Obama’s pitch to make the ultrarich pay as high a tax rate as their secretaries sent David Brooks into spasms this morning. But it’s worth calming down a bit and thinking about the numbers.
Here’s Brooks:
He claimed we can afford future Medicare costs if we raise taxes on the rich. He repeated the old half-truth about millionaires not paying as much in taxes as their secretaries. (In reality, the top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S. People in the richest 1 percent pay 31 percent of their income to the federal government while the average worker pays less than 14 percent, according to the Congressional Budget Office.)
Notice the sleight of hand there? His first number is “all income taxes.” His second number is all federal taxes. Here’s how that sentence would read if Brooks didn’t try to pull a fast one:
In reality, the top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S. People in the richest 1 percent pay 19 percent income tax rate while the average worker pays 9.3 percent, according to the Congressional Budget Office.
As Timothy Noah notes, Brooks ignores the fact that the top 10 percent take home half of all income in the country. I’d add that the top 10 percent controls 73 percent of the wealth and the top 1 percent accounts for nearly half that.
And the Buffett Rule wouldn’t apply to a measly millionaire whose effective federal tax rate is already 31 percent on $1,000,001 in salary and bonus a year. It would hit folks like Buffett—the super-rich who get most of their income from capital gains (or avoid it with tax shelters), which are taxed at less than half the rate labor is.
Buffett’s effective federal tax rate last year was just 17.4 percent, and he’s no outlier amongst his class. In 2008, the last data available, the average for the top 400 tax returns was 18.1 percent. That’s all federal taxes, including income and payroll taxes. One-third of them paid less than fifteen percent of their income. Not one of them paid more than 35 percent.
Plus, it’s always worth remembering that while the federal tax system overall is mostly progressive, the state and local system counteracts that, as this chart of 2010 overall tax-rate projections from Citizens for Tax Justice shows (h/t Jesse Drucker)
A taxpayer bringing home $100,000 a year pays the same overall effective tax rate as one bringing home $1.25 million a year, and they both pay just 1.5 percentage points more than someone making $66,000.
Just a few things to keep in mind when reading the likes of Brooks.
> Notice the sleight of hand there?
Haha, I have to admit - I didn't. Thanks for pointing it out.
> Just a few things to keep in mind when reading the likes of Brooks
I think people like him are best avoided and left unread.
Also I rarely use exclamation points but something is missing on the end of your final sentence
#1 Posted by F. Murray Rumpelstiltskin, CJR on Tue 20 Sep 2011 at 03:42 PM
a wee period, not an exclamation point. thanks, Rump
#2 Posted by Ryan Chittum, CJR on Tue 20 Sep 2011 at 04:19 PM
Brooks has just reached a point that most of his commie/liberal "professional journalist" brethren have not yet reached - Realityville.
Remember, Brooks is the same guy who took a thrill at Obama's pants creases.. The same guy who sat on Obama's admission that his "shovel-ready" claim was BS for a year. But he's finally seen the light (at least a little of it).
You guys will get to the same place soon. Maybe it will be after it is proven that Obama is investing some of his millions in projects he's shoving down the taxpayer's throats. Maybe it will be after his next vacation when you realize that there still is no "jobs bill" to vote on. Maybe it will be when he starts his next war, or when the body count in Afghanistan doubles.
#3 Posted by padikiller, CJR on Tue 20 Sep 2011 at 07:40 PM
This is your big "Gotcha"? Let's do the math:
31%/14% = 2.21x more taxes
19%/9.3% = 2.04x more taxes
So Brooks' point still stands. Yes it's different but not that different. The rich pay more taxes, and by a substantial margin.
Meanwhile MoveOn is advertising that Buffet pays less tax than his secretary does, which is blatantly false. How about some "context" there?
#4 Posted by JLD, CJR on Tue 20 Sep 2011 at 10:34 PM
David Brooks, 2006 - "Run, Barack, Run"
David Brooks, 2011 - "RUN!!!!! BARACK! RUN!!!!!!"
#5 Posted by padikiller, CJR on Tue 20 Sep 2011 at 10:44 PM
"Maybe it will be when he starts his next war, or when the body count in Afghanistan doubles."
--- almost sounds like you're hoping that'll happen.
#6 Posted by Hardrada, CJR on Tue 20 Sep 2011 at 10:46 PM
Hardrada blithered: --- almost sounds like you're hoping that'll happen.
padikiller responds: Right....
Just like I want Obama to dole out half billion dollars taxpayer-funded "loans" to his corporate cronies and just like I love the way he crams his commie crapola down the throats of the American people.. Because I'm such an Obama fan...
Where in the Hell do you guys get this silly stupidity? I mean, what pharmacological event has to occur to permit your neurons to engender this kind of dumbass nonsense?
