Facts Behind Tax ‘Fairness’

May 1, 2012

To all who decry the “1 percent” and the perceived unfairness of a tax system supposedly tilted in favor of the wealthy, ponder the following table from the National Taxpayers Union that breaks out who pays federal income taxes:

Tax Year 2009

Percentiles  Ranked by AGI

AGI  Threshold on Percentiles

Percentage  of Federal Personal Income Tax Paid

Top  1%

$343,927

36.73

Top  5%

$154,643

58.66

Top  10%

$112,124

70.47

Top  25%

$66,193

87.30

Top  50%

$32,396

97.75

Bottom  50%

<$32,396

2.25

Note: AGI is Adjusted Gross Income   Source: Internal Revenue Service
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Words for the Weekend – 12-3-10

December 3, 2010

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

                                      – Benjamin Franklin


Obama: ‘I’ll Let You Keep Your Money, But Not Those People’

September 23, 2010

President Obama has made it clear in the last few weeks that he opposes extending the Bush-era tax cuts for the wealthier (those making over $250,000), yet he supports extending those for the “middle class” (those making less than $250,000). Why the distinction?

If you ask him and those like-minded, they will tell you it is because the wealthy do not need, and would not miss, the money they would be forced to give to the government should their cuts expire. Those making below the magic number of $250,000, however, need the money and would spend it in better ways than those above that amount would — so the argument goes. He recently told ABC News that, “There are a whole bunch of better ways to spend the money,” adding that tax cuts to the rich was most likely “the least efficient way of giving the economy a boost.”

[picapp align=”left” wrap=”true” link=”term=obama+tax+cuts&iid=9786890″ src=”http://view4.picapp.com/pictures.photo/image/9786890/president-obama-speaks-the/president-obama-speaks-the.jpg?size=500&imageId=9786890&#8243; width=”234″ height=”180″ /]But lost in this argument is indication of why it should be government that decides who needs or does not need their own money (which is what tax money is – the taxpayer’s money, not the government’s). What gives Obama and his compatriots in government the wisdom to decide whose money to take and whose to not take?

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Laffer on Incentives

June 9, 2010

Former Reagan economic adviser Arthur Laffer recently wrote in the Wall Street Journal that “incentives matter.” He was specifically referring to the incentive businesses and individuals have to shuffle their income earnings to this year instead of next when the Bush tax cuts are scheduled to expire.

Arthur Laffer

As he notes, “People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.” What this means, he argues, is that income for this year will be inflated making it look like the economy is improving. But, when taxes go up next year, economic productivity will go back down.

Businesses are incentivized to invest and produce when they keep more of their money thanks to lower tax rates. Increased tax rates decrease that incentive.

Similarly, something Laffer didn’t address in his piece is that increased regulation or uncertainty about what regulations government will soon implement also serve as disincentives for businesses to invest and produce. As such, the current climate in Washington doesn’t bode well for the prospects of a booming economy.


Cheap on Charity?

April 20, 2010

With the release of both President Obama’s and Vice President Biden’s 2009 tax returns last week comes some revealing information. Though the Obama’s reported that less than 6 percent of their $5.5 million income went to charity, the most interesting tidbit is that the Bidens gave less than 2 percent of their $333,000 income to charity. Even the standard church tithe — considered a charitable donation — is supposed to be 10 percent.

Far be it from me to criticize anyone for the amount of their charitable donations. Under normal circumstances, a person’s private giving wouldn’t be a point of criticism; it is, after all, a matter of personal conscience. However, these low levels of charitable donations, particularly on the part of the Bidens, stand out because of  earlier statements from Obama and Biden asserting that we need to “spread the wealth around” and that paying more taxes was the “patriotic” thing to do.

Here’s Obama:

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Paying Nothing On Tax Day

April 15, 2010

In recognition of Tax Day, I’m revealing the amount of income taxes I paid for 2009 after filing my return earlier this year:   . 

No, that’s not a typo after the colon. I paid nothing.  Thanks to our “progressive” income-tax system, I received all of my federal witholdings back in the form of a check. I had a modest income last year thanks to the part-time job I’ve had while in graduate school. Because I only made so much (or should I say, so little), the government (read: politicians seeking votes) decided to essentially not charge me anything for the services it provides me.

This has been a trend in my years in college. I wrote a column for my student paper a few years ago in my undergrad. when I was first catching on to the progressivity of our income-tax system. Here’s one notable excerpt from it:

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A More Than Generous Tax ‘Credit’

February 9, 2010

Tax filers may notice an additional benefit this year: the “Making Work Pay Tax Credit.” This was part of the government’s economic stimulus/recovery efforts. It means $400 for individuals or $800 for joint filers.

What’s interesting about this “credit” is that those paying little to no income taxes (those getting all or most of their withheld income back after filing) will, with this, get more money back than they paid in. As it stands, a large percent don’t end up paying any income taxes anyway thanks to our “progressive” income-tax system. Take for example the following estimate:

The Tax Policy Center estimates that for 2009, 43% of tax units (most of which are lower income households that may or may not file a return) will have no income tax liability or will have a negative income tax liability, meaning the government will actually pay them.

Getting more back from the government than you paid in goes beyond a mere “credit”; it becomes essentially welfare — or an example of what Barack Obama called “spread the wealth around” on the campaign trail. Really, it represents a way for politicians to gain greater support for their reelection. If they can make sure that nearly half of filers don’t pay any taxes or actually get more money back, they can often rely on those filers’ votes.

There may be those who feel guilty for receiving the “credit” and are contemplating paying it back. They, however, should ask themselves if the government is likely to spend that money wisely to pay down the federal debt. With the ideas of those currently in power in relation to fiscal policy, it is highly doubtful. Politicians will probably just find another dubious way to redistribute it. In the end, individuals may be better off using the money to reduce their own personal debt.

* Note: I wrote a column on a similar situation in which I paid no income taxes a few years ago.