Poverty in America: Taxes

[LC EFA]

DUmmie tries to explain that the poor pay too much tax, and are supporting the rich people.

Hannah Bell  Donating Member  (1000+ posts)  Fri Jan-09-09 09:49 PM
Original message
Poverty in America: Taxes   Updated at 1:53 AM
   
Edited on Fri Jan-09-09 10:05 PM by Hannah Bell
“The poor don’t pay taxes.”

It’s the boilerplate we’ve been force-fed since the 80's - but is it true?

First, who are “the poor”?

http://www.taxpolicycenter.org/numbers/displayatab.cfm?...

According to the Tax Policy Center, they’re about 38 million “tax units” making under $18,725 a year and their dependents. This quintile of the population receives about 3.7% of all cash income.

“All cash income” is income from wages, retirement and pensions, interest, and capital gains - as well as income from “welfare,” workers’ compensation, veterans’ benefits, Social Security, energy assistance, and disability.

http://www.taxpolicycenter.org/numbers/displayatab.cfm?...

Let’s take federal taxes first.

Despite receiving an effective transfer of 3.2% of income tax, the lowest quintile still winds up paying a net .2% of all federal taxes.

One significant exclusion from this data, according to the note, is federal excise taxes. Excise taxes assessed on things like telephone use and gasoline tend to cost low-income people a higher percentage of their income than others.

Similary for many federally-assessed “fees” - taxes by another name. For example, federal child support enforcement services are most often used by low-income parents - mandatorily if parents receive federal aid. The government, however, takes a portion of what it collects as a fee - a perversely punishing way of “reducing the federal deficit”.

http://www.childsupportweb.com/childsupportblog/files/R... .

A significant proportion of the federal taxes paid by the poor are payroll taxes, including Social Security taxes. Though these taxes weren’t originally designed to fund other federal budget items, the reality is that they increasingly do.

In 2007, 9% of non-Social Security federal expenditures were funded with excess Social Security collections and interest on the Social Security Trust Fund - about 25 cents of every dollar collected in SS taxes. Workers in the lowest income quintile paid 3.9% ($7.2 billion) of that 9%.

Worse still, low-income workers, because of lower life expectancy, are less likely as individuals to live to collect Social Security benefits.

http://www.cbo.gov/budget/data/historical.pdf

Most of the Trust Fund has accumulated since the Reagan years, when Social Security tax rates were deliberately raised to generate surpluses that could be used to offset tax cuts for corporations and high earners; a transfer from workers making less than $102,000 a year to the wealthy.

While there is still an overall progressivity in federal taxation, this is not so at the state and local level. Nationally, those in the lowest quintile pay, on average, over 11% of their income in state and local taxes, while those in the top 1% pay about 5.2%, once federal deductions are figured in.

http://www.itepnet.org/wp2000/us%20pr.pdf

How can this be true?

1. First, heavy reliance on sales and excise taxes. For example, my city has a sales and use tax of 7.6%. It applies to nearly every good or service except groceries. And in two states, as June 2008, even food was subject to full sales tax.

http://www.arisecitizens.org/Tax%20Reform/Off%20Balance...

2. Second, unlike personal sales and excise taxes, property and income taxes can be deducted from federal taxes:

“On average, a fifth of all state personal income and individually-paid property taxes are “exported” to the federal government (and to taxpayers nationwide) as a result of these deductions. For the best-off state and local taxpayers, close to 40 percent of their state and local income and property tax bills are effectively paid by the federal government.”

http://www.itepnet.org/wp2000/us%20pr.pdf

3. Third, non-progressive income taxes:

“Another key contributor to the imbalance of Alabama’s tax system is its effectively flat income tax.... the state’s top rate of 5 percent kicks in on all taxable income of $6,000 or more for married couples. As a result, almost 80 percent of Alabama families pay at the state’s top rate...For the top 1 percent of earners, the state’s income taxes are the third lowest among the 42 states that have a broad-based income tax...for Alabama’s bottom fifth, the state’s income taxes are the nation’s third highest.”

http://www.arisecitizens.org/Tax%20Reform/Off%20Balance...

4. Fourth, low income tax thresholds:

“In 16 states, the income tax threshold for a single-parent family of three (was) less than $14,675, less than the Census Bureau’s official poverty line for a family of three in 2003. In 18 states, the threshold for a two-parent family of four (was) below the $18,811 poverty line for such a family. Two states...impos(ed) income tax on very poor families, those with incomes less than one-half of the poverty line. Those states and six others...tax families of three with full-time minimum wage earnings.”

http://www.cbpp.org/4-8-04sfp.htm

5. Finally, “sin” taxes - on lotteries, cigarettes, alcohol - are paid disproportionately by poorer people. Washington State collected $435 million in tobacco taxes in 2007, enough to fund about 1.5% of its proposed 2007-2009 budget of 29-plus billion. With smokers - who tend to be poorer than average - less than 25% of the state’s population, that’s about $300 each. And increasingly we find “sin” funding schools and health care, essentials that used to be funded from ordinary revenues.

http://liq.wa.gov/releases/pr080724.asp

http://www.ofm.wa.gov/budget08/highlights/assets/pdf/hi...

