RightWingTalkingPoint Debunked--"The Rich Pay 87 Percent of ALL the Income Taxes Collected"

[mistertrickster]

You've heard this one over and over again in all of its many manifestations:

"The top one percent pay 67 percent" or "the top 10 percent pay 92 percent of all the income tax collected" or some such nonesense.

This proves again Benjamin Disraeli's contention that "there are lies, damn lies, and statistics."

The idea is that because so much government revenue comes from the rich, they are over-taxed and can't be expected to sacrifice any further.

Nevermind that because of many other taxes (besides income taxes) like sales tax and payroll tax, the poor pay more of a share of their income in taxes than the rich do. This is why Warren Buffett, one of the richest men in the world, repeatedly points out that his tax rate is lower than his secretary's, who makes 60 thousand a year.

Nevermind that the rich earn most of their income not from work -- from which the government levies a 28 percent rate on the top -- but from wealth or interest on investments, for which the wealthy are only charged a 15 percent rate at most.

No, despite those important objections, an even more glaring error can be seen in the RWTP (right wing talking point) that most of the income tax is collected from the wealthy.

It absolutely doesn't matter.

The percentage of income generated by taxes on the wealthy is a total non-sequitor. It's a major premise and a minor premise leading to nothing.

Consider these two scenarios:

Let's say you live in a very small country with a population of only eleven income earners. You make 1 million a year and everybody else makes 10k a year.

Scenario A--

You and everybody else are taxed at 20 percent.

You pay 200,000 in taxes and everybody else pays 2000 (2000 x 10 = 20,000).

The gov't's total take is 220K. You paid 200/220ths of that or 91 percent.

Scenario B--

You are taxed at 19 percent.

Everyone else pays no income taxes at all.

Now instead of paying 200K in taxes, you pay only 190K.

You save 10K over Scenario A, but you now get to whine and moan that "your taxes are too high because you paid ALL (100 percent) of income taxes collected."

*****

Bottom line--the percentage that the rich pay in income tax collected is irrelevant as to whether the tax is "too high" or "too low."

As long as we have a tax on income, people earning a lot are going to pay a lot.

Because it's a tax on INCOME.

Duh.

The only way that the rich could lower their total percentage collected would be if everybody else became wealthier relative to the very few at the top.

[Hannah Bell]

1. if everybody else became wealthier >>

yes. but what the gripers want is for themselves to become richer, thereby ensuring they'll continue paying higher percentages.

if you want the peons to pay more taxes, give them a raise.

[mistertrickster]

2. Exactly right, Hannah!

The 400 richest families in America hold more wealth than the bottom 150 million people.

So then the rich use their own wealth (and the taxes collected on it) as a reason why they shouldn't be taxed so much!

"We're so wealthy that we pay most of the income tax" is not a good reason to lower taxes on the wealthy.

That very wealth inequality is the reason they pay so much.

[madokie]

18. That is it in a nutshell Hannah

[onethatcares]

3. an another board in a far off land, someone insisted that

corporations should not pay any taxes at all. 0, zero, nada. because of the jobs they create and the good they do. Honestly, these people can't get any dumber.

[mistertrickster]

5. It's like Harry Truman said,

"How many times do you have to get hit over the head before you see who's hitting you."

[Hannah Bell]

6. 2/3 of them don't.

[ColbertWatcher]

4. Thank you! It's about time someone killed that myth dead! n/t

[Warpy]

7. How to Lie with Statistics

is a really great book for debunking this rubbish.

Also, they hate having the obvious pointed out to them: that 40% of OASDI collected on the first penny a working person earns, no matter how poor that person is or how many kids are at home or anything else, is used in the general fund just like income taxes.

This was Saint Reagan's back door income tax increase on the poorest.

Fairness says we need to take OASDI out of all income, no cap, until the worst of the Reagan/Bush/Bush debt is paid down.

Let the wealthy decide whether or not they really want that flat tax after a few years of OASDI.

[FormerDittoHead]

8. A couple of points.

First off, I thought the SSI/Medicare/etc tax was 15.3% (which is still above cap gains tax), not 40%.

But the real point that should be made is that SSI/Medicare/etc tax isn't (currently) levied against unearned income. In other words, rent, royalties, cap gains, interest, dividends, (you know, the money that rich people make) doesn't pay a PENNY of this tax.

