Yves here. I don’t wan’t to sound like a Pollyanna, since Republicans love cutting taxes for the rich and after their continued failure to deliver on Obamacare “reform,” Republican Congresscritters are in even more need than usual of having an accomplishment or two to take back to their districts.
So despite Treasury Secretary Mnuchin’s entertaining threat that no tax deal would kill the stock market, the Republicans are almost certain to come up with something they will declare to be tax reform. However, it is also likely to fall well short of the plans now being bruited about.
First, the last time the US has major tax reform was in 1986. It took 13 months to get done. Trying to ram through major reform in a mere couple of months is a near-impossible order, before you get to the internally divided state of the Republican party.
Second is that deficit hawkery on both sides of the aisle will severely limit what Republicans can do. Mitch McConnell just reaffirmed that he wants a “revenue neutral” bill, meaning any tax cuts must be “paid for” by other tax increases or spending cuts.
As a result, tax maven Lee Sheppard has predicted that one of the most sought after reform prizes, that of a reduction in the headline corporate tax rate, will be underwhelming. Trump initially touted a 15% rate. Beale in the article below takes up the new messaging of a rate of 20% (actually, Mnuchin a few months back said even higher, that the target would be in the low 20%). Sheppard predicts 29%, which is such a high level relative to expectations that it runs the risk of being seen as a defeat rather than a victory.
Third, as we’ve said repeatedly, every tax break has a constituency. For instance, quite a few experts assumed that eliminating the deduction of state and local taxes wouldn’t be a hard sell, since it would mainly hit Democrats in blue cities. Ooops. Plenty of Republicans live in affluent suburbs and pay a lot in property taxes. So even a supposedly non-problematic measure got a lot of pushback.
So even though a tax reform bill will wind up being a gimmie to the rich, it’s likely to be much less of a gimmie than anything on the table now.
By Linda Beale, Professor of Law at Wayne State. Originally published at Angry Bear
Shortly before the inauguration, Steve Mnuchin discussed the incoming administration’s tax plans and announced the Mnuchin Rule–that “[a]ny reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class.” EXCLUSIVE: Steve Mnuchin says there will be ‘no absolute tax cut for the upper class’, CNBC Squawk Box (Nov. 30, 2016). At the same time, he argued that those who foresaw a tax cut for the rich accompanied by a tax increase for many in the middle class were wrong: “When we work with Congress and go through this, it will be very clear. This is a middle-income tax cut.” Id.
Contrast that with the so-called “tax reform” “framework” that the Trump administration has put out with the GOP establishment in Congress and for which both the House and Senate have made provisions in their budget document by including a (likely significantly underestimated) tax-cut-caused federal deficit of 1.5 trillion dollars.
As this blog and many tax and economic experts have noted (see, e.g., Nunns et al, An Analysis of Donald Trump’s Revised Tax Plan, Tax Policy Center (Oct. 18, 2016), Trump’s tax plan has always favored the wealthy. In fact, the recently released “tax reform” “framework” is heavily tilted in favor of the wealthy, because the corporate statutory rate cut from 35% to 20%, the elimination of the AMT, the elimination of the estate tax, and the 25% pass-through rate for taxpayers all represent huge tax cuts for wealthy taxpayers who are the ones most likely to have been impacted by those tax provisions. Meanwhile, there is actually an increase in rate for the lowest-income taxpayers from 10% to 12%, and the elimination of personal exemptions (and possibly other provisions) which may or may not be entirely offset by the proposed doubling of the standard deduction and possibly some increase in the child tax credit. Thus, some poor families who can afford it least may pay more in taxes, middle income families may get a small tax cut, and wealthy families who don’t need the money at all will get a huge tax cut. See, e.g., earlier A Taxing Matter posts on this issue here and here.
And these “massive” tax cuts for the wealthy, combined with massive increases in the deficit (and borrowing) to fund the tax cuts, likely won’t even trickle down as more jobs for working Americans. There’s very little support from past tax cuts for businesses and for the wealthy for any kind of economic stimulus, either in terms of more jobs or higher wages. See, e.g., White House math on corporate tax cuts is ‘absolutely crazy’, Mother Jones (Oct. 17, 2017). In fact, there is much more support for tax increases on the wealthy resulting in more jobs than vice versa.
