Since both taxes and spending affect the well-being of Americans—taxes make people worse off, and government spending on useful things makes people better off—it’s not enough to simply ask which Americans bear the nation’s tax burden. We also need to know which Americans receive the most dollars of government spending. To address that issue, the Tax Foundation just released a study titled "Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?" The analysis shows:

1. America’s lowest-earning one-fifth of households receives $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes receive $1.30 per tax dollar, and America’s highest-earning households receive $0.41 per tax dollar.

2. Government spending targeted at the bottom 60% of U.S. households is larger than what they paid in taxes in 2004. Overall between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending, year—a fact that’s not obvious by looking at taxes alone.

Policy Conclusions:

Many lawmakers favor sharply progressive taxes and oppose any tax reform plan that cuts the level of tax progressivity—such as a single-rate income tax or a retail sales tax—despite the economic benefits of those tax reforms.

But tax progressivity is only half the picture, and any amount of progressivity can be achieved by some mix of tax and spending changes. That means it’s possible to move toward a flatter, more economically neutral tax code, without reducing the progressivity in the fiscal system. In that case, lawmakers’ opposition to economically efficient tax reforms no longer makes sense.
http://www.taxfoundation.org/files/sr151.pdf
http://mjperry.blogspot.com/2007/03/who-pays-taxes-and-what-do-they-get.html

[Edited on March 25, 2007 at 1:09 PM. Reason : img]

3/25/2007 1:08:10 PM

Quote :

"2. Government spending targeted at the bottom 60% of U.S. households is larger than what they paid in taxes in 2004. Overall between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending, year—a fact that’s not obvious by looking at taxes alone."

I thought the concept of redistribution by this mechanism was obvious and well known. What are you saying is not obvious here?

Quote :

"But tax progressivity is only half the picture, and any amount of progressivity can be achieved by some mix of tax and spending changes. That means it’s possible to move toward a flatter, more economically neutral tax code, without reducing the progressivity in the fiscal system. In that case, lawmakers’ opposition to economically efficient tax reforms no longer makes sense. "

I don't see how "any" amount of progressivity can be achieved under a different tax system. The current numbers look pretty good, as far as the percentages go. We just need to cut taxes AND spending across the board and lower the tax rate for everyone.

And why doesn't the graph go beyond $100k? Is it because the tax dollars paid and spent levels out a little bit?

[Edited on March 25, 2007 at 1:27 PM. Reason : ]

3/25/2007 1:26:05 PM

i pay taxes

mostly what i get is fucked.

3/25/2007 1:41:38 PM

^ Aren't you in the military?

3/25/2007 1:45:36 PM

mostly what i get is fucked. a career, an education, full health coverage, and pilot training.

And crap, what do pilots in the military get paid?

Cry me a river.


[Edited on March 25, 2007 at 2:13 PM. Reason : .]

3/25/2007 2:11:55 PM

mostly what i get is fucked. a career, an education, full health coverage, and pilot training.

3/25/2007 2:13:15 PM

And I'm not sure I follow what LoneSnark is arguing here...

Are you saying you want a flatter tax in exchange for more spending on the bottom end? What would be the point?

3/25/2007 2:23:16 PM

^fairness?

3/25/2007 3:59:21 PM

most people oppose a single rate tax because all the proof that it works rests on assumptions and the economic "well being" of countries like Russia.
Or should we go through the whole "it will eliminate tax preparers and no one will ever be corrupt again" argument, cause that is both fun AND based in reality

3/25/2007 3:52:54 PM

Sorry, those were not my words, they were from the link I posted.

What I suspect is the argument goes something like this: The top income tax rate has dropped a lot in the 20th century, down to a low of 35%. This has resulted in immense efficiency gains for society but has not reduced the progressivity of the system because, at the same time, the rich are paying more in taxes than ever while the poor are paying less and getting more government handouts.

So, to state policy, the democrats should not raise taxes on the rich but should, instead, work to eliminate government programs which predominantly benefit the rich. The effects would be the same but without the negative effects of a tax increase.

3/25/2007 4:15:17 PM

sales tax, the fairest tax there is.

3/25/2007 4:15:54 PM

LOL, democrats eliminating handouts? haha, thats their base. I agree with you however. Also look at how much MORE our govt spends on these BS programs. Sales tax is fair, and cut some programs if the monies come up short..which they wont.

3/25/2007 4:18:07 PM

Quote :

" So, to state policy, the democrats should not raise taxes on the rich but should, instead, work to eliminate government programs which predominantly benefit the rich. The effects would be the same but without the negative effects of a tax increase."

Isn't one of the flagship issues Republicans like to tout lowering taxes? Why are you singling out the Democrats? It seems they would have more interest than the democrats in enacting this reform, and should try to swing the democrats over to their side.

Quote :

"LOL, democrats eliminating handouts? haha, thats their base. I agree with you however. Also look at how much MORE our govt spends on these BS programs. Sales tax is fair, and cut some programs if the monies come up short..which they wont."

No one said anything about eliminating handouts (yet) so I don't know who you're responding to. I agree that dumping money in to a problem won't automatically fix it, but it seems disingenuous to label gov. programs as "handouts" which has a negative connotation, which demeans the good people that may rely on those "handouts."