Next, and it's not so much your msg but more to the thread, that the money that goes toward OASDI is put into the GENERAL FUND right along with the "income" tax which those "poor rich" people pay "so much" of. (never does anyone say what percentage of overall income they make to pay that much tax)

There are plenty of HARD WORKING PEOPLE who have invested greatly into their educations, etc in order to make more money. I know doctors and lawyers, for example, who work 50-60 hours. I'm not trying to suggest they work so much harder than "lazy people", rather, these people have talents, sacrificed for their jobs and actually work for their money, unlike those born into it who live off of rent, interest, capital gains and dividends. I honestly think it's unfair to burden professionals and others who happen to EARN more money, the same way that the truly wealthy should pay the bill to pay for the protections of their wealth that the government provides.

Simply, I think we should tax unearned income at a higher rate than earned income.

If you get me started, I'll also say I think there should be a national wealth or property tax, but there I go...

[Warpy]

27. My point was that after Reagan raised OASDI six times

there was a huge overpayment of premiums going into the general fund along with the income taxes paid by those poor rich people. At the present, the amount of overpayment going into the general fund is 40% of the total collected. You confused that with the tax rate.

Personally, I'd love to see a 20% surtax on high incomes until the debt is paid down enough that we can think about getting this country back in order, but that's just me, don't get me started...

[FormerDittoHead]

28. Oh yes - you were right.

And I completely agree about how that overpayment by the lower classes never being part of the public discourse.

Oh, and don't get ME started on the lie that won't die: the national sales tax.

[hfojvt]

9. you didn't really debunk it though

Using my tax stats from the IRS from 2005, those with AGI over $200,000 were the top 10.7% of taxpayers. They paid 71.8% of all income taxes. I think the key is that 10.7% paying 71.8% looks pretty staggering. However, the fact is that they got 48.6% of the income. It's not nearly so staggering or shocking that 71.8% of the income taxes are paid by those with 48.6% of the income.

Those with incomes over $1,000,000 are the top .6% and pay 34.4% of the taxes while they get 18.7% of the income.

Anyway, that's how I prefer to debunk it. By comparing their share of the income to their share of the taxes, rather than by comparing their share of the population to their share of the taxes.

[mistertrickster]

11. Right, there're different ways to peel the same onion. What's really funny is

that under Eisenhower, tax rates on the wealthiest Americans were a staggering 91 percent.

That was the golden age of the middle class.

Coincidence?

I think not . . .

ON EDIT: I wonder what the percentage of income tax collected was on the top 10 percent when the tax rate was 91 percent. It could have actually been lower than now if the wealth were more evenly distributed then.

[unblock]

10. on the contrary, it's an EXCELLENT argument...

... for showing that the the rich are PRECISELY who the government should be taxing more.

if taxing all those poor and middle class people only manages to produce 33 percent of the total income tax revenue, then that's obviously not a very fruitful source of revenue for the government.

on the other hand, taxing a handful of rich people produces 67% of the total income tax revenue, well, that's quite a bit more effective. so if the government is looking to raise more revenue, if should look to where it's most productive: rich people.

[upi402]

12. Thanks so much! I coulda used this soooo many times

when I got flamed for stating this same thing, but then I could never seem to google up the evidence fast enough. So if it's OK - I've copied this and saved it.

[mistertrickster]

13. I'd be honored if you choose to copy it. Feel free to make changes. nt

[mistertrickster]

14. More thought experiments--look at what happens when the rich make more:

Scenario C—

You make one million dollars and the other ten people make 10,000.
You are taxed at a 10 percent rate and so is everybody else.

100K + 10K = 110K

You pay 91 percent of income taxes collected.

Scenario D—

You make two million dollars and everybody else makes the same 10K.

The tax rate stays the same.

Now what happens to your percent of income taxes collected?

200K + 10K = 210K

200/210 = 95 percent

You pay more because you make more. DUH. That's why they call it INCOME tax.

*****

How many rich people will forgo making that second million so that their share of the income taxes collected doesn't rise?

Uhhh . . . how about NONE?

[hfojvt]

15. that last line depends on the rate, IMO

and I would use the word "taking" rather than "making". I think many rich people merely confiscate wealth more than they create it or earn it. Thus a higher tax rate is kinda nice because the public confiscates it right back thus creating a disincentive for the original thievery.

Republicans love to tout that statistic too - rich people are paying more after the Bush tax cuts!! That is true because rich people are taking/making more after the Bush tax cuts. My previous stats from 2005 were

"However, the fact is that they got 48.6% of the income. It's not nearly so staggering or shocking that 71.8% of the income taxes are paid by those with 48.6% of the income.

Those with incomes over $1,000,000 are the top .6% and pay 34.4% of the taxes while they get 18.7% of the income."

Although I notice I made an error, those with incomes over $500,000 are the top .6% while those with incomes over $100,000 are the top 10.7%. I sometimes forget that the number in my spreadsheet is the top of the range, not the bottom of the range.

