Rebirth of Reason

Post to this threadMark all messages in this thread as readMark all messages in this thread as unread

Post 0

Wednesday, February 21, 2007 - 7:22amSanction this postReply
From the news article:

As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.

The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.

I wonder: What does the Heritage Foundation have to say about this?


Post 1

Wednesday, February 21, 2007 - 7:30amSanction this postReply
Excellent article Ed! Both enlightening and then depressing at the reality of what we pay in taxes. I'm glad to see my alma mater's Econ department doing quality research!

Post 2

Wednesday, February 21, 2007 - 9:15amSanction this postReply
The aggregate tax rate is arguably about 4% higher than the 40% the authors claim. I suspect that they did not include the employer-paid 6.2% FICA tax and 1.45% Medicare tax.  These amounts do not count as income to the employee, so to properly recalculate, they need to be included in the denominator as well. (0.4+0.062+0.0145)/(1+0.062+0.0145) = .443 or 44.3%

Post 3

Wednesday, February 21, 2007 - 9:49amSanction this postReply
Considering that the founding fathers revolted over tax rates of 17 - 27%, undeed this is abominable....

Sanction: 6, No Sanction: 0
Sanction: 6, No Sanction: 0
Post 4

Wednesday, February 21, 2007 - 10:46amSanction this postReply

A while back I had a blog and this was one of the entries.

A friend of mine forwarded an email he received - a list of taxes. I looked at that humungous list and realized that long as it was, it was incomplete. So I added those that came to mind. And it began to really tick me off. You don't want to read this if you haven't taken your blood pressure medication today.
There are taxes Everywhere. Just look at some of the ways we talk about them. They are...
ad valorem,
state, and
sin taxes

Politicians call for "revenue enhancement" (that means reaching into your pocket for more money - you tell me what is being enhanced!)
Conservative politicians talk about tax reduction but since the founding of this republic the long term trend has been nothing but up, up and further up.

I heard a state congress woman in Texas announce on TV that she had a great idea for a new tax: Every time money was electronically transferred from one account to another, even if it was savings to checking, there should be a 'transfer tax', she said. I'm glad she specified "electronically" or I'd be worried about moving money from my left pants pocket to the right.

Here is that list of taxes my friend sent me (along with a few I've added):

Accounts Receivable Tax
Alcohol Tax
Blank Media Tax
Building Permit Tax
Business License Fee
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dividend Taxes
Dog License Tax
Export Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax Gasoline Tax
Hunting License Tax
Import Duties
Inheritance Tax
Inventory tax
IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax Property Tax
Public Toll
Road Fees
Real Estate Tax Recreational Vehicle Tax
Road usage taxes (Truckers)
Sales Taxes
Service charge taxes
Social Security Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise
tax Telephone federal
universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Utility Taxes
Vehicle License Fees
Vehicle Annual Registration Tax
Vehicle Sales Tax
Watercraft registration Tax
Well Permit Tax
Workers Compensation Tax

The email with that list went on to say, "Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world and Mom stayed home to raise the kids. What the hell happened?"

The next thing to occur to me is how often we are double taxed, or triple taxed. And there are some taxes you have to pay every year even if nothing changes (like property taxes).

You pay taxes on money you earn, then they gouge you for sales tax when you go to spend it, and the business receiving your money will be taxed on whatever portion of it is profit and when they pay some of to a share holder as a dividend that is taxed.

Lots of money is taxed before you get it - like those dividends and then again when you declare them on your income tax forms and then again when you spend the money. What a vicious circle.

Delayed rebates are strange animals as far as taxation goes. Have you ever purchased a big-ticket item with a large mail-in rebate? You probably paid sales taxes on the before-rebate amount and got none of it back with the rebate. That's a tax on nothing!

If you invest some of your money, you'll pay taxes on interest earned, captial gains or dividends.

And apart from pure greed on the part of the state, why should you have to pay taxes on your property every single year? Or your vehicle? How long before the state has collected more in their property taxes than you paid for it to begin with? They keep on collecting for a piece of property they don't own and don't maintain. Let's call this what it is: a protection scam - extortion - pay us or we'll take your property away from you.

There are two forms of taxation that are deeply hidden and bigger than all of the above taxes combined:

That part of the sales price that is the built-in cost of all the taxes paid by the entire supply chain, (you know, a McDonald's Big Mac's hamburger patty carries a cost burden being passed on to you that represents a tiny portion of the taxes and grazing fees paid by the rancher that raised the cattle, gas taxes of the trucker that took the cattle to the feed-lots, employee taxes on all employees of all the supply chain companies, etc.)

Think about it - this is some portion of every tax and every fee paid by every business that received any money at all from McDonalds. And it is the same for every product and every service purchased by every consumer!

And here is the biggest tax of all:

The opportunity costs and failed economic growth caused by the tax burden is beyond calculation. What didn't happen forever stays invisible except in our imaginations, like the person never hired by a business someone never started because they didn't have enough disposable income after paying their taxes.

