Who Is ‘The Taxpayer’?
FOR MY ACTUAL THOUGHTS ON THE TAXATION SITUATION CLICK THIS
Lefties love to go on and on and on about ‘the taxpayer’ and about how only ‘the rich’ get tax cuts. In their greatest heights of dissimulation, they’ll post up stats about how much each tax bracket got back as a result of the cuts, either in dollar form, or in terms of percentage of the total cut. Ignoring the fact that the tax cuts resulted in a huge increase in revenue in the past couple years, we have to ask a simple question: How much are these people paying in the first place?
Personally, I’m of the opinion that you’re only a ‘taxpayer’ if the amount you pay in taxes approximates per capita government expenditure (Which is being charitable, considering that close to 40% of our budget goes toward various forms of social welfare). In other words, you put in about as much as you take out. Any less and you’re a tax recipient, any more and you’re a tax donor. So today I’m going to look at a couple things: First, how much are people actually paying. Then, how much are they getting back. And finally, I’m going to ask you just how ‘fair’ it is that some people pay nothing for something, while others pay a whole lot more, for a whole lot less.
I’ll be using the CBO’s own numbers from 2003, so there shouldn’t be any whining about skew. And, because I’m not a douchebag, I’ll be explaining how I produce my graphs from their numbers, which are calculated by household and divided up into quintiles (personally I’d like to use individuals, but household yields more conservative numbers). The nice thing about these numbers is since they’re effective tax rates, income tax on business and excise taxes have already been incorporated. In other words, the leftie ‘oh but you didn’t count excise taxes, which are really regressive because poor people spend a greater percentage of their income on those things’ objection doesn’t apply. Here’s a table of the basic data. The only numbers that I crunched are the last two columns (expenditure and corrected expenditure).
From here, we’re going to make lots of graphs. I apologize for their worthlessness but I just switched to Open Office 2.0.2 and am still getting used to the graphing function. The CBO divides their data into fifths. In other words I only get 5 data points to play with, the average for the bottom 20% of all households, the average for those between the 21st and 40th percentile, up through the average for the top 20% of all househods. It’s cumbersome, and nonintuitive, but that’s what we’re stuck with:
1st, pretax income against taxes paid. The difference between the two lines represents post tax income. Pay attention to the fact that taxes paid go up steadily from bottom through the second lowest group, then skyrocket in the 1st.
This second graph is just a variation, showing income both before and after taxes. The difference between the two lines this time is taxes paid. Again notice the ever widening gap.
The third graph maps taxes versus post tax income as a percentage of pre tax income.
All three of these indirectly, but more clearly (confusing huh), illustrate the tax percentage paid by each group in a graphical manner. They say the same thing, I’m just being complete. They establish the basic relationship between income and taxes.
The next three graphs, on the other hand, take it one step further. Instead of being merely illustrative, they add in the dimension of taxes received (per household government expenditure). Through these next three graphs, we’ll actually be able to see who are the tax receivers, the tax payers, and the tax donors. We’ll also get a very vivid picture of just how socialized the American progressive tax system really is.
This fourth graph compares the percent share of total (all households combined) income for each of the 5 groups, and compares that to percent share of total taxes paid. It’s here we first see the taxpayer (which is the point where the lines intersect), tax receivers (left hand side), and tax donors (right hand side). The ‘taxpayer’ comes just above the median for the people between the 60th and 80th percentile. This means that roughly only the top 30% or so of all households actually pay as much or more than they take in. The size of the distance between those two lines represents just how much the receive or donate. Gives you an idea of just how extreme the difference can be.
But because this is a percentage it really doesn’t drive home the monetary disparities involved. It’s important to note that those ‘income’ numbers include all social welfare payments included already. This is good for the next step, which will be to graph these numbers against the total budget. Now, instead of complicating things by taking total budget data from another source, we’re just going to multiply each of the median income values by the number of households in the quintile and add it all together. And divide by the total number of households to get per capita expenditure.
It’s not perfect, but it’s a good approximation.
Notice where the line crosses? That’s a decent estimate of the income level at which you pay about as much in taxes as you get in government services; it even gives you an income amount of roughly 77,000 dollars (since it’s about the median for the 2nd highest fifth…which is 77,000). But that makes the assumption that there are no ‘transfer payments’ ’social insurance’ or any other social welfare programs in place.