Comparing this to 1996, which I also have a spreadsheet for. Those with incomes over $200,000 were the top 1.3% they got 17.8% of the income and paid 34.6% of the income taxes. Thus, in 1996 the top 1.3% got a lower share of the total income than the top .6% got in 2005. Did the rich earn their extra income, or did they just take it? Were they working harder and/or smarter in 2005 than they did in 1996 or do lower tax rates and higher unemployment rates encourage and empower them to take more of the pie?

In 1996, those with incomes over $75,000 were the top 9.9%. They got 42.1% of the income and paid 62.4% of the taxes. So 9.9% paying 62.4% going to 10.7% paying 71.8% looks like the rich are paying a higher perctage after the Bush tax cuts. But 9.9% getting 42.1% and 10.7% getting 48.6% (which would be 9.9% getting 44.97% with a straight-line estimate) shows that the rich are getting a higher percentage of income too.

Also, in 2005 the average tax rate was 18.4% compared to 21.4% in 1996. If it had stayed at 21.4% the government would have collected another $140 billion in taxes. Which group got over 60% of that savings - the top 10% or the bottom 90%?

[mistertrickster]

22. Good analysis here. The right loves to talk about the "top ten percent," but they

never define that by income . . . or as a percentage of income controlled.

in 1996 the top 1.3% got a lower share of the total income than the top .6% got in 2005.

Whoa! That is scary, isn't it.

[B Calm]

16. Damn right it's bull-shit! I tell right-wingers if the rich pay 87 %

of ALL the Income Taxes, then why not just let them pay the remaining 13% too, hell they can afford it! Truth is, they don't pay near the taxes they say they do!

[KG]

17. I'll never understand why working people worry that the rich might pay 'too much' in taxes.

[Cresent City Kid]

25. It's from relentless "education" from the right since 1980

We've been told that the rich were taxed so heavily, that they couldn't invest in the economy. To me that always sounded more like a threat than a logical consequence, and a hypothetical threat at that. They made it sound like the investor class would automatically reduce or increase their investments by the exact amount that they were taxed.

Here's the rub. People invest to make more money. More money is more, even after taxes. If you're in the top tax bracket, doubling your income doubles your taxes, but also doubles your after-tax take which is more than you lose. When Clinton raised the top rate, I don't remember investment grinding to a halt, or the economy crashing.

The top bracket is sort of a flat-tax scenario. A guy making $480,000 pays the same rate as Bill Gates. If I was at the bottom of the upper bracket, I would favor a new higher bracket for the top 1% over a reduction of the top rate overall that hurts the country.

[JackRiddler]

26. Ask Joe Wurzelbacher and everyone else who has accepted...

the dominant ideology, in which people more easily identify with the rich than with their own interest.

I think the key here is in consumerist ideology. Even given the substantial consumption of material goods in our society, it is far outstripped by vicarious consumption via the media, which spend most of their entertainment hours depicting others (usually signified as both virtuous as well as rich or powerful) in the act of consuming more than most of us could imagine. We may spend more time watching fictional characters or semi-fictionalized celebrities in the act of "eating" than we do eating ourselves. Having Lamborghinis and mansions and fancy cocktail parties with everyone in Dior is rarely experienced in real life by 90 percent of us, but to many seems more normal than being a garbageman. Can you think of a TV series about a garbageman? Even the "working class" TV series show families with nice big houses in good repair, lots of leisure time, pets, big backyards, rare worries about bills, season tickets for sports teams, kids in college, no health crises, etc. Another aspect of this is that a large share of us certainly spend more time watching pro athletes get exercise than we do exercising ourselves. This increasingly becomes the mental replacement for real life, which is lived as though it's a temporary or virtual state from which one is sure to one day find release. It will be like you stepped into the television yourself. Virtual life becomes real, real life is virtualized. And Joe the Unlicensed Plumber of the $40K annual income in the end worries more about what tax he would pay if he won the lottery (in a broader sense) and made $250,000, contrary to any realistic expectation, because winning the lottery has been made to seem common and likely. All you have to do is want it and work for it, and if you don't get it, you must not have wanted it enough or worked for it hard enough. People would rather dream of being rich than be fully aware of their own situation.

[DailyGrind51]

19. Because they have 90% of the wealth?

[MiniMe]

20. Not of the wealth, of the income.

[MiniMe]

21. My answer is what is the percentage of the income do they make?

[DailyGrind51]

24. Good point, contractural separation packages are not based on performance,

since they are negotiated when the executive is hired. There really is no incentive to perform because some of these CEOs can retire on what they receive upon termination.

[Cresent City Kid]

23. Nicely done

I heard a guy on Charlie Rose complain that 10% of the population pays 40% of the taxes. With that 10% making 90% of the money, it sounds like they're getting off cheap to me.