RJ, not sure what you're looking at. How you calculate the numbers is really important. The piece that the Archduke posted last month was from the WSJ, and it was terribly flawed. It looked at income *after* deductions, and then calculated tax rates. I wrote about that on post 146 here:

http://redscape.com/forums/viewtopic.ph ... 8842#p8842

I'd be very careful what you read in the WSJ about this topic. I've got to say that I think the quality of the paper, especially in anything editorial has dropped tremendously over the past few years. It's becoming Fox News for people who read.

bbauska wrote:So 23.3 percent of a person's income is not enough in the eyes of President Obama. How much is acceptable? When you include state, local, and consumption taxes, what should the final total not exceed?

Is 50% too much?
60%, 80%?

Should the government be allowed to take everything (100%)?

So Buffett pays 3 times what his secretary does. Is that enough, or is it too much?

Yawn. How about Americans pay enough in taxes to pay for the spending of the government they vote for? Is 40%so unreasonable?

geojanes wrote:RJ, not sure what you're looking at. How you calculate the numbers is really important. The piece that the Archduke posted last month was from the WSJ, and it was terribly flawed. It looked at income *after* deductions, and then calculated tax rates. I wrote about that on post 146 here:

http://redscape.com/forums/viewtopic.ph ... 8842#p8842

I'd be very careful what you read in the WSJ about this topic. I've got to say that I think the quality of the paper, especially in anything editorial has dropped tremendously over the past few years. It's becoming Fox News for people who read.

Income is Adjusted Gross Income which is before the vast majority of deductions. There are a few odd ball deductions that you are allowed that take you from total income to AGI including Keoghs and health insurance for the self-employed. But AGI is before deductions for charity, home mortgage, property taxes, casualty losses, investment expenses, state income taxes, etc., so it really is the right measure.

This is from the lead editorial in the WSJ. That's very different than an op ed. (By the way, the op ed that you quoted was fine; our tax code is so complicated that it is easy to misinterpret stats.) Overall, I disagree with you on the quality of the WSJ. Some of the Op Eds and Eds go over the top, but in general the news and editorials are the most informative of any daily paper in the US.

Of more concern to me is that you disregard the data. I'm sure many other people will do the same. That's one of the built in biases that leads to the polarization of this country.

How is a lead editorial that different from an op-ed? The only one is that it is supposedly the view of the paper as a whole, not just the author. It's still opinion, and not 'news'.

I think george would likely argue that it's the 'oddball' deductions which tend to be available to those on higher incomes rather than everyone else. Even so, comparing averages over income brackets does not prove that an individual at one end of a bracket is typical.

What I see in the USA is a denial of reality over taxes. They are low compared to the past 50 years. They don't keep pace with spending. There's a deficit as a result of that gap. But woe betide anyone who suggests that taxes be set at a level to even reduce the gap (let alone start actually paying off the debt). People think they are over-taxed, and want further cuts, and blithely claim that the USA can do what no country has ever done, which is to successfully cut a way out of recession without adding to fiscal pressures.

danivon wrote:How is a lead editorial that different from an op-ed? The only one is that it is supposedly the view of the paper as a whole, not just the author. It's still opinion, and not 'news'.

My original post is about the IRS stats and not the WSJ's opinion. The IRS stats show that Buffett's point is not accurate.

danivon wrote:I think george would likely argue that it's the 'oddball' deductions which tend to be available to those on higher incomes rather than everyone else.

Let's let George make his own arguments, but my guess is he understands the US tax system enough to not make that particular argument. (I credit the English for that particular phrasing.) AGI is the common measure of income. The adjustments are generally to equalize the self employed to the employed. The current controversy is about favored cap gains rates, qualified dividend rates for the wealthy, and income tax rates in general. This just isn't about the oddball AGI deductions.

danivon wrote:Even so, comparing averages over income brackets does not prove that an individual at one end of a bracket is typical.