A year after his claim that there would not be a tax cut for the upper class, Mnuchin has flipped. He now says that there will be tax cuts for the wealthy (though he still hasn’t admitted the degree of his forked tongue on this issue). His excuse now–“when you’re cutting taxes across the board, it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class. The math, given how much you are collecting, is just hard to do.” See Steven Mnuchin: Of course tax cuts will help the wealthy!, Salon.com (Oct. 18, 2017).
Sounds like Mnuchin just can’t do basic math, since it appears that Mnuchin wants to be able to claim that any tax reform that cuts taxes for the middle class will inevitably give tax cuts to the rich. But that’s simply not true.
- If you “cut taxes across the board”, you will give tax cuts to the rich (and much smaller tax cuts, at best, to the working middle class), but you don’t have to cut taxes across the board–in fact, they claimed a year ago that they would not do that.
- If you gut the AMT, you will give tax cuts to the rich, but you don’t have to gut the AMT and you certainly can tweak the way the AMT works to ensure that the rich don’t benefit from the changes.
- If you eliminate the estate tax, you will give tax cuts to the ultra wealthy and NO tax relief to the working middle class or lower income taxpayers. (And most of the assets in those estates that are taxed–usually much more than the $11 million in assets that are excluded from the asset tax for a couple–have been subject to no tax on the appreciation in those assets during the deceased person’s lifetime and are passed with stepped up basis to heirs, so the estate tax is not a double tax on those assets but rather the only tax that is ever charged on that appreciation.) But you don’t have to eliminate the estate tax at all, since it is ONLY a tax for the wealthy.
- The estate tax does not cause people to lose family farms (the very few family farms that may be subject to any estate tax after the preemption amount have 14 years to pay off any tax due out of the income of the farms).
- The estate tax does not cause mom and pop stores to be lost.
- The estate tax does not cause middle class families to have to sell the family china and silver that belonged to great-grandmother, because middle class families simply don’t have $11 million in assets and so all of the assets they do have are covered by the $11 million exclusion from tax.
Tax academics and other tax experts could tell Mnuchin how to cut taxes on the poor and middle class without giving any new tax breaks to the wealthy. Mnuchin just doesn’t want to hear. Because it is quite clear that the goal of the purported “tax reform” is entirely to give huge new tax breaks to the very wealthy.
That fits perfectly with the rest of the actions that the Trump administration is taking:
- scuttling financial regulations that protect ordinary people from predatory financial institutions and from the disasters that can result when “too big to fail” institutions get too much market power
- scuttling environmental regulations that protect ordinary people from predatory industry pollution to the air, water, and land, that can result in disastrous illnesses, loss of America’s beautiful natural wilderness heritage, while providing faded and heavily supported polluting industries like fossil fuels the ability to rip off those resources and destroy the environment at almost no cost (sweetheart deals from the corrupt Secretary of the Interior Ryan Zinke, who rates corrupt corporate buddies over ordinary working Americans)
- appointing backward-looking Supreme Court Justices like Neil Gorsuch, who appears to think the Supreme Court exists to empower corporate owners and managers to singlehandedly set workplace rules and deny employees rights to organize collectively (as the court already did in Hobby Lobby, in which it permitted a corporation to deny its workers fair health coverage and the workers’ own individual religious rights based on the priority of the corporate owners religious beliefs that it would be a sin to allow their employees to be able to make their own religious decisions and use a certain kind of contraception coverage.
Working Americans, wake up! Mnuchin doesn’t care about you or about a fair tax system. Trump doesn’t care about you or a fair tax system. Nor do McConnell and Ryan.
This tax “framework” is all about payback to the denizens of the DC swamp–including themselves (first and foremost) and the wealthy lobbyists, wealthy corporate CEOs and real estate developers, and other wealthy buddies that have helped this wealthy cabal take over the federal and state governments through gerrymandering, vote suppression, and plain old lies that hide their own corruption and involvement in selling out the American people and, as a result, destroying the American dream.
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How would you cut taxes to benefit the working class and exclude the rich? Double or triple the personal exemption?
