Posted by FleshPresser at 9:20 PM /
The Professor posted at 4:17 PM
You do understand the misleading nature of your analysis, right?
For instance, you write:
"Do some simple math. Divide the relief by the income, and you come up with the REAL story. In the $40,000-50,000 range, as an example, the tax relief is approximately .0012% of the income. If you're in the $75,000-100,000 range, it jumps up to .0055% of your income. $200,000-$500,000 gets about .023% of their income. Those earning over a million get .043% of their income."
That is an interesting statistic, but simply meaningless. Let me explain. Your analysis looks at the total income, and the dollars that the taxpayer will receive in return. Of course, you are including a certain amount of initial income that isn't taxed at all. Depending on your status (single, married, family, etc) you have a certain amount of income that is simply not taxed.
For example, if your income is that of most Americans (read about 50%) the vast majority of your income is not taxed. So let's say, for example, that families with exemptions aren't taxed until they earn 40K, thus, a (hypothetical) 5% rebate in your taxes on, say, 10K of your 50K income will be 500 dollars, or 1% of your TOTAL income. On the other hand, if you earn 500K, then a 5% rebate will be based on $460K, and thus would be much closer to the actual 5%, since the 5% is assessed across a much larger portion of the income. This hasn't taken into account the (still) progressive nature of the tax system, which increases the percentage taken by the government of your money earned, the more of it you happen to earn.
Admittedly, this has been a hypothetical example, to make the math easier--I recommend you check the real numbers and run the math on that as well. I think you will find the math, and logic, still hold up.
Perhaps the best way to resolve all this is to eliminate the progressive tax structure all together. Make everyone pay taxes starting with the first dollar earned. Eliminate any Earned Income Tax Credit. Ensure that every voter is a "tax paying voter."
let me know what you think of that idea.
I actually wrote about an analysis that was conducted (and mis-represented by the Dems at the time) by the CBO. My blog, and a link to the actual CBO report, can be found at "http://theprofessornotes.blogspot.com/2004/08/dems-distort-cbo-report-to-trash-bush.html"
FleshPresser posted at 2:33 AM
I bet you think I had forgotten about you, or I was going to let you slide on your comments, right? noooooo.... :)
Let's skip thorugh the heavier number crunching here and cut to the chase... so as to avoid less-than-stimulating reading (though it may be too late for that at this point).
Regardless of how you twist the percentages of income, the refund amounts are provided by the Tax Policy Center, and are taken from government agencies directly.
More importantly, however, are the premises behind our current system of taxation.
You WOULD agree that people with lesser incomes generally take standardized deductions, while those with larger incomes tend to itemize. I'm not sure what your background or occupation is, but I have accountancy experience, and I can tell you that this is true.
It's the whole "you've got to have money to make money" argument, in a sense. The more money an individual makes, the more loopholes in the tax code are generally available to that individual, in the form of shelters and the like.
It is well-established that while individuals with larger incomes pay more tax as a pure dollar amount, they tend to pay less as an overall percentage of their income - a generalization, I know, but percentages will bear it out.
At the risk of jeopardizing my family's business, I would actually advocate for a flat tax, or do away with "tax returns" completely and establish a National Sales Tax instead.
The problem with deductions and itemized taxes is that it gives the government the ability to incentivize certain behaviors or expenditures. This, of course, opens the door wide to politicians. A lot of tax incentives happen to be ones I fully support. Others, however, are ludicrous (Bush's incentives for purchase of fleet SUVs and ultra-large SUVs comes to mind).
Best to create a simplified tax code with a base flat rate, and perhaps a few remaining deductions available to everyone on an equal basis (mortgage interest deductions, etc.)
The Professor posted at 11:36 AM
Why thank you for remembering me :)
Let me tackle these one by one, if you don't mind. I am sorry that the math became a bit arcane but as I was trying to point out, when you do "simple math" it is usually too simple, and thus wrong. By your own admission, there are many many loopholes and rules, so simple math won't apply.
Now, on to the specifics. I am not challening the numbers from the Tax Policy Center--just your simple math that is used to analyze it. For instance, you identify that those earning less than 10K get nothing back. Correct--they received 100% back on all they contributed, since they contributed nothing. Of course, that one little bit is an aberration in the math.
After that, the math gets more complicated as the progressive nature of the tax structure kicks in. The more you earn, the greater the percentage of your income is taxed--and the greater the percentage.
So you write:
"You WOULD agree that people with lesser incomes generally take standardized deductions, while those with larger incomes tend to itemize."
True. But those with the least income pay no taxes, and those with moderate (30-50K) incomes also pay relatively little given that most of their income is not taxed at all (at least not as an "income tax.") And don't forget AMT! (Oh wait, I think you did--see next quote from you...)
Again, you write:
"The more money an individual makes, the more loopholes in the tax code are generally available to that individual, in the form of shelters and the like."
Now see, in the words of Ronald Reagan "there you go again." The AMT is designed to ensure that one pays their taxes, and cannot (mis)use loopholes. The tax is actually a misnomer, given that it is the "alternative minimum tax" but in reality one pays the "maximum" of that or the taxes computed using the traditional itemized deductions. Of course, Congress in their wisdom passed that a number of years ago, and put an absolute dollar figure on it, so as inflation and income creeps up, more and more "regular joes" are getting caught in this stealthy tax-increase.
And finally, you write:
"It is well-established that while individuals with larger incomes pay more tax as a pure dollar amount, they tend to pay less as an overall percentage of their income - a generalization, I know, but percentages will bear it out."
I recommend you go read that CBO report. It actually disagrees with you. The lowest income levels pay NO taxes (and with the EIC actually get money FROM the government--reverse taxation of sorts.) And when you get to the highest levels, the progressive nature of the tax system, combined with the AMT, has ensured that the richest pay the most--both in pure dollar figures and in percentage of income earned.
Seriously, go read the link I provided, and then go read the CBO report for yourself!