The statistics show that even with those favored capital gains and dividends rates, high earners still pay a much higher % of their income in tax than those making less than $200,000 a year. The major point here is that Buffett's anecdote may not be correct, or even if it is correct, it is by no means typical. Yes, funny things can happen when looking at means, and medians, and stats of any kind. But I don't see how you can parse this data and come to a different conclusion than the one I am making.

danivon wrote:What I see in the USA is a denial of reality over taxes. They are low compared to the past 50 years. They don't keep pace with spending. There's a deficit as a result of that gap. But woe betide anyone who suggests that taxes be set at a level to even reduce the gap (let alone start actually paying off the debt). People think they are over-taxed, and want further cuts, and blithely claim that the USA can do what no country has ever done, which is to successfully cut a way out of recession without adding to fiscal pressures.

Well, that's a totally different topic of discussion. There is a huge disconnect in the taxes we want to pay and the services we want to receive.

But the point of these statistics is that Obama's most recent proposals are perpetuating the myth as opposed to solving it. In other words, he is saying that the rich are taxed less than the middle class, and all we have to do is raise their taxes and cut the growth of spending. But the reality is that the rich have a higher % of their income go to taxes than the rest of us. His entire line of argument is at odds with the IRS stats.

I don't disregard stats RJ; data are my guide in this world. You quoted an article without providing a link that defined what the numbers you quoted meant. Without a definition, the numbers you wrote were meaningless. So I quoted another article from the same source (WSJ) that was previously discussed and showed how their analysis used numbers after deductions. Clearly flawed, when deductions for high income earners is one of the points of the myriad problems with the tax code.

You're right, the way to do this kind of analysis is using AGI, and so you're saying that the numbers you quoted use the AGI, which I'll trust, and this article states that rich people pay the most. But Buffet says they pay the least. So the Times explained the seeming paradox today:

http://www.nytimes.com/2011/09/21/business/obamas-tax-on-millionaires-faces-obstacles.html?scp=3&sq=effective%20income%20tax%20rates&st=cse

Simply, the standard deviation for the tax rate of high income individuals is high. Some pay lots, some pay little. It mostly has to do with how you earn your income. Lots of capital gains, dividends= low rate. Lots of earned and regular income=higher rate. Or to put it another way, star athletes & entertainers are getting screwed when they're compared to many business owners, the idle rich who live off a portfolio of investments, and of course the hedge fund managers. Perhaps the footballers need to head to Washington to do some lobbying of their own.

But again regarding data, this whole issue really came to my attention through data. As I pointed out previously, in 2010 I paid 17.7% effective income tax, the same rate as Buffet did, and it was a year that I made more than I ever had and worked less hard than I ever had! There were many years when I paid much more than that, worked so much harder and made much less. Thinking longitudinally on my own life it just struck me as plainly unfair and wrong. Why do we tax earned income more than (some) unearned income? No good reason, lots of bad ones. Socially, we want to encourage work, not retirement, yet we do the opposite. Hey Mr. Business Owner, you want to cash out your company after 10 years of hard work, sure, here's a huge lump sum, and since you've owned this business more than a year, that huge lump sum is taxed at 15%, so you can go retire and not work another day in your life. Socially, it's nuts. Not bad if you're the business owner though.

What would you recommend George? Perhaps a more level tax system with no deductions? Perhaps something with Danivon's percentage of 40% for everyone? Or maybe just the privileged few can pay more, and the rest pays nothing. Danivon says 40%. I say 15%. Any other takers on a percentage?

BTW, sorry to wake you Danivon.

Ray Jay wrote:My original post is about the IRS stats and not the WSJ's opinion. The IRS stats show that Buffett's point is not accurate.

Sure. But you went on about how a leader editorial is so different from an op-ed. It's not really, it's still just 'opinion'.

danivon wrote:I think george would likely argue that it's the 'oddball' deductions which tend to be available to those on higher incomes rather than everyone else.