@Darius – You could increase the tax rates on the upper income brackets and lower them on the lower brackets, e.g., lower the rates on the 10%, 15%, 20%, and 25% brackets, raise them on the 28%, 33%, 35%, and 39.6% brackets. There are other ways to do it by increasing tax benefits used by the working and middle classes and limiting the use of those tax benefits by the wealthy, for instance.
There should be an effective rate of zero at the low end. At the same time, there should be a carbon tax and financial transactions tax.
You could also look to the exemptions or even to other taxes. Every exemption has a constituency and some of them (e.g. Capital Gains and Carried Interest) are mostly rich constituencies. If you actually closed these then you could even it out. In fact Trump once indicated support for doing just that. The fact that they are no longer doing so and are exclusively talking about mortgages and 401k’s only strengthen’s Professor Beale’s point.
1950s tax rates under the great socialist Republican Eisenhower are a good place to start.
To cut taxes for the working class and increase them on the rich, you eliminate the differentiation of income sources. A dollar of income is a dollar of income, whether it is wages, interest, dividends, or capital gains. The realignment of revenue neutral tax rates effectively lowers the taxes on wages and salary and increases them on capital gains with no other changes. Voila – increased taxes on the 1% and decreased taxes on the 99%.
The Trump Administration only has four goals wit this tax “Reform”:
1. Maintain long-term capital gains as a preferred income tax rate;
2. Lower the corporate income tax;
3. Have a low pass-through tax rate for Subchapter S etc. corporations; and
4. Eliminate the estate tax to allow for unfettered transfer of assets to future generations.
Everything else is just salesmanship. None of their goals help anybody who makes less than about $250k/yr.
Tax Dividends, Capital Gains, and any form of income in the same manner.
Exempt wages, earned income, below $100,000 per year.
Even though it would be imperfect, there really ought to be a local cost of living adjustment for Federal tax brackets. $100,000 for a family buys you a very affluent lifestyle in some parts of the US, while in high-rent San Francisco or New York City, you’d be budget-stressed middle class. They’ve had them for other programs, such as Legal Services (maybe not recently but certainly in past) to determine how much to distribute. I worked on a program that did ZIP-code based surveys. Just using rents as a proxy for cost of living would get you a fair distance towards a good adjustment.
IIRC, the 1986 tax reform was the first major rewrite of the tax code since 1953. That’s 33 years, so if it takes that long to get to the next major rewrite, we’ll be in 2019. Mnuchin is two years too early.
Speculating freely (and hopefully), maybe by 2019 there will be wide enough acceptance of MMT principles that a major tax rewrite will acknowledge that federal taxes don’t pay for federal spending.
Federal taxes do fund most federal spending. It doesn’t have to be so, but that’s how it currently is. What happens if the deficit limit is reached? Many operations of the government shut down, because there isn’t enough tax revenue to pay for continued government operations.
As reader pslebow said last month, many descriptions of MMT confuse the word “can” with the word “does” (or “don’t”):
“Federal taxes do fund most federal spending.” This is true only in the minds of the likes of McConnell and Ryan. Who exactly is counting up the taxes to fund the spending? Not the Fed or Treasury :
Therefore, I don’t think that your reality is “how it currently is.” What the government may do, however, is built up fear of accumulating a deficit so that spending and taxing can take place where a particular party wants it too.
Well, yes, taxes don’t create money. When new money is created by the sovereign government, it enters the economy by being spent. But most federal government spending does not occur in the process of money creation. The money needs to be recycled in the form of taxation, and without that taxation, the federal government will not spend the money.
Please read the whole link : Money is not “recycled” through taxation:
No, I’m not convinced, and I’m sure that others are equally skeptical, but they don’t bother to comment because they believe the notion that “taxes do not fund federal spending” is beyond belief.
Note the highlighted word “can“. He did not say:
In the United States in 2017, taxes do fund about 85% of federal spending. My percentage might be a little off, but I’m close. Randall Wray’s and Beardsley Ruml’s 4 reasons for taxation are all reasonable, but in our current system, there is a fifth reason for taxation: to generate revenue to finance federal spending.
What kind of response do you get when you tell your Senators and your Representative that taxes do not fund federal spending?