For more than two decades, more of the burden of state and local taxes has been moving down the income distribution.

http://www.businessbookmall.com/Economics_33_Distributi...

The percentage of taxes paid by corporations has declined, as have rates for the top fraction of individual payers.

http://www.cbpp.org/3-29-07tax.htm

In 1969, corporate income taxes were 19.6% of federal revenues, 3.9% of GDP. From 1981 to 2005, they ran 1.1% to 2.1% of GDP and 8 - 14% of revenues.

http://www.cbo.gov/budget/data/historical.pdf

Likewise, in the prosperous post-WWII years, top individual tax rates were 70-91%, and capital gains rates were 25-32%.

In recent decades, individual rates ran between 28-50%, and capital gains between 15-28%.

http://www.ctj.org/pdf/regcg.pdf

The poor DO pay taxes; but how much can they pay when they receive only 3.7% of national income? The poorest 20% of families today receives a smaller percentage of national income than in 1950. The rest has been transferred to the top, partly through changes in tax policy favoring the rich over the poor and middle, big capital over small capital and labor.

Contra the bright forecasts of the Reagan era, the payoff of the “cut taxes on wealth” policy has been flat wages, increased disparity between the rich and everyone else, more jobs shipped overseas, the destruction of infrastructure and social safety nets, increasing homelessness and social pathology, and a succession of bubble economies that now threaten to end in total meltdown.

Note:

For those inclined to think sin taxes don’t amount to much in comparison to the loudly and often-advertised social costs of “sin,” think again. The poor may sin more, but sinners don’t necessarily cost more:

“Lippiatt estimated that a 1 percent decline in cigarette sales increases costs for medical care by $405 million among persons 25 to 79 years old.2

Manning et al. argued that although smokers incur higher medical costs, these are balanced by tobacco taxes and by smokers' shorter life spans (and hence their lower use of pensions and nursing homes).3

Leu and Schaub showed that even when only health care expenditures are considered, the longer life expectancy of nonsmokers more than offsets their lower annual expenditures.4“

http://content.nejm.org/cgi/content/full/337/15/1052

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4800489

I'd hate to have to go through such mental gymnastics as the above poster does to have to justify my positions.

maryf  Donating Member  (777 posts) Fri Jan-09-09 10:00 PM
Response to Original message
1. Thank you for this Hannah Bell!
   
I was just discussing today that the only fair tax is a progressive income tax, I think, and one where the wealthy pay their fair proportion. Reading at another thread the Leona Helmsley quote that "only the poor pay taxes"; we have to get the people demanding fairer taxes!! Great research!!

Who determines what is fair ?

[NHSparky]

Hmmm...okay.  The "rich", of which Zerobama has declared I am one--who knew?--DO in fact pay a disproportionate percentage of the federal income tax in this country, DUmmies--a fact which "progressive" states like California, Massachusetts, Maine, and New York are all learning as their richest leave these respective states in droves for greener (read: less oppressive taxing) states.

That "richest 10 percent" the left always refers to gets 45 percent of the income, yet pays 70 percent of the taxes, and that's not "fair" enough for you dipshits?

Remind me not to punch my monitor when I do my taxes next week, or whenever my company gets around to shipping me my W-2.  I've already got a rough estimate based on my paystubs, etc., and I dare say I'm paying more and getting less back in federal taxes alone than any of you bong-water swilling Cheetos-engorged booger-eating morons ever SAW in salary at Burger King.

[Carl]

I am glad that I don`t have a soul that is a festering cauldron of envy and greed as DUmmies live out their days with.

Guess what DUmbasses?
Life isn`t fair and it never will be in some way to each and every one of us.
The faster one accepts that and makes the most of what it is for them the happier they will be.

You have to want happiness though and that is the difference between them and us.

[DumbAss Tanker]

That lowest quintile will, as a group, collect far more from Social Security than they ever put into it, they are the greatest beneficiaries of the big Ponzi scheme.  I believe the writer of that bilge engaged in some serious goal-post adjustment when the FICA tax part of it was being drafted.

[jukin]

The poor use more services, get more money out of the system, and pay less taxes. 

[JohnnyReb]

"The faster I go, the behinder I get", just about describers a progressive income tax in my book.

[USA4ME]

Hannah Bell

“The poor don’t pay taxes.”

