Kruse Kronicle

Taxing Questions

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by

mwkruse
in ,

Greg Mankiw links this report based on Congressional Budget Office data. Here are my own charts created from the data:

 

Totaleffectivetax

The 2005 total effective federal tax rate as a percentage of the 1979 rate:

  • Top Quintile = 92.7%
  • Fourth Quintile = 82.1%
  • Middle Quintile = 76.3%
  • Second Quintile = 69.2%
  • Bottom Quintile = 53.8%

The effects of the Bush Tax Cuts? The 2005 total effective federal tax rate as a percentage of the 2000 rate.

  • Top Quintile = 91.1%
  • Fourth Quintile = 84.9%
  • Middle Quintile = 85.5%
  • Second Quintile = 76.2%
  • Bottom Quintile = 67.2%

As repeatedly noted, the cuts cut a greater percentage for the bottom quintile than for the top. (32.8% vs. 8.9%) Even more interesting is the total effective federal tax rate for households with children:

 

 

Totaleffectivetaxchild

The 2005 total effective federal tax rate as a percentage of the 1979 rate:

  • Top Quintile = 101.2%
  • Fourth Quintile = 85.0%
  • Middle Quintile = 76.8%
  • Second Quintile = 60.1%
  • Bottom Quintile = 14.3%

As I showed in a post last month, the top 1% of taxpayers pay 40% of federal income taxes. The top 25% of taxpayers pay 86% of income taxes.

Tax3

Finally, keep in mind the New York Times article two weeks ago that pointed out that while the bottom quintile has $9,974 in income per household a year, it spends $18,153. That means non-cash assistance (as well as draws on savings in the case of retired or unemployed payers) nearly doubles the actual income of the bottom quintile.

Rather than populist outcry over "tax cuts for the wealthy," maybe we need to look at the whole package of consequences of tax policy. Is the final objective really to have all taxes paid by the top 1% of society?

Comments

57 responses to “Taxing Questions”

  1. Right Mind Avatar
    Right Mind

    Tax Rates by Income Quintile

    Via Kruse Kronicle . Kind of puts a nail in the argument that the poor pay more taxes.

    Reply
  2. Don Meaker Avatar
    Don Meaker

    Keep in mind that the income tax only lands on some income. Drug pushers pay no tax. Increasing value of property pays no tax. Increasing stock value pays no tax.
    One famous Billionaire, Warren Buffet, is famous for using such loopholes, paying himself a minimal salary, never seling stock to avoid capital gains, and he complains that the tax code is unfair.
    Lee Iacocca, in the year he turned Chrysler around, was paid by Chrysler the grand sum of one dollar, plus stock options. What quintile was he in?
    One of the greatest sources of unfairness in the tax code is that the wealthy can hire lawyers and accountants, and change their behavior in ways which reduce their tax liability. If the top rate was lower, there would be less incentive to finesse the code. If the tax code was simpler, there would be less opportunity to move earnings into different tax classes.

    Reply
  3. john s Avatar
    john s

    Historically, poor and middle class people do better when they get less free stuff from the government. When Bill Clinton was in office non military government spending as a percentage of the economy drooped about 2.5%. Median wage increase averaged about $565 a year, from $26,580 to $31,098. When the first President Bush was in office non military spending grew 2.5%, while median wages dropped $825 per year. Under the current President Bush, non military spending has once again increased as a percent of the economy, about 2%. Surprise, surprise median wages are down.
    In fact, since 1946, non military spending has tripled as a percent of the economy, from 9.63% to 28.62%. Most of this increase is in the form of entitlements to the poor and middle class. During that time period real GDP growth has slowed dramatically. Big government only ends up hurting the poor and middle class by slowing the wage growth they would enjoy if they stopped asking for handouts.

    Reply
  4. Eric Avatar
    Eric

    These statistics are misleading unless you include ALL taxes, including property and sales taxes. Sales taxes are very regressive and the lowest quintile will pay far more in sales taxes than any other quintile. Once you include ALL taxes and compare it to income, you’ll see that the system was actually quite flat BEFORE the Bush tax cuts.

    Reply
  5. 2020 Tax Resolution Avatar
    2020 Tax Resolution

    I am not really very much particular when it comes to taxes and legal matters. but this one can help. I just hope that you make it more simply the next time. keep it up.

    Reply
  6. FAP Turbo Avatar
    FAP Turbo

    I’m planning to apply for a Green Card (EB-5), but I have two question about this.
    1. If I stay on my country most of the time, do I need to pay US tax for my earnings? (My earning is from the Internet by Google Ad Sense and other US based companies.)
    2. What’s the minimum days I have to stay in the US every year to maintain my Green Card status?

    Reply
  7. Renee Taylor Avatar
    Renee Taylor

    I believe that no person who is a high earner is paying the high tax imposed to them. I don’t believe they are following rules because they really don’t and we do not!

    Reply

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