Think of "opportunity costs" when NASA trumpets how its technology is being used in the private sector and how this is a reason for NASA to consume your tax dollars. People will never see the technology NOT being developed by the private sector because of taxes spent to support NASA (my friend supplied that example).

Think of a person who day after day through an entire life received just enough vitamins and minerals to stay alive but not enough for the energy to do more. Instead of reaching towards the heights of their abilities, they would spend a life just getting by. The same is true of our economy. Our collective energies are drained away and a sizable portion of the brilliance and energy of our best people is being squandered by Washington's wasterels. But you'll never see this - it is invisible.

And it just occurs to me, we should include the cost of inflation as a kind of tax.

So, how much do think we should add to that 40% figure?

(Edited by Steve Wolfer
on 2/21, 11:30am)

Post 5

Wednesday, February 21, 2007 - 2:58pmSanction this postReply
"4-tenths slave; 6-tenths free? Abominable. Ed"

No - 100% slave. If the state has the right to claim 40% of your production and leaves you the rest, it ultimately has the right to claim 100% of your production. The state leaving us 60% to live on is like a slave master allowing his slaves to sleep at night.

Post 6

Thursday, February 22, 2007 - 10:40amSanction this postReply
Some Background ...

The origin of the income tax on individuals is generally cited as the passage of the 16th Amendment, passed by Congress on July 2, 1909, and ratified February 3, 1913; however, its history actually goes back even further. During the Civil War Congress passed the Revenue Act of 1861 which included a tax on personal incomes to help pay war expenses. The tax was repealed ten years later.

However, in 1894 Congress enacted a flat rate Federal income tax, which was ruled unconstitutional the following year by the U.S. Supreme Court because it was a direct tax not apportioned according to the population of each state. The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State.

Some take-away Messages ...

-for the first 137 years of this country (1776-1913), there was no non-dicretionary (i.e., general) income tax
-folks were taxed from 1861-1865 to fund the Civil War (and for 6 years thereafter, for apparently no good reason)
-in the year of 1894, folks were taxed on their income
-in 1895, general income tax was deemed unconstitutional and folks were not taxed on their income anymore
-from 1776-1861 (for our first 85 years), there was no income tax whatsoever



Sanction: 5, No Sanction: 0
Sanction: 5, No Sanction: 0
Post 7

Thursday, February 22, 2007 - 6:38pmSanction this postReply
Excellent points, Ed!

I especially like the take-away messages.  They reminded me of the final paragraphs in an article called, The Tax-Reform Racket, by Lew Rockwell.  It was an 'expose' of the various tax reform proposals that were being talked about at the time. It can be found here:  http://www.lewrockwell.com/rockwell/tax-reform-racket.html

After showing the practical, economic, and/or moral shortcomings of the various proposed reforms, he suggested,
"...we abolish the income tax. It took in $873 billion last year [2004]. If we cut the budget by that amount, we would end up with a completely gutted federal budget, right? Actually, that is not true. We would end up with a federal budget of about $1.5 trillion, where it was in the last year of Clinton's second term. If anyone thinks that the federal government was too small back then, I can only recommend a complete education in economics, politics, and the truth about human freedom. 
Thus do I end this talk with a call, not for reform, but for an end to the income tax. It should be replaced with nothing at all. In any case, that would be a good first step."

Sanction: 5, No Sanction: 0
Sanction: 5, No Sanction: 0
Post 8

Thursday, February 22, 2007 - 7:00pmSanction this postReply
Aid to Dependent Dictators, by Bill Walker, is another fun article.  It was reprinted on Rockwell's site: http://www.lewrockwell.com/orig5/walker1.html

It's a great article and it fits on this tax thread since ending foriegn aid moves us closer to being able to eliminate the Income Tax without increasing the deficit!

And, as he points out, foriegn aid may well be one of the most unpopular of the spending programs.

Here is a 'random' quote to give you a little of the flavor:

Now let's look at where massive aid didn't go after WWII: Singapore, Hong Kong, and Taiwan. In each case, the economy grew at over 5% per year. Again, "economic miracle" occurred when price controls were removed, free trade and foreign investment permitted. Equally important was the absence of aid. Local politicians had no choice but to allow some economic freedom, or they would have had nothing to steal from their productive classes.

Unfortunately the majority of the world's politicians face exactly the opposite incentives. As long as the dictator of a post-colonial African or post-Soviet "republic" prevents the development of a private sector, his regime cannot be overthrown. Year after year, the assured flow of US aid dollars will provide him with a cornucopia of weaponry and wealth. This is exactly what has happened all across the world, from Azerbaijan to Zaire. "Aid" has brought permanent stagnation. In many aid-dominated African nations, incomes are actually lower than they were twenty years ago.



(Edited by Steve Wolfer on 2/22, 7:15pm)

Post to this thread

User ID Password or create a free account.