You’re getting hung up on the notion that the federal government needs a reserve to “finance” from for its spending. The sovereign issues the currency, it does not need to “find” money to pay for itself. When you’re setting the tax rate, the issue is not paying for spending, it’s, how much inflation do we want? Where are the excesses of margins of income that should be deducted? Where are the areas lacking that need influxes of income? (note, despite the common trope, this is not “redistribution of wealth”; we do not take assets from the rich and give them to the poor)
Or to think of it another way, suppose the federal government announced that the taxes for the upcoming fiscal year were to be paid in physical dollars. Once all the dollars were collected, the federal government set it all on fire, literally. Every $20 bill burnt to a crisp. Then they announced they were printing new dollars in the amount burnt, plus extra, to pay for expenditures. How would that be any different than using the tax dollars to “pay” for spending, plus extra deficit spending?
And yet tax revenues largely determine how much the federal government spends. No matter how one analyzes the abstractions, that’s the current reality. It’s the difference between “does” and “can”.
The government “does spend” and “can spend” without using taxes.
Yes, but the determination is related to the larger marcoeconomic effects of the deficit spending, not due to the federal government “running out” of money. It may seem pedantic, but it produces a more useful way of thinking about government spending than the “Sky is Falling!” rhetoric of the deficit hawks who present it like we’re still on the gold standard.
I don’t like the attitude of the deficit hawks either. And I don’t think that if the government needs to expand the money supply, that is should do so by borrowing money that it has created! That seems twisted to me. Since the money isn’t going to be paid back, it means that the people who buy treasuries will be able to receive interest payments forever, as if they had bought a consol. I suspect I’m in agreement with the MMT people on this.
@Vatch, 9:09 pm – The “money supply” of the economy includes all dollar bills, dollar denominated bank accounts, and other dollar-like securities. When taxes are paid to the federal government those dollars are removed from the money supply, meaning they no longer exist. They have been effectively destroyed, and can not be spent or invested. When the government pays its bills, salaries, and social benefits new dollars are created at the moment when the local bank follows instructions received from the Fed to increase the bank account balance of the payee.
You are correct that the amount of tax revenue is used, in part, to determine the level of spending. However, this is an anachronism of the gold standard days prior to 1971 and is used as a convenient way for TPTB to claim that there is not enough money to provide concrete material benefits to the general public, such as Medicare-for-All, free public higher education, a Job Guarantee, etc.
Just checking, you do understand that the Treasury could pay off all of the outstanding securities tomorrow if it chose to do so, don’t you?
How would that work? Wouldn’t they need Congressional approval?
@Vatch 10/24/17, 10:30 am – It might need Congressional approval, I really don’t know about that. But, the mechanism would be simply to transfer the existing dollars currently in Treasury securities accounts to non-interest bearing (checking) accounts. No new dollars needed. It’s just an asset swap.
I am sorry that you do not believe the article that I linked to. I was once a skeptic like you and I began reading all I could about how money really works because I wanted to know how the financial crisis of 2007-8 could have occurred and how the banks were bailed out with trillions of dollars while the little guys suffered the consequences of losing their homes, losing pensions and becoming poorer because banks wanted to have more profits at others’ expense.
These heterodox beliefs on the website are gaining more support because it makes sense when you think about funding unexpected things like wars or hurricanes or bank fraud: a sovereign government can never run out of money for funding those occurrences (and anything else they wish to fund given the resources available and without ever depending on taxation) just because government can always spend into the economy when it is needed.
I invite you to read the many articles on the website linked to. After you have given some time to them, you may just change your mind. Let me know when you do!
I already agree with this clause:
But this is also true:
No, a sovereign government can never run out of money for funding anything they desire to fund given the availability of resources (both human and not). That is another myth that political parties use to put the fear into the populace so they can carry out policies they desire. The debt ceiling is made up by people who can use it for their own purposes, such as threatening to not pay out salaries or other federal funding unless some goal is met first. There can never be a true debt ceiling as long as a sovereign nation uses its own money (and resources).
This is an instance of the “No True Scotsman” fallacy. The debt ceiling is what the legislators and the President decide upon.
“No, a sovereign government can never run out of money for funding anything they desire to fund given the availability of resources (both human and not).”
Yes: and the key here is (real) resources. Where those resources are internal ones, there should be no problem; however, where resources are foreign controlled questions may arise. Internationally, a Sovereign does not have complete control over its currency.
