the federal taxes. According to the Congressional Budget Office data in the image above, the top 20% of taxpayers paid 94.1% of all taxes. That data is echoed by data from the Internal Revenue Service.

Is that fair?

How can anyone look at these numbers and honestly claim that “the rich”, by which the leftists mean the most productive entrepreneurs and workers, are “not paying their fair share” of taxes? THEY ARE THE ONLY ONES WHO PAY TAXES.