In reality, 43.5% of our federal budget last year went toward these kinds of things (’income security’, medicare, social security). Because such data was unavailable, I was unable to do a perfectly accurate estimate of how much of these social welfare payments go to each quintile. While the majority of them would go toward those in the lowest category, it would be improper to make the assumption that ALL did. Instead, what I’m going to do is divide up the federal budget into the 60% that’s spread around equally (more or less), and the 40% that’s basically socialism. From there we can build an estimate that, while conservative (assuming that more people get social welfare benefits than really do), presents a more accurate reflection of our tax system. The way this works is that we’ll use the 60% to determine what everyone, regardless of income, gets in federal expenditure. This yields a horizontal line. On top of this we’re going to place a diagonal line that’s highest for the bottom fifth and lowest for the highest fifth, based off the assumption that the lowest income households get the most in government benefits, and each proceeding quintile gets less and less, until the top fifth gets none at all. Again, this makes federal expenditure look more equitable than it really is. So the lefties once again can’t attack it. This is what we end up with:
This crossover point is an intentionally lowball estimate. Which is why i did all that freaking work to produce it. If you look at both Graphs 4 and 5, the crossover point is really within the 1st quintile. In actuality, Graph 4 is the best representation we have of where the crossover point is. Yet by applying the corrections I did in Graph 6, I’ve tried to strengthen my analysis. It’s one of the weird facts of science that the stronger your methods of analysis, the less robust your results look. It’s more or less the handicap principle. Basically I’m saying “Look, I bitchslapped MYSELF, and I still win!”
In other words, someone making about 77000 dollars a year or more is ‘the taxpayer’, everyone below is actually getting more than they put in. Why should we make the disparity in benefits greater by directing more ‘tax cuts’ to them? As it is, they already get more out of the arrangement than they put in, whereas it’s a losing proposition for anyone making more than 77k. I’ll leave it to others to pontificate about this, whether it be spittle-flecked Marxist or neo-Randian alike. In my old age, I’m skeptical that anyone would be reasoned and principled about it.
When I revisit this topic, I’m going to divide up the taxes, the CBO document I’m using divides things into income, payroll, and excise taxes. And it’d be worthwhile to look at those as well, but this is enough work for one evening.
But there is one thing that cannot be denied. This is a socialist system, this IS a wealth redistribution system, just one concealed by processing through government expenditure in non-welfare areas. I’ll leave it to others to pontificate about this, whether it be spittle-flecked Marxism or neo-Randian alike. In my old age, I’m skeptical that anyone would be reasoned and principled about it.
Something that leftists will [i]always[/i] bring up in terms of “tax contribution” if you call them on how ‘fair’ it is for some people to pay more in is, “But those people who don’t put into the system by providing civil servants with jobs, doing low-wage work, going to school to better themselves and society, and raising children to be the future generations!”
It’s nauseating, I tell you. If you’re a taker, just admit it. Under the current scheme of things, it’s supposed to not be shameful to admit so, so do it. You’re a victim, right? Oh, you’re just a middle class nobody who doesn’t like to work….? Hmm.
Another argument made is that “Those who make more, benefit more from their tax money (as they’re able to/acutally do make more) and should pay in proportionately as a result!”
I’ve really not broken it down into specifics, myself, but I will say that, “In order to make money, you have to have money,” and that really, there’s a certain point (let’s call it a variable point; I don’t know what it would be, exactly - let’s say twice the median income) over the cost of living at which a person is actually more able to invest and make their money work for them in a serious way, utilizing the infrastructure (transit, communication, etc.) which is put in place largely through tax money - either directly, or indirectly (ie regulation). Honestly, I’m not raelly sure which way I think it should be, or how it really falls. I’m pretty damn certain I’d not mind paying 40% of my income in taxes vs. 30% of my income, if I were also making twice as much.
At the very least, try and fix the system so it’s more of a direct proportion, so that people don’t directly get shafted by the tax burden when they hit a certain income mark. (*sigh* I’m going ot have to figure all this out someday soon, too, so that I don’t accidentially work myself into a higher tax bracket by getting a 1k/year raise… maybe I’ll just ask my boss for more time off.)
