Remember Mitt Romney’s division of Americans into the “Makers” and the “Takers”? That division reflected the GOP’s longstanding policy of privileging the privileged.
Americans argue a lot about the meaning of “privilege,” but there is plenty of research confirming that–whatever other attributes may confer social or fiscal privilege–there’s hardly anything better than being rich.
I’ve posted before about the research confirming that education vouchers are disproportionately used by families whose children are already in private schools–most of whom can well afford to pay the tuition. Our tax dollars are relieving them of that obligation. How very nice of us!
And of course, it isn’t exactly a secret that the richest Americans make out like bandits when it comes to federal taxes. As the Center for American Progress has reported, low-income Americans pay higher payroll tax rates than rich Americans, the state and local tax (SALT) deduction is extremely regressive, and mortgage interest deductions are skewed toward the rich. Meanwhile, long-term capital gains and qualified dividends—both of which are forms of capital income that are taxed at lower, preferential rates—”overwhelmingly accrue to the rich.” And Republicans have pretty much eliminated estate taxes on the basis that they are not fair to the “Makers” who want to enrich their children and grandchildren.
There has been less attention focused on state-level tax rates, but a recent report from The Hill confirms a widespread suspicion that state-level taxes are similarly skewed. It turns out–surprise!!– the rich don’t pay anything remotely close to their fair share of state tax burdens. And it isn’t only their ability to pay clever accountants that largely exempts the rich from those pesky tax bills.
The wealthiest families in most states are paying lower tax rates than everyone else, a new analysis found.
The new study conducted by the Institute on Taxation and Economic Policy analyzed the tax systems across all 50 states and Washington, D.C., by looking into how each of seven different income groups pays state and local tax rates.
The study ultimately found that the lower someone’s income is, the higher their overall effective state and local tax rate is.
“On average, the lowest-income 20 percent of taxpayers face a state and local tax rate nearly 60 percent higher than the top 1 percent of households,” the analysis states.
In 41 states, the top 1 percent of families have a lower tax rate than everyone else, according to the analysis. In 42 states, the top 1 percent of earners pay less than the bottom 20 percent, and in 46 states the top 1 percent are taxed at a lower rate than the middle 60 percent, the study found.
The study found that only six states, plus Washington, D.C., tax the bottom 20 percent of income brackets at the lowest rate: New Mexico, New Jersey, New York, Vermont, Minnesota and Maine. Indiana is among the thirty-four states that tax low-income families at higher rates than everyone else.
So if you are a struggling “Taker” in the Hoosier state, or in another one of those thirty-four states, you get punished for being poor. I found this absolutely gob-smacking.
There are all kinds of arguments (good, bad and indifferent) against raising tax rates for the rich–including what level of taxation can be considered punitive, where the lines should be drawn between brackets, and the level of taxation of businesses that might have a negative effect on productivity. But I am unaware of any rational argument for saying, in effect, “let’s hit these folks while they’re down.” Or, “let’s get the money we need to operate state government from poor folks so we don’t have to annoy our rich citizens.”
I’m sure the fact that political donations come predominantly from the upper bracket of earners has absolutely nothing to do with it. (And I have a bridge in Florida to sell you…)
Given the amount of attention our state legislators focus on taxes, and their constant public hand-wringing and crocodile tears about the need to protect citizens from the burden of taxation, I find it very interesting–and very disheartening– that so little attention has been paid to the over-taxing of those least able to pay and the unconscionable under-taxing of those with ample resources.
Assuming We the People emerge more or less intact from the existential threats we face– to democracy, civility and the planet– we really need to have a data-based discussion of tax policy.
Social security contributions follow this pattern. Most people contribute to SS on 100% of their wages while the wealthy only contribute on a small % of their income. An example would be nurses and hospital staff paying on 100% of their wages while the doctors and administrators are paying on 25% or less of their income. FAIR? No.
If one wanted to improve the financial strength of Social Security and Medicare, this seems like the first thing to fix. REMOVE the cap for high earners. Make it fair.
I’m not sure that we can have a data-based discussion about anything. Nearly every fact presented by the right might as well be labeled an “alternative” fact. As an example, let me offer the notion that wages rise as productivity rises. In fact the only wages rising when productivity was up 98%, were those at the top.
We are too prone to accepting the lies of “successful” people simply because they are successful. If they made a billion or so, they must know more than I do! There’s an old Chinese saying that all rich men have a good thief in their family tree.
Patmcc, you hit the nail on the head! Too few people are even aware of the cap. In fact, most people only find out when they hit the cap.
“The study ultimately found that the lower someone’s income is, the higher their overall effective state and local tax rate is.”