Let's let George make his own arguments, but my guess is he understands the US tax system enough to not make that particular argument. (I credit the English for that particular phrasing.)

Looking at his reply, I can see that he understands it just fine enough.

This just isn't about the oddball AGI deductions.

No, it's about what gets called 'income' and the rate to which it gets taxed if it's detected as such.

The statistics show that even with those favored capital gains and dividends rates, high earners still pay a much higher % of their income in tax than those making less than $200,000 a year. The major point here is that Buffett's anecdote may not be correct, or even if it is correct, it is by no means typical. Yes, funny things can happen when looking at means, and medians, and stats of any kind. But I don't see how you can parse this data and come to a different conclusion than the one I am making.

Well, because I can see that averages can hide an awful lot of variation. Especially means (which these are) and especially when including some very large outliers (which income distribution will tend to).

danivon wrote:What I see in the USA is a denial of reality over taxes. They are low compared to the past 50 years. They don't keep pace with spending. There's a deficit as a result of that gap. But woe betide anyone who suggests that taxes be set at a level to even reduce the gap (let alone start actually paying off the debt). People think they are over-taxed, and want further cuts, and blithely claim that the USA can do what no country has ever done, which is to successfully cut a way out of recession without adding to fiscal pressures.

Well, that's a totally different topic of discussion. There is a huge disconnect in the taxes we want to pay and the services we want to receive. [/quote]Well, there I was kind of referring more to Brad's line of argument which seems to repeatedly boil down to arguing that the poor should pay more in tax and the rich less, and overall less, and spending be cut across the board to 'live within means'. I think of it more like devil-take-the-hindmost economics, but still.

But the point of these statistics is that Obama's most recent proposals are perpetuating the myth as opposed to solving it. In other words, he is saying that the rich are taxed less than the middle class, and all we have to do is raise their taxes and cut the growth of spending. But the reality is that the rich have a higher % of their income go to taxes than the rest of us. His entire line of argument is at odds with the IRS stats.

Really? I don't think he's claiming that reducing deficits by about $300Bn a year will solve all of the problems, but it seems like a good start. The issue is that if he's to be asked to 'pay' for a job stimulus programme, he'd be dumb (and so would the demanders) to do so by cutting spending that means a loss in jobs. The net effect would be low, and the waste really more than the US can be affording right now.

If you take all taxes, not just federal, and you take all income, not just that which is declared as fully taxable to the IRS, the rich do pretty well. And let's be clear - a fair way better than they did the last time that the budget was balanced.

Increasing taxes for the poor or middle class would be a disaster if done now. You'd be cutting off what residual demand there is from disposable incomes, increasing personal debt, decreasing private savings, and so stifling a recovery.

Put is this way, while the US boomed the rich did the best. When it crashed, some may have taken a bit of a bath, but few lost everything and they are now doing pretty well. So when it comes to asking for anyone to contribute to rectifying the situation, why should we not ask those who:

a) benefitted most from the profligacy of the past, and
b) still have the means to help out

?

bbauska wrote:Perhaps something with Danivon's percentage of 40% for everyone? Or maybe just the privileged few can pay more, and the rest pays nothing. Danivon says 40%. I say 15%. Any other takers on a percentage?

BTW, sorry to wake you Danivon.

No bother, laddie, you don't tend to behave in the same way as 'the departed'. Please be clear, though, I don't say 40% for everyone. I would say 40% for the rich is not a massive hardship for them. Neither would I say that those below pay nothing. You have what's called a 'progressive' system wherein the very bottom pay nothing (because they are already below a point that it's reasonable to live on), and the next up pay a small part (so as not to overly disincentivise moving up from the 'nothing' band'), and those a bit further up pay some more, and so on. Kind of like the theory of the US federal income tax system (if not the reality of the US tax system in the round).

Very good to have that explained.