It’s the boilerplate we’ve been force-fed since the 80's - but is it true?

Yes, it is true.

Here's the problem with liberals; a typical statment like "The poor don't pay taxes" is something that normal people, upon hearing it, know exactly what you're talking about.  But liberals don't, they don't have the mental capacity to figure out what you mean beyond just the words you use.  And so for them, you have to break it down and explain every little detail.  It's like having a child and having to reintroduce to them how Lincoln Logs stack on top of each other everytime you pour the contents onto the floor to play.

Exise taxes, federally-assessed “fees," various state sales and income taxes, and sin taxes are not part of the equation when someone says “The poor don’t pay taxes.”

Using the DUmmies own words of the poor being "tax units making under $18,725 a year and their dependents,"  then their deductions and child tax credits are automatically going to take them down to below what they already paid in via their W-2.  They're going to get a refund on a good portion of what they were required to pay in anyway.  Even more likely they'll get back more than what they paid in because of their number of dependants.  If you got refunded back what you paid in, or got a refund that exceeded what you paid in during the year, then no, you didn't pay any taxes.

This is not to deride anyone who has a majority, if not all, or their income taxes taken out via their paycheck.  One could earn $50K+ and just turn in your W-2 and deductions at the end of the year, but unless you had huge deductions then you paid taxes.  There's no doubt you paid taxes.  I assure you that you didn't get a refund for everything you paid in, that is if you got a refund at all.

Actually if the DUmmies wanted to help the poor, they would be in favor of eliminating excise taxes, sales tax, and things like sin taxes because even the DUmmie correctly pointed out those are taxes on the poor.  But you never, ever hear them say they want those taxes gone.  If it was up to me, the poor wouldn't pay any taxes, I've got no problem with that.  But they don't need to be receiving gov't assistance to help make ends meet.  That needs to be done locally through charitable organizations that individuals can choose to contribute and that can monitor those to whom payments are given to ensure they aren't mismanaging what they are receiving.  That's real compassion, not this "Where's my gov't check so I can spend it however I like?" baloney.  We all know that's a dead-end road to remaining in poverty, unless of course you want to enslave the recipient to gov't dependance, which is what the DUmmies want.

.

[djones520]

After my tax return, and what I get from WIC, I'm pretty sure that I don't pay taxes.

So what about the rest of those who make less then I do, and take more then I do?  I'm pretty damn sure they don't pay any taxes as well.

[DumbAss Tanker]

Actually if the DUmmies wanted to help the poor, they would be in favor of eliminating excise taxes, sales tax, and things like sin taxes because even the DUmmie correctly pointed out those are taxes on the poor. 

I'm sure they'd see it that way, I personally regard them as an extremely egalitarian tax, the true Flat Tax, actually.  It's pay as you go for what you consume, no more and no less, which seems entirely fair to me. 

[Chris_]

Uh, I'm poor?!
I made a tad less than $15k last year "paid" a total of $235 in federal taxes and am, because I qualify for it, am getting a $4000 "refund". Thanks, Sparky, I needed that. I never have been good at math, but, by my math, I paid -$4000 in taxes. Oh, my car costs $80 to register and my state "refund" is $115... These idiots should quit whining. People like Buffet can, make voluntary donations to the government, but, would rather bitch about how they are under taxed can STFU. Even the dumbest should understand that 5% of a million is much, much more than 2% of 40K...

[NHSparky]

After my tax return, and what I get from WIC, I'm pretty sure that I don't pay taxes.

So what about the rest of those who make less then I do, and take more then I do?  I'm pretty damn sure they don't pay any taxes as well.

I'm pretty sure that your take-home is far more generous than an equivalent civilian pay.

Consider what in your pay is subject to federal, SS, and state taxes.  Only your base pay is subject to SS, only pay is subject to state/federal taxes, and your allowances aren't subject to any taxes at all.  Case in point?  I went over some of my old LES statements (yeah, I'm dating myself) a while back and compared them to some of my pay statements right after I got out.  My first job made roughly the same as my "taxable" income in the Navy, yet I took home only 60 percent of what I was taking home on the 1st and 15th back in the canoe club.

It took moving to a job making almost double in taxable income to bring home the same amount.  Granted, the military doesn't have unemployment taxes, worker's comp, medical/dental deductions, but it is something you have to consider in the civilian community, not to mention all those allowances you're getting now aren't free anymore.  Bottom line, when you get out/retire and get a civilian job, be damned sure that you're not just looking at a gross salary--how much will that salary translate into take-home pay?

Don't get me wrong, dj--you earn every penny of your salary and then some, as does anyone wearing a uniform.  Just keep in mind that from a tax standpoint, you're getting a pretty good deal, actually.

[rich_t]

If brains were dynamite most DUers could even blow their nose.