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Income Tax Burdens in Perspective

From National Review:

Here is a chart that shows how much income taxes are paid by each income tax group:

As you can see, the top-earning 1 percent of Americans (the 1.4 million returns making more than $380,000) paid 38 percent of federal personal income taxes while the Americans in the lower half of the income spectrum (or 70.0 million returns) paid 2.7 percent of the total. This chart also shows that roughly half of taxpayers pay for almost all of federal personal income taxes.

Based on this data, it is hard to say that top income earners are taxed unfairly lightly.

More importantly, the people in the top are not always the same year after year. This week, E. J. Dionne’s Washington Post column quoted an author as saying:

“The effective rate for the top 400 taxpayers has gone from 30 cents on the dollar in 1993 to 22 cents at the end of the Clinton years to 16.6 cents under Bush,” he said in a telephone interview. “So their effective rate has gone down more than 40 percent.”

In fact, the top 400 aren’t a static group. There’s lots of income mobility in and out of the “top 400″ every year, and most of their income is due to highly fluctuating capital gains (which are taxed lower than ordinary income). IRS data for the top 400 over a 15-year period shows that 72 percent of them appeared only once. A little more than 12 percent appeared twice, and a little over 15 percent appeared three times or more. Trying to fine-tune tax policy to attack the “top 400″ will only tax different people tomorrow than are there today.

The Truth About the 2001-2003 Tax Cuts

From The Heritage Foundation:

In the battle over the extension of the 2001/2003 tax cuts, a lot of myths about the tax cuts are being perpetuated. One of the common myths is that the Bush tax cuts disproportionately favored the wealthy, shifted the burden of taxes from the rich to the middle class, and made our tax system less progressive than most wealthy nations.

First, although there was a slight shift of burden to the middle class immediately after the 2001 tax cuts were passed, as the higher earners (and businesses) grew their savings, investments, and wage funds, their share of the tax burden rose. By 2007, the highest earners were paying a significantly larger share than they had previously, and today the tax burden of top 1 percent exceeds that of bottom 95 percent.

Does that sound unusually progressive? Well, it is. The U.S. federal tax system is more progressive than any other OECD country, by several measures. (And if you count state taxes in the U.S. and the corresponding value added tax in the European countries, it would only increase this difference). It isn’t only that the wealthy in America pay more taxes because they earn more money. Compared to the relative income they earn, the top 10 percent pay a higher relative share of taxes than their European counterparts.

Read the rest at The Heritage Foundation.

“Historic” Rise in Taxation in 6 Months

From RedState:

We’ve been here before.

Americans For Tax Reform culled a few things from the List of Expiring Federal Tax Provisions 2009-2020 off the government’s website:

In just six months, the largest tax hikes in the history of America will take effect.  They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.  These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  The lowest rate will rise from 10 to 15 percent.  All the rates in between will also rise.  Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:

– The 10% bracket rises to an expanded 15%
– The 25% bracket rises to 28%
– The 28% bracket rises to 31%
– The 33% bracket rises to 36%
– The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income.  The child tax credit will be cut in half from $1000 to $500 per child.  The standard deduction will no longer be doubled for married couples relative to the single level.  The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax.  For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011.  The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.  These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January 1, 2011.

Read the rest at RedState.

Don’t Give Up on the American People…at Least not Yet

From Big Government:

Gloominess and despair are not uncommon traits among supporters of limited government – and with good reason. Government has grown rapidly in recent years and it is expected to get much bigger in the future. To make matters worse, it seems that the deck is stacked against reforms to restrain government. One problem is that 47 percent of Americans are exempt from paying income taxes, which presumably means they no longer have any incentive to resist big government.

Mark Steyn recently wrote a very depressing column for National Review Online about this phenomenon, noting that, “By 2012, America could be holding the first federal election in which a majority of the population will be able to vote themselves more government lollipops paid for by the ever shrinking minority of the population still dumb enough to be net contributors to the federal treasury.” Walter Williams, meanwhile, has a new column speculating on whether this cripples the battle for freedom:

According to the Tax Policy Center, a Washington, D.C., research organization, nearly half of U.S. households will pay no federal income taxes for 2009…because their incomes are too low or they have higher income but credits, deductions and exemptions that relieve them of tax liability. This lack of income tax liability stands in stark contrast to the top 10 percent of earners, those households earning an average of $366,400 in 2006, who paid about 73 percent of federal income taxes. …Let’s not dwell on the fairness of such an arrangement for financing the activities of the federal government. Instead, let’s ask what kind of incentives and results such an arrangement produces and ask ourselves whether these results are good for our country. …Having 121 million Americans completely outside the federal income tax system, it’s like throwing chum to political sharks. These Americans become a natural spending constituency for big-spending politicians. After all, if you have no income tax liability, how much do you care about deficits, how much Congress spends and the level of taxation?