3/25/2007 4:25:05 PM

Wow, the Duke got brutally pwnt. You don't see that too often.

Quote :

"So, to state policy, the democrats should not raise taxes on the rich but should, instead, work to eliminate government programs which predominantly benefit the rich."

That sounds pretty good to me.

3/25/2007 5:27:57 PM

moron, If I offend someone who does nothing but breed and rely on tax payers to pay for them..so be it. I also see no reason people on medcaid should be given free acne, hair, erection, and fertility meds.

You are correct that there are plenty of people who geniunely need those programs. THere is also the working poor who, through no fault of their own, need some assistance at times. However, we encourage them to stop working entirely to receive the help. Instead of putting more value on the worker, we are upside down.

3/25/2007 7:24:58 PM

^Prove it. What percentage of the poor do "nothing but breed and rely on tax payers to pay for them"?

3/25/2007 7:53:16 PM

Figures like "$8.21 in government spending for each dollar of taxes paid" are essentially meaningless.

In many cases it turns out that some of those dollars are spent on services that the poor would be better off without; services like say, forcibly invading their homes and hauling them away to years of captivity because their private lifestyle choices are not government approved.

In other cases some of those dollars are only buying what the poor would otherwise spend pennies on. It's hard to justify $10,000 per child per annum for a public education when you can buy an equivalent or superior private education for a quarter of that.

This sort of figure can't possibly reflect the reality that the lowest income quintiles are the lowest income quintiles because for generations, their forebears have had to make decisions in the face of perverse incentives, created by government handouts, that systematically reward and reinforce sloth, indolence, shortsightedness, irresponsibility and self-destructive behavior.

Nor can it reflect the economic opportunities they will never have access to because the same government has, for just as many generations, systematically punished thrift, hard work, farsightedness, initiative, innovation, and nearly every other quality that can be found in those who drive economic progress.

When the basis of public policy is the plunder of private property and not its protection, nobody benefits; certainly not those who are plundered, and - in the long run - not even those who receive the lion's share of the loot.

The only sensible course of action is to cut taxes, spending and regulation across the board. Anything else would be counterproductive, callous, cruel and frankly, downright criminal.

[Edited on March 25, 2007 at 8:19 PM. Reason : clarity, grammar, impact]

3/25/2007 7:53:32 PM

From each according to his ability, to each according to his need.

3/25/2007 8:42:27 PM

So 98% of the people on this board are getting a good return on their investment.

3/25/2007 8:59:10 PM

Megaloman84! You have returned to us!
Where have you been hiding yourself this past while?

3/25/2007 9:08:26 PM

Quote :

"Where have you been hiding yourself this past while?"

Ol' Atlas probably shrugged for a while.

3/25/2007 9:39:23 PM

Quote :

"Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property. But it is also true that man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder. --Frederick Bastiat "The Law""

3/25/2007 10:15:11 PM

Quote :

"sales tax, the fairest most regressive tax there is."

3/25/2007 10:22:02 PM

Libertarian circle jerk in

3...

2...

1...

3/25/2007 11:12:30 PM

^
You had your fun in my "300" thread.

I'm still cleaning up that mess

3/25/2007 11:44:14 PM

RevoltNow, the point of the thread is that a sales tax need not be regressive.

On the contrary, if every cent collected by the sales tax is then returned to the poor and middle class through either an EITC or vouchers while the rich get nothing then the system as a whole is clearly not regressive.

3/26/2007 8:40:03 AM

The FairTax bill has a feature where everyone gets rebated the sales tax up to the poverty level. So the poor would effectively pay no federal taxes.

Of course if spending continues unchecked, any tax system will eventually become tyrannical.

3/26/2007 9:32:01 AM

^ That is not entirely what I was referring to. Yes, rebate checks level it out, but other government programs which target the poor and middle class make it completely one sided.

That said, I hate the fair-tax proposal; a sales tax in excess of 20% tends to wreck goods markets.

I prefer a Visible Value Added Tax (VVAT).

3/26/2007 10:17:22 AM

even though people from lower income backets get more "handouts" don't the people who pay more taxes get the same amount of benfits in another form?
if govenment ensures your $ in banks why should me and bill gates contribute the same amount to fund that program? the govenment pays to keep up highways i travel out of state maybe twice a year while bill gates truck are shiping and moving products contantly why should i pay the same as him? gov pays the military/police/firemen why should i have the same contribution to protect my lake park apt as bill gates pays to protect his 2-3 million $ homes?

just using gates as an example but ami the only1 who see no reason why poeple who earn more shouldn't foot the bill? i'll probaly feel totally differnt when i make my first mil and i pay 400k in taxes.

3/26/2007 10:27:39 AM

you pay a lot less than he does actually

3/26/2007 10:30:12 AM

Odd, every service you mentioned is provided by local and state governments which would have nothing to do with a federal tax.

The police and fire department is provided by city and county property taxes which is already a flat tax: 11 cents per $100 in property value, or a flat tax of 0.011% on property value (varies by region).