Of course, the issue of [i]how[/i] to tax people, in which proportions or amounts, would hardly be half the issue it is today [b]in the first place[/b] if we weren’t so heavily taxed. It’s part of the “class welfare” ploy to divide us on such lines, largely through finances (one of the most important parts of life, to everyone). And, dare I say it, it’s how the NWO plans on taking over. If we’re fighting amongst ourselves, it’ll be pretty easy to take us over. A nation divided and all…
(BTW, you might want to put commas in your graphs’ Y axises. It’s hard to read. And name your rows and columns so one can get a quick guestimation, then read the explanation.)
Comment by Caimlas — May 17, 2006 @ 9:30 pm
We lucky duckies
While we’re delving into the right wing fever swamps, take a look at this unintentionally funny post by Indian Cowboy. I was astounded: I thought Lucky Ducky was only a joke found in the comic strips and the editorial…
Trackback by Pharyngula — May 18, 2006 @ 8:10 am
Wow, what an incredible detailed post illustrating your failure to understand the basic concept that as long as the government runs on, say, money, then funding it is going to require taxing away money. And therefore, those people who have most of the money will be impacted the most. Maybe you should do a post next on how it’s unfair that homeless people don’t pay any property taxes.
Of course, any layperson who thinks that actually figuring out tax burdens, expenditures, and so forth is this easy, when in fact it’s something that actual economists spend years on, has got to be pretty blinkered. Congratulations, you wasted lots of time on something you’re totally unqualified to do.
Comment by plunge — May 18, 2006 @ 9:13 am
Yeah. See above. PZ is trying to tweak you for the comment about socialism.
Comment by compass — May 18, 2006 @ 10:15 am
And, because I’m not a douchebag, I’ll be explaining how I produce my graphs from their numbers….The only numbers that I crunched are the last two columns (expenditure and corrected expenditure)…. The way this works is that we’ll use the 60% to determine what everyone, regardless of income, gets in federal expenditure. This yields a horizontal line. On top of this we’re going to place a diagonal line that’s highest for the bottom fifth and lowest for the highest fifth, based off the assumption that the lowest income households get the most in government benefits, and each proceeding quintile gets less and less, until the top fifth gets none at all.
This isn’t a very clear explanation of how exactly you crunched the second column of numbers. How/why did you decide to use this assumption (as opposed to one that assumes the top fifth get something back)? How exactly did you calculate the ‘corrected expenditure’ values for each quintile?
As Caimlas points out in the first comment, an argument can be made that the highest earners’ incomes depend disproportionately on tax-funded infrastructure. Caimlas leaves out perhaps the most important part of that infrastructure, though - the courts. I don’t have any hard numbers handy, but my understanding is that the vast majority of court time (and money) is spent on corporate law. It seems to me that, insofar as the highest income quintile (or two) benefit disproportionately from this infrastructure, their tax burden should reflect it.
Is the portion of taxes that pay for the elaborate system of corporate law included in the 60% that’s ’spread around evenly’ or is it part of the socialist 40%?
Comment by noahpoah — May 18, 2006 @ 10:49 am
How much of our population are really made up by ‘business people’ that would benefit directly from corporate law? Court system was included in the 60%, btw.
I was just trying to make a simple statement about the difference between per capita tax expenditure and actual taxes paid. Not a whole lot more.
Comment by Administrator — May 18, 2006 @ 10:56 am
why do you people make assumptions about what someone is trying to say, plunge? I am not calling the other 70% leeches, merely saying that they aren’t ‘the taxpayer’.
As you said yourself, those that make the most money pay the most taxes, so shouldn’t they get the most back in tax cuts? It makes little sense for those that pay hte least in taxes to get a tax cut unless what you really do want is nothing more than wealth redistribution
Comment by Administrator — May 18, 2006 @ 10:59 am
On top of this we’re going to place a diagonal line that’s highest for the bottom fifth and lowest for the highest fifth, based off the assumption that the lowest income households get the most in government benefits, and each proceeding quintile gets less and less, until the top fifth gets none at all.
So, when you say you made an assumption what you really mean is that you completely made up some numbers which are not supported.
How can you possibly say that the fifth highest quintile gets no tax funds when corporations recieve, and have in the past recieved, boatloads of federal money. That and the fact that much of federal funding for things like railroads and highways support large corporations as much as regular folks.