@Vatch, 2:54 pm – Look at it this way. The debt ceiling is like a credit card limit. The spending has already been authorized by Congress. However, since they still operate as if we were on the gold standard, they count the expected tax revenue and determine how much over that will need to be put on the credit card (Treasury securities). If the credit limit isn’t high enough to absorb this deficit, they have to vote to raise the limit. For a long time this was virtually automatic, but it has now become a political football. Even so, it is totally unnecessary and totally a political artifact of the gold standard days.
@John Zelnicker October 24, 2017 at 1:28 am
This is one of my points. They don’t have to raise the limit. Normally they should raise it and they do raise it, but it’s not a requirement. They’re the ones who make the laws, and if there are insufficient tax revenues, they’re the ones who decide whether to continue spending or not.
We’re back to the discrepancy between “can” and “does”.
They don’t run out of money. They choose not to pay, and present it as having run out of money via the creation of an artificial link between taxes and spending. Yes, it’s real, and yes, it can cause a default, but it’s a political decision rather than a financial constraint.
It’s a financial constraint imposed by the people who write our laws. Once again, it’s the difference between “can” and “does” (or “don’t” or “doesn’t”).
If you believe that I have a slightly used, very effective, MIC for you.
so then we can give even more tax breaks to the rich. And they don’t have to be financed. Full speed ahead.
“Tax cuts for the working class” can’t do squat for working families. Christ, we have been down this road with Reagan and W, haven’t we learned anything? The appeals to the working class are mere marketing, sleight of hand to take attention away from the gigantic money grab for the wealthiest among us.
Tax cuts for the rich will do nothing for the economy but make it worse. $1.5 trillion in cuts to Medicare/Medicaid to offset them, what exactly is that intended to do for the working class? Motive us to get off our lazy asses and work harder, I expect. And these increases to the deficit will not coincidently build more pressure and more calls for slashes to social programs that support mostly poor and working class families.
Any appeals by the Republicans to the working class are disingenuous as the Republican Party has no record of positive accomplishments on their behalf, and a long, long record of contributing to their decline. Trickle down economics has always been a lie, and will always be a lie. The Republicans are not focused on helping anyone but the rich, and their concern with the working class extends only as far as how to fool them with a sales pitch.
Judge Republicans not by what they promise, but by what their proposals will do and have done for almost 40 years.
@KYrocky – A real reduction in taxes for the working class would be a benefit for them as well as for the economy as they will spend every penny of their increased income; the wealthy won’t. That’s mainly why trickle down doesn’t work. Increasing disposable income doesn’t have any effect unless that increased income is spent.
Otherwise your comment is spot-on.
Republicans sell tax cuts for the rich by selling them as tax cuts for all, even though the 99 percent see little if any benefit and may be harmed directly. Real tax reform would concentrate taxes at the top of the wealth scale.
Increasing the capital gains tax significantly (treating it as ordinary income) would probably do the trick and it would also cool down a lot of speculation. private equity and general hedge fund activity.
Increasing the capital gains tax again–Obama raised it by 66% to 23.89% in 2012–might lead to the disappearance of capital, such as happened in the ’70s. Back then, one often had to self finance a second mortgage to sell your house. Venture capital was hard to find, and few firms went public.
According to the OECD, the middle class in the US is under taxed. See this article from the Atlantic.
https://www.theatlantic.com/business/archive/2012/02/us-taxes-really-are-unusually-progressive/252917/
Since Social Security and Medicare make up a large percentage of federal spending, one cannot neglect the payroll taxes the way the analysis in the Atlantic article does.
From the article:
‘Before you ask, this ranking takes account of employee-side payroll tax as well as the federal income tax.’
Given the amount of VC being wasted on half-baked startups, and the kind of underhanded financialization tactics and tricks being done with publicly traded companies, I’m not sure that’s a bad thing.
https://www.washingtonpost.com/news/wonk/wp/2016/11/07/The-unexpected-way-Obamas-tax-hike-affected-the-wealthiest-Americans
Meah, not quite as you put it if a neo-liberal oligarchic mouth piece notes no capital flight, mostly because Obbie-the-wan put the tax structure so that it allowed even larger loop holes for the very top, those buddies paying his speaking fees. individuals/couples who don’t work via trusts and off-shore income due to not being in the real important 0.01%, got the shaft.