As for the highways, they too are already alloted via a flat sales tax of 62 cents per gallon of gasoline. Bill Gates' trucks may drive a lot more than you do, but they also consume a lot more fuel and thus pay substantially more in taxes.

3/26/2007 10:44:45 AM

Quote :

"You had your fun in my "300" thread. I'm still cleaning up that mess"

Your 300 thread was fucking moronic.

3/26/2007 10:54:41 AM

Quote :

"a sales tax in excess of 20% tends to wreck goods markets. "

Prices should drop about 20% on average because of the hidden tax costs in all goods and services. So the 20% tax would tend to be a wash.

Value Added Taxes are anything but visible. They hide a tax in each level of production.

3/26/2007 2:40:39 PM

In theory, you are right. But a sales tax is easier for the average joe to avoid than income taxes. As such, studies show, a sales tax in excess of 20% starts to break down as the black market grows to include common household items.

However, a VAT tax does not suffer from this problem as each sucessive stage in production only faces a fraction of the total tax.

Which means a VAT tax is far less disruptive to society, making it a benefit. But you are right, the tax is not visible, but you can make it that way with statute by mandating register notification (on every receipt the seller must print the estimated amount paid in taxes on the item purchased).

3/26/2007 3:39:47 PM

Quote :

"By 1913, 36 States had ratified the 16th Amendment to the Constitution. In October, Congress passed a new income tax law with rates beginning at 1 percent and rising to 7 percent for taxpayers with income in excess of $500,000. Less than 1 percent of the population paid income tax at the time."

http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml

Must have been nice...

PS I never knew the Constitution had to be amended to allow the collection of federal income taxes until my dad mentioned it about a week ago. Apparently they were afraid 1% was too high when they first passed the income tax law.

[Edited on March 27, 2007 at 10:26 AM. Reason : PS]

3/27/2007 10:24:17 AM

The United States had plenty of experience with income taxes early in the 19th century (rates were high during the civil war). The reason the constitution was amended was because the Supreme Court was made up of a bunch of libertarians which were using technicalities in the constitution to strike down such laws they disagreed with.

This, of course, was fixed by FDR in the 1930s when he replaced the court with a bunch of statists which ignored the constitution in order to enable society to change and evolve in accordance with their beliefs.

I would normally say the two sets of judges were equally wrong by ruling in accordance with their beliefs and not with the law, but at least the first set stuck to ruling on legislation. The second group eventually became so impatient with the pace of legislation they began creating new laws from scratch without any input from the legislature whatsoever.

3/27/2007 12:18:58 PM

The second graph is may be slightly misleading because it already divides though by taxes paid. At first it seem as if what the various groups are paying is shown in the first graph and what they are getting. However, you would have to multiply taxes paid by the second graph to get services received.


In general the idea of slanting services to the poor as a opposed to taxes towards the rich is a good one. The purpose of federal taxes is redistribution. We should accept that and move on to making it as effecient as possible.

However, the problem is that much of "government services" is actually intergenerational transfers (SS, Medicare, even most of Medicaid) which are proving impossible to meddle with.

If not for entitlements we could pay the whole thing on the back of a low flat tax. With entitlements there is just not enough money at the bottom to pay the whole bill.

Suppose you means tested entitlements?

Well this is effectively just an increase in taxes. So you would lower taxes at the top end just to raise the effective rate again through means testing.

3/27/2007 1:42:28 PM

perhaps this graph helps you a little more:

3/27/2007 1:56:39 PM

^

Well what I was really saying was that a graph showing services recieved by income class would better match the taxes paid by income class.

I am also interested in how they calculate services recieved. I assume you divide most through by the population. I am not sure that gets us exactly what we want.

3/27/2007 2:03:52 PM

It is true I do not know how they graphs are being created, so far I am just accepting them at face value.

I am assuming they have eliminated from the revenue/cost such things as military defense, upkeep, legislator salaries, etc., and then look at where the remaining proportions went.

It is also true I seriously doubt the average bottom 20%er gets $31k worth out of government programs. I suspect, as with most government spending, that much of it is wasted on administration or fraud. But the least wasteful government program, the EITC, is also the largest for the poor, so I suspect they get a lot of that figure and there is no question that most of it went to the bottom 20%.

We could dramatically increase the efficiency of redistribution by eliminating everything but the EITC, as I understand it.

And reducing the cap on SS checks would help too.

3/27/2007 2:14:47 PM

Quote :

"But the least wasteful government program, the EITC, is also the largest for the poor, so I suspect they get a lot of that figure and there is no question that most of it went to the bottom 20%."

Do you suppose that the Earned Income Tax Credit is the most efficient because it basically is just handing out cash and doesn't really require local offices like a lot of the other programs (like medicare, or SSI etc...)? I'd agree on that basis.

However, I have met "poor" people who routinely get back 4-5k per year by lying about their income. They just work in cash. There are even ways of "buying" other peoples tax so you can get more in the EITC, I don't begin to understand it, except that they make more $ than I do and somehow I'm the one who actually pays tax.

Its a good idea, but we need a few million audits as I see it.

3/27/2007 7:18:08 PM