Steyn and Williams are right to worry, but the situation is not as grim as it seems for the simple reason that a good portion of the American people know the difference between right and wrong.

Read the rest at Big Government.

2010: The Year of Tax Hikes Beyond Belief

From Big Government:

This Tax Day I’m sure we’ll all raise a glass to our friends at the IRS.

After all, their ranks are only growing. While the private sector is still struggling, with unemployment hovering just under 10 percent and real unemployment (including those who have quit looking for work) estimated at over 16 percent, this is a boom time for hiring at the IRS. Come to think of it, it’s always a boom time for government hiring in general.

All the tax increases in the health care takeover legislation – more than $500 billion – and the new enforcement mechanisms required to make sure every American is purchasing health insurance mean thousands upon thousands of new IRS employees.

But there’s more on the tax front. Almost another $1 trillion in tax increases are heading our way on December 31, 2010, when the Bush tax cuts expire. I don’t think Americans are ready for this massive tax hike. They’ve forgotten it’s coming. They’re still having trouble finding new jobs, or getting their mortgages in order. They’re not ready for higher capital gains taxes, a return of the death tax, and a tax penalty slapped on married filers.

And with President Obama and Speaker Pelosi still looking to “spread the wealth around” as part of their radical liberal agenda, we’re looking at additional tax threats in coming months. First, there’s the cherished Holy Grail of Al Gore’s nutty environmental movement: cap-and-trade, with its crippling new energy taxes.

Read the rest at Big Government.

Top 10 Anti-Tax Quotations – Annotated

From Big Government

On April 15th, it is always a worthy enterprise to reflect on one of the major motivations of the American Patriots that caused them to break away from England. Of course, I am referring to “Taxation Without Representation.” Today, we know from the Tea Parties multiplying around the Country that Gerald Berzan is quite to say right that “Taxation with representation ain’t so hot either.” Perhaps that is why Douglas Adams declared that he was “spending a year dead for tax reasons.”

In that lively spirit, I give you my Top 10 Anti-Taxation Quotes with my annotations: 

No. 10. 

“In this world nothing is certain but death and taxes.” Benjamin Franklin. It is hard to start anywhere else. The little known full quote is “Our Constitution is in actual operation; everything appears to promise that it will last; but in this world nothing is certain but death and taxes.” The Founders, who framed a Constitution to protect us from government, did not dare consider an income tax. Franklin obviously did not trust future politicians. 

No. 9.

“I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” Milton Friedman. The 1st of two Friedman quotes in this countdown brings up the question: Why the Republican Party is (or should be) so anti-tax? Franklin obviously warned us. Friedman accepted his warning and knew that unless we fought them at every turn, taxes would be more than inevitable. 

 Read the rest at Big Government.

Economics 101: What the Tax Code Really Costs America

From Moonbattery:

Ignore for a moment the fact that only half of the country pays all of the income taxes, more or less. How much does it cost to just comply with the United States Tax Code? Too damn much. $338 Billion (more than $1000 per legal American citizen), not to mention the immense cost in time — the IRS itself estimates that Americans spend 7.6 billion hours a year dealing with the complexities. More fun facts below.

Take-home lesson from the video: Heads they win, tails you lose.

Homework: Read more here on the wonders of our perverted tax system and some saner alternatives.

Flat Tax or National Sales Tax?

From Big Government:

My post last week about the flat tax generated a lot of friendly comment and email, but also some pointed questions about whether a national sales tax such as the Fair Tax would be a better approach. Since I’ve written favorably about a national sales tax, debated in favor of a national sales tax, and even testified to the Ways & Means Committee about the positive attributes of a national sales tax, I certainly have no objection to that reform. Any single-rate, consumption-base tax would be a vast improvement over our corrupt and punitive internal revenue code.

So why, then, do I spend most of my time on the flat tax? The simple answer is that I don’t trust Washington. We know the politicians are salivating at the prospect of imposing a broad-based consumption levy such as the value-added tax. And we know they want the VAT in addition to the income tax. What’s to stop them from saying they’ll impose a national sales tax, promising to repeal other taxes, but then pulling a bait and switch and giving us both? As I explain in this video, the national sales tax should only happen after supporters amend the Constitution to repeal the 16th Amendment and replace it with an ironclad ban on income taxation to protect against political duplicity.

Read the rest at Big Government.

God Bless America

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