Sunday, January 10, 2010

If the richest Americans paid taxes (or "The great sucking sound of the trickle-down tax-cutting Reaganomics deception")

Yesterday I published the following tweet:

If rich paid their share (say 20% on income over 60K) we'd all be better off and still reduce deficit by 100 billion (IRS 2006)#p2 #tlot.

Immediately I was excoriated by a couple of "conservatives". I can respect Conservatives who will debate me on substance and well researched facts, and I have experienced that many times on Twitter. However, there is a cacophony of reactionary noise whose sole purpose is to promote a point of view devoid of any reasoning or self-awareness. I said what I said after surprising myself about what the numbers published by the IRS point out, and as a result of an interchange with a proponent of the flat tax. I always looked at the flat tax concept as a way to defraud a short-attention-span public that does not bother to go through the numbers. Clearly that concept is mostly useful to mask the fact that the complexity of the tax system is anything but the progressive scale (as opposed to a flat tax). Just to humor myself I went trough the IRS data and did a quick calculation.

Here are the IRS numbers out from the 2006 tables:

· number of tax payers with AGI above $64,702 (top 25% - closest to $60k available figures): 33,929,730

· total tax paid by top 25%: $883,153 million

· tax paid by top 25% on income below $60,000: ($8,440 joint filers $12,000 single filers) let's say $10,000

· total AGI of top 25%: $5,535,830 million

From these figures I calculate:

· total tax paid for income under $60K=33,929,730x10,000=$339,297million

· total income over $60K=5,535,830 million-33,929,730x60,000=$3,500,046.2 million

· that taxed at 20% is: $700,009 million

· adding the two components: 339,297 million + 700,009 million = $1,039,306 million

which is clearly more than what they paid. In fact the difference is $156,153 million, even more than my initial published claim, which so outraged the right-wingers. This is how much they added to the deficit in 2006 compared to a model where they actually paid a meager 20% tax rate.

These results should be surprising to most people, and I think they will be surprising even to high income earners, say people earning $200,000 who currently pay much higher average rates than the 20% marginal rate I suggest in this example.

What has been very hard to grasp, and this example aims to illustrate, is how incredibly biased the tax system is towards the super rich, those who never have to do one day of productive work in their lives. I can hear the usual reaction with accusations of class warfare. Nonsense! If we have an unfair class system there will be class warfare - it's human nature and a historical fact. This nation was founded on class warfare against those who oppressed the colonists. Are we moving towards a class divided nation? The inequality that arose form the tax policies initiated by Reagan speaks for itself, and yet, with such unfair tax system the vitriolic rants from the right are always about cutting taxes. Yes, cutting taxes is great, but not the way Conservatives have been doing it (in collusion with many Democrats, this is well understood). The tax cuts at the top were just an excuse to shift the burden to the Middle Class. A real fair system would reallocate the benefits and the burdens of our nation in such a way to maintain a balance. If you read my previous posts you know that in the last 30 years that balance has been destroyed. My claim is not that the rich are bad and are oppressing all of us. Some certainly are, just as a matter of statistical probability. Some actually speak out against this unfair system (Warren Buffet, Bill Gates Sr., George Soros). Statistically there are always people of principle that will go against the lower instincts of hoarding and greed. The point is, this is not about individuals. It's about a fair system that we can all support. And historically it's not hard to go back and find examples of fairer tax structures that kept this country united, prosperous, and growing with the certainty that each generation could expect to be better off than the previous one. I don't mean to be nostalgic, but, can we have that back? Is that what Teaparties are saying when they talk about "getting America back"? If they are, they sure are misguided about who they trust to get them there!

This suggests that we need to trash the current tax system. Simple tax reform that will benefit all of us, including those who will continue to be outrageously rich, but can do that without the motivation to act in ways that are destroying our country, the global economy, and therefore endangering their own preservation. Any way you look at it, and in line with my previous findings, the tax system has been rigged to benefit the ultra rich at the expense of huge deficits that are then blamed on necessary services to the public (education, infrastructure, etc.).Let's fight against abuses and fraud that cripple our government, but not trust those lies about cutting taxes and debasing good (our) government. We came out of a much deeper Depression when we had a president that stood up to the big money mindless greed; we need to understand that we must do that again. Left to their devices they will drive us into the ditch like they did last year, or even worse. Not because they are bad people, but because they are doing what humans do in a system that promotes destructive, abusive, hoarding behavior.

2 comments:

  1. How can you be surprised that the tax system shows preference for the elite in America when it was that group that created the system? The industrialists, venture capitalists, and various other 'super-rich' citizens were brought in to counsel the government in the development of the tax laws I'm sure they pointed out how important it was to lighten the load that any taxation might put on their ability to 'maintain creating jobs' in America - after all, small busnisses and other such things create more jobs than anything else (other than Walmart and McDonalds).

    What crap.

    The rich pay less than their fair share for the simple reason that 'those who have the gold, write the rules' (the Golden Rule of Capitalism).

    You aren't raving as much as you think you are.

    Wie viel ist Aufzuleiden!

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  2. Could not get the translation for Aufzul-blah-blah. Probably some term used by crazy composers... Sorry for not meeting your expectations. This is an effort to understand numbers, a very boring task. I try to rave enough to express my outrage without scaring away those that need to understand these findings. You already know...

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