My taxable income is too low to require my filing annual taxes at federal and state level. There are millions of us in the same position who do pay the additional fees, taxes and interest on day-to-day bills we must incur along with those who pay taxes and the wealthy who aren’t bothered by the higher tax rates of the low and middle income Americans. This cold weather has interfered with my planned schedule and appears to be continuing and worsening. My plan today is to gas up, Kroger shop, pick up stamps at the Post Office before the new rate hike, shop for frozen veggies at Save-A-Lot and make it back home. Fingers crossed that my 28 year old Pontiac Sunfire is not frozen shut and I can get the accumulated snow off of my windshield. If my plans work out there is still money in my bank account to pay the upcoming cremation of my daughter who died last month and the final bill listed in my January budget. I also managed to donate to two Democratic candidates but will drop the charitable donations I have aided for years and will concentrate on the Democratic candidates and party organizations. Being almost 87 years old, deaf and disabled, my social life is almost nonexistent; I am NOT seeking aid or pity. Simply pointing out that those of us in this same situation must make decisions NOW regarding this vital election year if we are to maintain American priorities, values and morals as provided by democracy, Rule of Law and the Constitution as it stands against the GOP takers following the Trump MAGAs, White Nationalists and deadly Freedom Caucus.
“Assuming We the People emerge more or less intact from the existential threats we face– to democracy, civility and the planet– we really need to have a data-based discussion of tax policy.” The tax policy is but one of the data based discussions we are faced with at this pivotal moment in history; our personal decisions to act and speak out are being challenged as never before since the Civil War.
A downside of federalism is each state creating and setting its own tax rates. Sounds virtuous in theory: 50 “experiments”; 50 choices for citizens and businesses.
But state and local competition is often zero-sum; states and localities beggar their current communities for imagined intermediate-term which evaporate when their cash cows change plans or, not surprisingly, seek to repeat their unearned windfalls by seeking greener pastures elsewhere.
The ACTUAL net effect of a “50-state war of all against all” (and its local equivalent) is the transfer of tax burden from those who have the power or influence to shift it to those who lack that power.
It’s an inevitable and obvious outcome.
Let’s say, for example, that there was some benefit to society of contributing to national economic expansion. The first question is, how would you measure that?
I think the chief cause of that effect is when someone conceives of a product that benefits consumers. In my experience, that is typically the marriage of technology, which is changing more rapidly every year now, and a consumer benefit that results in either a new product or an existing product that employs a previously impossible creation process.
For instance, Jeff Bezos, who managed the means of paying for the means of production for an existing product; distribution, logistics, and retailing, hired people who knew massively connected networked relational database retailing and grew Amazon. Bingo, now we cannot live without it.
Who earned the credit?
Wait a minute, that’s a really complex equation there, cowboy. Perhaps it’s impossible to determine who earned exactly what, and tax accountants know that numbers proceeded by a sign signifying monetary tokens must be precise to the second decimal.
Perhaps the means of wealth distribution is too complicated for governments to deal with, so doing it based on the ability to influence government is not honest.
You think?
Greg, I will argue that federalism is part of the reason so many state’s tax policies are regressive. Indiana is lazy and the tax forms start with “what income did you report in your federal tax return”?
When all of your income is reported on a W2, there is no way to magic any of the numbers at the federal level. Once you’re in business for your self or most of your income is from “passive” activities (investing, real estate, etc…) you can hide all kinds of income from taxation. The federal tax laws are very generous that way. All of this flows down hill into Indiana’s state tax forms.
“Makers…Takers”
Save time. EVERY GOP self-justification is always “projection” and, if that fails, then “whataboutism”.
Projection is the best tool when you have to justify the unjustifiable.
You want the truth? Just take ANY self-justification and reverse it.
Romney’s Makers/Takers?
“Makers” are the producers and providers. “Takers” are anyone else with a finger in the pie.
Companies don’t calculate pay from value-added. They pay based on “prevailing wage”. Surpluses are typically kept (not gifted to customers as cost reductions) and gifted to shareholders who’ve done NOTHING to earn that excess above a risk-appropriate ROI.
“Takers?” Romney‘s companies’ shareholders (and massively over-compensated, over-bonused C-level management).
“Makers?” Romney’s companies’ employees.
Finding ways to further reduce taxes on the rich is currently a top priority for Indiana’s despicable self-serving majority gop legislature in the present session. Multiple experts testified in a hearing last week that there really is no room to take more from those at the bottom by increasing our already high sales tax. This gop legislative body has a solid history of ignoring facts and reality in order to reward their corporate and wealthy campaign donors because those donors may be their ticket to even loftier positions in DC.