I’m not sure I understand the correlation or reference to the 1970’s. The worldwide stagnation between 1973-1976 was primarily caused by the oil shock and the end of the Bretton Woods system. There are probably components related to the end of the Vietnam war as well.
You will have to explain your statement about the disappearance of capital during that time since the 70’s are a pre-neoliberal financial/industrial setup with limited deregulation and very limited venture capital activity of the kind that we see now.
I doubt very much that “capital” will disappear – where will it go? I am just suggesting that those in the upper brackets who are the main beneficiaries of capital gains because of asset inflation should be taxed at normal income rates and that the middle class (not sure where that starts) and the poor get some tax relief.
Help me. “Venture capital was hard to find” because the venture capital industry was just starting. The firms were teeny and there were hardly any when I started on Wall Street in the early 1980s. There were also virtually no hedge funds (Soros’ Quantum fund was one of the few). KKR, one the first of the modern LBO firms, was founded in 1976. I worked on one of the very first LBOs at Goldman.
And venture capital has NEVER been important for new business formation. This is a myth promoted by the finance industry. The definitive source on this is Amar Bhide’s landmark, The Origins and Growth of New Enterprises. He found that fewer than 1% of new businesses were VC financed. The main sources of funding were savings, friends and family, and credit cards.
And those VC funded firms didn’t even make up a majority of the most successful new firms either. They were less than 25% of the Inc 500, despite VCs trying to get hard in the underwear of fast growing firms prior to IPOs (and those firms are usually receptive due to having Big Famous VCs typically leading to better underwriters being more willing to participate in the IPO and a lot of investors thinking their participation means it’s a better company).
And why should consumers need to borrow? Access to more consumer finance is part of the Reagan-Thatcher model. Borrowing was meant to serve as a substitute for wage gains, which had been the foundation of the old economic model. Consumers don’t need to borrow (save for buying houses) if they have good incomes and can get a job quickly if they are fired (which was the case back in the old days, as impossible as that seems now)>
Tax capital gains at a high rate. Index it to inflation. The longer you hold, the lower you’re taxed. This would hit speculators hard. So it will never happen.
being that your link is from 2012 it probably doesn’t include the obamacare tax, and in reading I noticed no mention. The ACA is a tax that has a deleterious affect on many not quite low income citizens, turning them into low income citizens while the wealthy beneficiaries of the stock gains in the medical industrial complex as well as the stabilized insurance and associated financial sectors that prey on the population have their cake and eat it too. Also I might note that the capital gains tax rate under Pres. George H W Bush was 28.9% and obamas increase fell short of that while the tax rate under W was 15.7%
http://federal-tax-rates.insidegov.com/d/a/George-H.-W.-Bush
http://federal-tax-rates.insidegov.com/d/a/George-W.-Bush
You might explain the math of your “66% increase”, to me it seems like a way to make a little look like a lot. Also, during the years when the capital gains tax rates were lowest (gwb years) the economy weakened to the point of collapse which was only avoided by heaping trillions on those least deserving of it, the wealthy.
apologies S A, meant to be a reply to Heraclitus @ 9:53
Bush long term capital gains rate was 15%. Obama raised it to 20%, then added the 3.8% Medicare surtax for people with income between $200,000 and $250,000 per year. 8.8% is a 66% (67% rounded) increase on 15%. Add your state long term capital gains tax and we’re talking real money.
Back in the ’50s we didn’t have any venture capital, so the government created the Small Business Investment Corp program. These SBICs were essentially leveraged buyout shops that had particular rules–for instance they had to be paid back in eight years (my memory is dim). Eventually there were also minority SBICs with smaller capital requirements. You borrowed from the feds at 7%, and made 40% on the equity annually. Eventually this gravy train was shut down (in the ’90s, I think). The SBICs could have invested in venture cap, but buyouts were much less risky, so they tended to favor buyouts.
When venture capital started doing well, in the ’90s, startups went to venture capitalists for funding not so much for the money as because of the advice and connections. Sometimes, as with Benchmark, the successful venture cap guys had backgrounds in human resources, not finance.
The currently reported proposed tax changes would increase advantages to upper income tax filers.