Would you support 5% for the 1st 250K, 10% for the 250K to 1 Million, and 15% for 1 Million to 1 Billion, and 40% above that with no deductions anywhere? After all, The President did say "Billionaires". Sounds progressive to me, and the IRS would be pared down considerably.

geojanes wrote:I don't disregard stats RJ; data are my guide in this world. You quoted an article without providing a link that defined what the numbers you quoted meant. Without a definition, the numbers you wrote were meaningless. So I quoted another article from the same source (WSJ) that was previously discussed and showed how their analysis used numbers after deductions. Clearly flawed, when deductions for high income earners is one of the points of the myriad problems with the tax code. You're right, the way to do this kind of analysis is using AGI, and so you're saying that the numbers you quoted use the AGI, which I'll trust, and this article states that rich people pay the most. But Buffet says they pay the least.

The WSJ is subscription based so referencing is not helpful. Here's the actual data. http://www.taxfoundation.org/news/show/250.html#Data. It's not as clean as my summary, but Table 1 is a good place to start. It shows an average tax rate of20.7% for those with AGI over $160,000. For those with AGI between $33,000 and $67,000 it is 6.75%. For those with AGI between $67,000 and $114,000 it is 9.3%. If data is your guide to this world, that's worth spending time on.

geojanes wrote: So the Times explained the seeming paradox today:

http://www.nytimes.com/2011/09/21/business/obamas-tax-on-millionaires-faces-obstacles.html?scp=3&sq=effective%20income%20tax%20rates&st=cse

Simply, the standard deviation for the tax rate of high income individuals is high. Some pay lots, some pay little. It mostly has to do with how you earn your income. Lots of capital gains, dividends= low rate. Lots of earned and regular income=higher rate. Or to put it another way, star athletes & entertainers are getting screwed when they're compared to many business owners, the idle rich who live off a portfolio of investments, and of course the hedge fund managers. Perhaps the footballers need to head to Washington to do some lobbying of their own.

I think that's a fair point. Some millionaires and billionaires are paying their fare share. In fact, given that other m's and b's are not, the averages hide the fact that some are paying in quite a bit.

From your article:

As a result, the effective federal tax rate, including payroll taxes, for the wealthiest 0.01 percent of earners fell to 31.5 percent in 2005, from 42.9 percent in 1979, according to data from the Congressional Budget Office. Over the same time, effective rates for taxpayers in the center of the range fell to 14.2 percent, a decrease of just 4 percentage points.

The article has slanted it to make a different argument, but it does admit that on average, the top .1% are paying at 31.5% whereas "the center" is paying at 14.2%.

geojanes wrote: But again regarding data, this whole issue really came to my attention through data. As I pointed out previously, in 2010 I paid 17.7% effective income tax, the same rate as Buffet did, and it was a year that I made more than I ever had and worked less hard than I ever had! There were many years when I paid much more than that, worked so much harder and made much less. Thinking longitudinally on my own life it just struck me as plainly unfair and wrong. Why do we tax earned income more than (some) unearned income? No good reason, lots of bad ones. Socially, we want to encourage work, not retirement, yet we do the opposite. Hey Mr. Business Owner, you want to cash out your company after 10 years of hard work, sure, here's a huge lump sum, and since you've owned this business more than a year, that huge lump sum is taxed at 15%, so you can go retire and not work another day in your life. Socially, it's nuts. Not bad if you're the business owner though.

I think that is fair. One mitigating point to keep in mind is that qualified dividends (and some non-qualified ones) are already taxed at the corporate rate of 34%. Cap gains works differently, but to the extent that dividend earners are paying a lower rate (15% vs. 35%) it is fully explained by the fact that money has already been taxed once.

There are other important points in the NYT article.

His secretary and the 19 other employees in his office paid an average of 36 percent, he said.