Comment by AoT — May 18, 2006 @ 11:38 am
Again, I think you’re overestimating the number of ‘businesspeople’ in the top quintiles.
Also, since the diagonal line portion was based solely off of social security, welfare, and medicare, I’m pretty sure not a whole lot of top 20% people get too much of that.
What would be more supported is placing that 43.5% solely in the bottom or bottom 2 quintiles. This would widen the gaps even more and give even greater assertion to my point that a progressive taxation system is pretty damn socialist.
I made my position look worse by that assumption, not better.
Comment by Administrator — May 18, 2006 @ 12:37 pm
[...] OK so I’m not really a cowboy. But hey, madmen need diaries too. « Who Is ‘The Taxpayer’? [...]
Pingback by OK so I’m not really a cowboy. » Blog Archive » ‘The Taxpayer’: Redux — May 18, 2006 @ 1:21 pm
Wow. Hey…you mean people who pay taxes like “sales tax” aren’t actually “paying tax”?
I think all that ponyriding has damaged the brain in your ass.
Comment by Pastor Maker — May 18, 2006 @ 3:21 pm
Wow. Hey…another non-substantive comment.
Comment by Administrator — May 18, 2006 @ 3:34 pm
Links and Minifeatures 05 18 Thursday
Carnivals
Carnival of The Vanities Recommended:
Trackback by Searchlight Crusade — May 18, 2006 @ 3:50 pm
“Also, since the diagonal line portion was based solely off of social security, welfare, and medicare, I’m pretty sure not a whole lot of top 20% people get too much of that.
What would be more supported is placing that 43.5% solely in the bottom or bottom 2 quintiles. This would widen the gaps even more and give even greater assertion to my point that a progressive taxation system is pretty damn socialist.
I made my position look worse by that assumption, not better.”
If you base it only on social security, welfare and medicare then it will inevitably be skewed towards not noting the benefits that acrue to the highest quintile.
Look at it this way: If I own a trucking company, do I derive more or less value from a national system of highways than your average city commuter? If I run a factory, do I get more or less money from the electricity I use, the lines for which were subsidized by tax monies?
I am certainly not talking about business people, though I would guess that they make up a larger percentage of that highest quintile than you think; but, lacking numbers that is a moot point.
Comment by AoT — May 18, 2006 @ 6:18 pm
I understand what you’re saying. Those kinds of infrastructure costs amount to I believe 5-10% of our budget.
Here’s a breakdown of things people have said go unequivocally to the rich more than the poor:
Administration of Justice 1.4%
Transportation 2.4%
Things that arguably help the rich more than the poor (but almost incalculable based on easy-to-get numbers…woudl have to know how much goes to industry versus direct government employment):
National Defense 13.5% (artificially high during Iraq)
General Science, Space, etc 0.9%
So a 3.8 percent I’ll grant you. and I’ll go ahead and give you half of the national defense/space crap (it’d be nearly impossible to tease apart what benefits the Military Industrial Complex vs what benefits the nation in terms of national defense). Which brings us to 11% of the total. I think we can agree that people making 77-110,000k don’t benefit from this (30th percentile to 10th percentile); they’re likely to be salaried. At most I’d say the top 5% are those that benefit from this kind of stuff. I could integrate this in a much more rough fashion into the model but the result would remain more or less the same except for the top 5% of households, who would show greater government benefits than currently shown.
I’ll hack something together later tonight if you’re still following this. It’d be the roughest calculation yet so I dont think anyone should put much stock in that.
Thanks for an on-point comment by the way. It’s nice to debate that way every once in a while.
Comment by Administrator — May 18, 2006 @ 7:46 pm
Do you actually think that at the top end of income that all income is taxable? Taxpayers in that end are able to hide and shelter and avoid taxation on a very large portion of their incomes.
The rate should be calculated on the amount of income rather than the amount of income that the unfortunate rich were unable to shelter and were therefore taxed on.
Of course, they don’t pay Social Security taxes above 96k or on investment income.
Comment by intellectimpure — May 19, 2006 @ 5:19 am
more quibbling, doesn’t apply to the majority of the ‘tax donors’. Try again.
Comment by Administrator — May 19, 2006 @ 6:10 am
Because the dollar amounts are so huge at the top of the sample it is not a ‘quibble.’ The higher the income level the greater the ability to hire professional cheaters, err, I mean accountants and advisors, to manipulate the numbers.