The following portray the most recent IRS data (2014) published by the IRS (August 2016) on tax returns.
The compilations provide a context for discussions relating to taxes and redistributions.
The first three tables show DISTRIBUTIONS of the number of returns, reported taxable income and the reported taxable income paid by categories of ADJUSTED TAXABLE INCOME (from all sources). The fourth the MEAN or AVERAGE tax rate of each ADJUSTED TAXABLE INCOME category.
1 Over half of income tax returns report adjustable taxable income under $40,000 per year.
-%– Adjusted Taxable Income
22.8 Under $14,000
31.8 $14,000 to under $40,000
7.7 $40,000 under $50,000
13.1 $50,000 under $75,000
8.6 $75,000 under $100,000
11.8 $100,000 under $200,000
3.4 $200,000 under $500,000
0.8 $500,000 or more
100.0 TOTAL N = 148,606,579
2 About two-thirds of the taxable income is paid in filings showing adjustable taxable income of
$100,000 or more (16 percent of tax filers – Table 1).
—%– Adjusted Taxable Income*
0.2 Under $14,000
6.8 $14,000 to under $40,000
4.3 $40,000 under $50,000
11.0 $50,000 under $75,000
11.1 $75,000 under $100,000
25.5 $100,000 under $200,000
16.7 $200,000 under $500,000
24.4 $500,000 or more
100.0 TOTAL
* $6,997,855,644,000
3 About three-fourths of individual (single, married, etc.) filed federal taxes are paid by filings reporting adjusted taxable incomes of $100,000 or more.
—%- Adjusted Taxable Income
0.1 Under $14,000
3.9 $14,000 to under $40,000
2.7 $40,000 under $50,000
7.7 $50,000 under $75,000
8.2 $75,000 under $100,000
22.0 $100,000 under $200,000
18.8 $200,000 under $500,000
36.6 $500,000 or more
100.0 TOTAL
* $ 1,402,387,185,000
4 The mean or average tax rate by adjusted taxable income tax filing category reveals modest progressivity.
– %- Adjusted Taxable Income
9.8 Under $14,000*
11.5 $14,000 to under $40,000*
12.5 $40,000 under $50,000
14.0 $50,000 under $75,000
14.8 $75,000 under $100,000
17.3 $100,000 under $200,000
22.5 $200,000 under $500,000
30.1 $500,000 or more
20.0 TOTAL
* There is a portion of lower adjusted income filers who pay no taxes and receive Earned Income Tax Credits.
If payroll taxes (Social Security and Medicare) were included in federal tax calculations of this sector of income tax filers, the lower income filing categories would see a substantial increase in total federal taxation given that most reported adjustable income is from wages and salaries, while those in the upper filing categories would exhibit virtually no change in tax rate due to different income sources (e.g., capital gains) and upper limits on the amount of payroll taxes paid in wages and salaries.
For a context on government finance, the 2014 federal budget reported income of $2.79 trillion and expenditures of $3.23 trillion. The GDP: $15.8 trillion.
Here is an idea:
Delete the second page of 1040 (OK, keep the signature block.)
Everybody pays 20 percent of AGI ( 1040 line 32, I think)
Reimburse employee portion of SS and Medicare taxes back to the taxpayer.
Is taxation by the US used primarily to modify behaviors? It appears to me that it works to keep the poor & working classes desperate.
It appears to me that for the wealthy it serves to give them complete control & power over how the armed forces are used.
My concern about the lies about a limited amount in the US Treasury and some necessity for a balanced budget is that it will come true.
What reason anymore do those in the world have to continue to put their money into Wall Street?
It takes awhile for what things were that made us envied and secure, our Treasury powerful enough to wage Economic Warfare whenever we wanted on anyone we wanted, to be fully perceived.
With the legalization of Meyer Lansky financial engineering, laws passed that benefit criminals, the reality of no reason to trust the banks of America, means something.
Certainly it is correct to see Capitalism as an enemy of the people.
What is called the Washington Consensus was given to Russians and means Privatization there as it has turned out there, is to happen here.
The working classes are honorable honest hardworking people. They are kept poor on purpose.
Look even at Silcon Valley where they may be paid a hundred & 50 thousand a year as a working stiff engineer, and can’t pay the rent.