Taxing the rich is not theft or punishment for success. We need to understand it as a user fee to maintain the system that made success possible for the rich and must remain available for those that follow. The rich must more to maintain the system that enabled their phenomenal wealth accumulation.
What Paul said!
I propose a bracketless sliding tax scale, beginning at the official poverty level and sloping up to a cut-off point not quite 100%. Each increment of income is taxed one increment of tax higher than the previous increment. The increments of income and also the increments of assessed tax can be infinitesimal.
Nobody needs to earn a billion dollars a year. Those who are so successful as to earn that kind of income are also powerful and influential in every other way.
Economics is not about static money but circulating money, just like football is about 22 people on the field competing within the rules of the game.
Playing football and economics requires movement.
The thing about circles is that every point on them looks the same to its neighbors. There is no start and endpoint.
Who is more important to Amazon? It’s workers, customers, investors, or Jeff Bezos?
Who knows?
Wealthy people tend to think about their taxes in total dollars when they compare them to the taxes paid by the poor. They say things like “I paid over 60 thousand dollars in taxes last year. How much did you pay?” They conveniently ignore the fact that their contribution is a much smaller proportion of their total wealth than that paid by people in lower wealth brackets. It’s a spin that most people don’t know how to answer. It is designed to make the poor feel guilty for being poor.
There is also the fact that everything we buy is taxed in multiple ways (sales tax, property tax, gas tax, employment tax, and too many others to enumerate here) before we open our wallets to pay the purchase price. A poor person must spend all or almost all of their income on necessities and has no way to reduce the burden imposed on them by all this largely unnoticed, indirect taxation. The wealthy, on the other hand, can control their spending, increase their savings and investments, and constantly increase their wealth.
This imbalance in opportunity can only be corrected by government actions. Very few wealthy people or corporations are going to voluntarily donate 50 or 60% of their wealth to their fellow citizens. It is up to the voters to take action to correct the imbalance. Voting a straight Democratic ticket in the next election would be a step in the right direction.
Beware tax code amendments! Why? Because they are written by corporate and think tank counsel, and you can bet they are not written with a view to tax equity. Koch and others of his ilk pay tax counsel generously and the final insult to the rest of us tax-paying peasantry is that they take such payments as a deduction, i.e., an “ordinary and necessary” business expense. I think such an effort is neither, and that businesses that by hook or crook manage to take their Citizens United payoffs as deductions should be prosecuted, but I will never see that happen since the congressional recipients of such largesse are not likely to vote for such a pipeline of profit into their pockets (see Santos, Trump, and others who treat campaign contributions as their own in paying lawyers for personal expenses).
I once did a two year stint as Deputy Attorney General in charge of taxation for the Territory of Guam, which due to the 1950 Organic Act of Guam was the Internal Revenue Code of the U.S., and dealt with foreign investment and local enforcement of such code, and I discovered that no one wants to pay taxes, and that the only person they hate more than the tax gatherer is his lawyer, and this has roots. Jesus was put down for his association with tax gatherers whose Roman gatherers of “tribute” were, among others, the bad guys.
To do: Elect those who genuinely watchdog the comings and goings of the House Ways and Means Committee, if such there be.
Patmcc pointed out the subtle and often overlooked distinction between “wages” and “income.” Whereas we working stiffs are taxed as per 100% of our wages, most of rich folks’ income is not from wages, but from investments, etc.—most often, things we can’t afford because we’re paying bills and taxes (and the private school tuition for the rich folks). And when determining taxes on non-wage income, there are so many twists, turns, and loopholes…
As my grandmother, of blessed memory, used to say: Them that has, gets.
This reinforces the thesis laid out by Susanne Mettler’s “The Submerged State” (big thank you to Sheila for the recommendation).
Time for overall flat tax on income, period! NO loopholes, no other forms of evasion, period! The wealthy need to pay their share at the same percentage rate the poor do, period!
Why is this so hard to grasp as THE workable solution? Makes no sense that the poor get poorer and the rich get richer! If they wealthy were chipping in to the pot, just their fair share, no more, no less. Look at how much more money in the kitty and how many things it would fund. Pretty simple concept, but the wealthy just want to thumb their nose at the poor. Disgraceful and surely not what decent people do.
Just got this in my email:
Kathy,
Republicans in Indiana have introduced legislation that would allow children to quit school at 14 years old to become full time corporate farm laborers.
Enabling young people to abandon their education to work on corporate farms undermines their development and perpetuates a cycle of poverty and exploitation, not to mention the demands of farm work, especially in corporate settings, can be dangerous and abusive for young people.
Instead of profiteering off of our kids, we should be focused on improving their educational opportunities! At Futures PAC, we fight back by electing pro-education Democrats.