Someone who has an income of a million dollars who is able to sheild three hundred thousand from taxation would have a tax rate of what? What amount of tax revenue would be lost?
Most pork is consumed by people in those brackets. It is not listed as a government expenditure but is still money in the pockets of those individuals.
Is your presentation an attempt to show one particular tiny slice of a bigger picture or did you leave out many other factors because they would lessen the hoped for shock value of the numbers?
Isn’t this you saying ‘we have generalized taxation disorder, take these tax cuts and you’ll feel better’? This is junk science in the vein that you chastise constantly: taking a limited amount of data and oversimplifying the situation to prove your biased assertions. Honest oversight or intentional obtuseness?
Comment by intellectimpure — May 19, 2006 @ 7:03 am
An additional point: You and others assert that there is upward mobility in our economy. The further assertion is that there is upward mobility even for those who come from humble beginnings. That being the case, as a citizen progresses through the decades he will enter higher and higher tax brackets. But he started out low. He was paying in less than your figures suggest he recieved. As time went on however, he entered the realm in which he was paying more than he recieved.
Obviously, any ’shapshot’ of a year of tax figures misses the very large point that rather than hold up a year of figures, we would have to hold up a lifetime of figures to accurately portray reality.
Show me a mans tax history from 16 to 96 and I will show you that you need to be seeking a lifetime average of tax rate rather than one year.
Comment by intellectimpure — May 19, 2006 @ 9:32 am
on your latter point, touche.
ON your former point, again, no, it makes no difference. None whatsoever, you’re trying to make it sound like the very rich are somehow thieves because of how much they pay in taxes versus how much they make in a year. Much as you and I both hate them, they still pay a lot more than you or I will ever pay, and as I said to AoT, even if we give them all the parts of the budget that are vaguely connected to wealth, their tax burden is still the highest.
Not only that but but your point is still disingenuous since Graphs 5 and 6 (the most important ones) dealt with the magnitude of taxes paid and nothing else. ANy way you slice it, they pay more. Furthermore, this really is about the whole 30% that are tax donors not the ‘very rich’.
Fuck the very rich. I have no use for them and neither do you. I won’t ever be one and have no intention of being one. This aint about them.
All my detractors have been talking abotu Bill Gates’s etc. Unless you mean to tell me that Gates, Trump, et al. are accurate reflections of the entire top 30% of all households, you’re missing the greater point.
Any of your ‘poor rich people’ or ‘jealous democrat’ rhetoric has to be directed to households who make between 77,000 and 110,000. The majority of the households in that range are not ‘the rich’, their level of income isn’t unachievable. Ad they’re typically salaried employees.
Since the only assertion I was trying to make was how few people actually end up paying ‘net taxes’, and since the limited amount of data was far more than enough to make that limited assertion, nope, not junk science whatsoever.
And it’s an assertion that so far most of even the dirtiest of the lefties have admitted to.
Comment by Administrator — May 19, 2006 @ 10:39 am
I think there is still a major problem here. We can look at government expenditures in two ways:
1. Direct payment to people. This would be welfare and social security and the like.
2. Acrued benefit from direct payment. This would be indirect value acrued from direct payment. For example, education. If you have someone who could not otherwise go to college and they get a government grant to do so, that money not only benefits them but also benefits empleyers in general by producing more workers and thus driving down salaries.
One could even look at welfare in this light. I mean, people on welfare aren’t going to go invest their checks and make more money, they go out and spend it, and the money goes up the income chain to someone who is richer than they, be it a landlord or a food company.
Comment by AoT — May 19, 2006 @ 3:09 pm
Actually, cowboy, one of the main functions of government is security. That’s the army and the police. One of the main things they protect is property. Now someone with more property to protect should be paying higher rates. Thus the rich should be taxed more than the poor in this regard.
Comment by Brian Macker — May 21, 2006 @ 4:33 pm
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Links and Minifeatures 05 18 Thursday
Carnivals Carnival of The Vanities Recommended: Fearless Philosophy (Cory Maye) Carnival of The Capitalists Recommended: Professor Bainbridge (amending Sarbanes-Oxley) Insureblog (how transparency in medical billing is important) ********** Okay So I’…
Trackback by Searchlight Crusade — September 16, 2007 @ 11:37 am