This is very odd based on the data. I can't see a tax situation where a secretary is paying tax at that rate. Perhaps some of the other 19 employees are millionaires? According to the IRS data, there just aren't subsets of individuals who are paying average 36% tax rates. By the way, if you click on the graphic, it will show something else that is very important. Everyone who makes less than 50% pays at less than a 15% effective tax rate. For those making between $50,000 and $100,000 (Buffett's secretary?) over 90% pay at less than a 15% effective tax rate and the rest pay between 15% and 30%. In other words, the chart disputes Buffett's claim on his secretary's tax rate, or at least suggests that it is a most unusual situation. That is what the data is showing as far as I can tell.

RUFFHAUS 8 wrote:The debate needs to center around what services do the people want to pay for (e.g. how big a role do we want government to play in our lives?). Once that is determined, then we know who much money we need to raise per year to pay for those services, and can discuss how much we need to raise to pay down the deficit. Establishing the rates before establishing the needs is stupid.

I completely agree and is why I try to avoid Brad's persistence on the topic.

RUFFHAUS 8 wrote:

geojanes wrote: As I pointed out previously, in 2010 I paid 17.7% effective income tax, the same rate as Buffet did

please explain to us specifically what is wrong with this? Why is it an outrage that you pate the same rate as Buffett? Seriously what is wrong with this?

Nothing. I was happy to pay the same rate as Warren Buffet in 2010. But I was outraged that I paid a lot more in prior years, when I was working a hell of a lot harder and making less.

I don't profess to know what the "right" tax rate is. I just know someone who works for a living (meaning earns income) shouldn't pay a higher tax rate than the richest person in America.

Ray Jay wrote:One mitigating point to keep in mind is that qualified dividends (and some non-qualified ones) are already taxed at the corporate rate of 34%. Cap gains works differently, but to the extent that dividend earners are paying a lower rate (15% vs. 35%) it is fully explained by the fact that money has already been taxed once.

Yeah, double taxation is a better argument when more corporations actually pay corporate taxes. As you know, many are able to show corporate profits, pay dividends, and pay little in the way of corporate income taxes. But some pay that full rate, others don't. The effective tax rate at the corporate level, I expect, has an even higher standard deviation than the highest personal income earners.

Now if you're serious about data:

http://www.irs.gov/pub/irs-soi/08intop400.pdf

Table 3 (on page 12): 243 of the richest 400 Americans paid an effective tax rate of less than 20% in 2008. Sure some paid over 30%, but most didn't. I know I paid 26.7% in 2008, and I'm guessing if you had a job in 2008, you, and Randy, and just about every employed person here with an above average income paid more than 20%. And that's not right. Working people--and I mean that literally: people with earned income as a majority of their total income--should not pay more of their income in taxes than most of the very rich.

RUFFHAUS 8 wrote:I'm beginning to see why you have no time for Diplomacy....

Ha, I groaned when I saw RJ's post, 'cause I knew I had to respond, because this is my topic, really my only topic now, but I don't have time for this either. So, you'd be doing me a favor if you said, "Oh, I get it now, George is right!"

George,
I do not wish to continue the frustration you have with time restraints in your life, but we have a definite difference in the way we look at the problem.

You (and Danivon, I believe... please correct me if I am wrong) want to set the amount of taxes brought in to be based upon the amount of need. I would be ok with that theory if everyone had to pay the same percentage (flat tax). That way people would see the taxes that are taken out and the decisions would have more impact at the ballot box. Certainly a real way to handle the issue. Not my way, but a way just the same.

I, on the other hand; look to the amount of taxes that the government should be taking from the people, and want the government to make that amount of money work. I would allow for a more progressive system under this plan to gain the benefit of a set tax rate at all levels not to exceed 20% at the top rate.

You may think it is a chicken or the egg conundrum, but the difference is large in my opinion. THAT is why I want to see people's opinion of how much is too much taxation. When no answer is given I can only assume that you feel that the government is entitled to 100% of a person's income. There is no room for agreement with that position.