Kids belong in school, not toiling full-time for Big Agriculture’s profits. Donate today to defeat child-labor Republicans.
To help defeat this measure at Futures PAC: https://secure.actblue.com/donate/pl_futurespac?amount=10&refcode=pl_20240118_01&link_id=8&can_id=fde24e4a5056c4c58350eb3f40c2aeba&source=email-heartless-republicans-reject-summer-food-money-for-kids&email_referrer=email_2174981&email_subject=indiana-republicans-want-your-eighth-graders-to-become-full-time-factory-farm-workers&refcodeEmailReferrer=email_2174981
Whose money, you think, goes to elect DEMs? It ain’t the poor…take big money out of politics and elect real servant leaders and MAYBE taxation would get fairer. The chances of that – ZERO.
LL, money doesn’t elect people, voters do.
Democracy assumes that a majority of voters are and will be well informed.
That seems to be our track record too.
What does the country need to know to be judged as informed? Sheila classifies the answer as Civic Literacy.
Understanding the Constitution and our history as a nation are big topics in the body of knowledge called Civic Literacy.
I’m reminded of Tevye, in Fiddler on the Roof, who gives us insight on this point. Tevye yearns to be rich, belting out the benefits of wealth as he sings If I Were a Rich Man, including this exquisite line: “When you’re rich, they think you really know.”
But they don’t.
Billionaires, by their actions, make their own case against themselves often enough. The point is illuminated by Anand Giridharadas, a former columnist for the New York Times, in his Winners Take All: The Elite Charade of Changing the World.
He wants to correct the genius myth. So-called geniuses “are not our saviors,” he contends.
Giridharadas calls the prevailing ethos “MarketWorld,” a place made up of people who want “to do well and do good.” What an effective cover for what really goes on!
In a review of the book, Joseph Stiglitz, noted economist and winner of the Nobel Memorial Prize for Economic Sciences, remarks on how Giridharadas “beautifully catches the language of Aspen, Davos and the recently extant Clinton Global Initiative, which will doubtless reappear in the newly born Bloomberg initiative. It’s a world of feel-good clichés like ‘win-win’ and ‘make a difference.’”
Note that the “geniuses” don’t call for power redistribution and fundamental systemic change. Nor do they suggest that plutocrats might have “to surrender precious things for others to have a mere shot of transcending indecency.”
Instead, “like the dieter who would rather do anything to lose weight than actually eat less, this business elite would save the world through social impact investing, entrepreneurship, sustainable capitalism, philanthro-capitalism, artificial intelligence [and] market-driven solutions,” writes Stiglitz.
“They would fund a million of these buzzwordy programs rather than fundamentally question the rules of the game — or even alter their own behavior to reduce the harm of the existing distorted, inefficient and unfair rules. Doing the right thing — and moving away from their win-win mentality — would involve real sacrifice; instead, it’s easier to focus on their pet projects and initiatives.”
As Giridharadas puts it, people want to do “virtuous side projects instead of doing their day jobs more honorably.”
Roberta Dunn. A flat tax will not level the playing field for low income citizens. If a person living on minimum wage had to pay 20% tax on their income they could be left with not enough money to survive. A billionaire paying 20% income tax would still have hundreds of millions of dollars. Who could find that either humane or fair?
Also, income tax is only one part of the funding for the government services we all depend on. As I noted above, all taxes raise the price of all the things we buy and that hits the poor much harder than the rich.
We really need to deal with a couple of myths (highlighted by Roberta – Sharon making two good points).
First, too few people understand marginal tax rates, which make “flat taxes” (used in many states) seem desirable. One does not lose take-home pay by moving into a “higher tax bracket”. Also, reducing the number of tax brackets removes ZERO lines from your tax form. Most people, with simpler situations, just use the tables provided. Removing the top two or three tiers just saved money for the rich.
The other, again, thank you Sharon, is what I call the marginal utility of the dollar. A dollar isn’t a dollar. It means more to the poor that it does to the rich.
Thought experiment 1
Take half the income of
a) a person making $50,000
b) a person making $500,000
One of them has slipped into the poverty level; the other is still has a lot of money
Thought experiment 2
Triple the income of
a) a person making $20,000
b) a. person making $1,000,000
One of them went from poverty to middle class; the other bids up the price of art or otherwise tries to figure out what to do with money they don’t need (gold toilets?)
Since Indiana’s legislators have indicated they wish to do an overhaul on Indiana’s tax structure, it would behoove those who care about the common good that we focus on what they plan to do. We need to familiarize ourselves on the present tax code and how it affects different income groups. To hold our elected officials responsible for the common good, we need to know how our local state politicians vote. Bloggers can help by supplying information on Indiana’s tax structure.