#7 Posted by padikiller, CJR on Tue 20 Sep 2011 at 10:59 PM
Grossly misleading. Warren Buffett derives much of his income from investment and capital gains, which are more lightly taxed than income. If you want to tax investment more heavily, be my guest, but the reason investment is taxed more lightly than consumption is that governements generally want to encourage investment. (I have to laugh at liberals who are indignant that lower-income people pay more taxes, and then a day or two later propose heavier taxation on consumption, such as higher gasoline taxes.) Even the normally Obama-friendly AP was moved to investigate (and, accordingly, dissect and leave for dead) the latest round of leftist memes and demogoguery on this subject, but CJR is still in there flailing away at criticisms of The One when he is riling up his Democratic base with nonsense such as his 'Buffett' claims.
This matters, because faulty math leads to bad policies that - in the inevitable 'Animal Farm' manner - end up either having little effect that is sought by our friends the ever-credulous bourgeois liberals, or make the conditions they decry even worse.
As long as leftists support Social Security - the most regressive tax there is - and imply that the answer to any problems down the road for the system are even more regressive FICA taxes, and as long as leftists support federal 'matching' programs which end up raising state and local taxes (Medicare being the most egregious example), they (whether journalists or not) have very little standing to go on about income inequality.
Chittum doesn't really refute anything Brooks wrote, he just spins it a different way. Income inequality is prima facie a 'sin' to committed leftists, though American political history suggests the issue has little traction with the public at large for a lot of cultural reasons. Sorry, but even David Brooks has more credibility. CJR and others on the Left end up persuading no one who doesn't already agree with the worldview.
#8 Posted by Mark Richard, CJR on Wed 21 Sep 2011 at 12:47 PM
Nobody, really, is going to dig wonkishly into these numbers. The better news is that Team O is coming up with catchy messages like "Buffett pays less in taxes than his secretary." That sticks. Sort of like "Social Security is a Ponzi scheme." It's the messaging, stupid.
#9 Posted by Elizabeth, CJR on Wed 21 Sep 2011 at 03:13 PM
"31%/14% = 2.21x more taxes 19%/9.3% = 2.04x more taxes
So Brooks' point still stands. Yes it's different but not that different. The rich pay more taxes, and by a substantial margin."
Except it doesn't. Brooks misstated the percentages by a factor of two (and suddenly you don't care about the "fabricated" nature of his math) and the rich pay the exact same amount on their income as the poor do.
The poor makes $30,000? He pays 9.3%.
The rich makes $30,000 (in a new york minute), he pays 9.3% on that income.
The rich get the same tax benefits as the poor on similar levels of income. On those amounts exceeding, they should pay more. Why? They have the f'in money.
If the pie of wealth was more evenly cut, then you could make the argument that the contributions to the pie making should be equal. It's not. The bottom 90% are getting the crumbs and the top extracts near the whole of GDP. Who should pay for the maintenance of the institutions which allows the economy to function? Those who profit from it.
If wealth was shared, that would be everyone.
Since it isn't, it should be the rich.
#10 Posted by Thimbles, CJR on Thu 22 Sep 2011 at 01:07 PM
The commie way is always the same..
Take somebody else's stuff.
Penalize success. Penalize innovation. Penalize hard work.
Reward failure. Reward complacency. Reward sloth.
Great plan, this is. Wonder why it has failed in every place it's existed?
#11 Posted by padikiller, CJR on Thu 22 Sep 2011 at 03:34 PM
You make more you pay more. Good. I'll take it. Now how do I get there? Because no one wants to be impoverished and pay nothing.
#12 Posted by Mark A. York, CJR on Thu 22 Sep 2011 at 10:11 PM
Half of America pays nothing..
Nearly 50% of Americans pay no income tax at all.
Commie/liberalism has created a culture of dependency and expectancy that is ruining American society.
Nobody wants to be impoverished? Take a look in your local trailer park and you will see that it is filled with people who choose to live in squalor instead of working. Try again.
#13 Posted by padikiller, CJR on Thu 22 Sep 2011 at 10:24 PM
Padi: Do you deliberately ignore the taxes other than income taxes that the working poor and retired pay?
Average income of $12,500 pays 16% of their income in taxes. Is that too low a percentage for you?
#14 Posted by garhighway, CJR on Fri 23 Sep 2011 at 03:28 PM
The working "poor" don't pay net taxes.
When you factor in the earned income credit, the personal exemptions, the standard deduction and the "making work pay" credit, they take more money out of the treasury than they pay in.
It's just that Reality thing.
Sorry dude.
#15 Posted by padikiller, CJR on Fri 23 Sep 2011 at 05:16 PM
Padikiller wouldn't know reality if he got run over by it.
Reality is in part sociological. The wingnuts in the middle class buy the fear-mongering of the rich because they're:
1. Afraid of "slipping" themselves, which is a real fear;
2. Like Reagan believing he'd find a pony, actually believing they'll make it upwards, when ... *old Europe* has more mobility than the U.S.
Try to refudiate that one, Padi?
#16 Posted by SocraticGadfly, CJR on Fri 23 Sep 2011 at 06:16 PM
padikiller tolls the Reality Bell:
OK... A working "poor" American makes $12,500 working at McDonald's
Adjusted gross income = $12,500
Withholding = $0
Personal exemption = $9350
Taxable income = $3150
Income Tax = $318
"Making Work Pay" credit = $400
Earned Income Credit = $72
Total tax credits = $400 + $72 = $472
Total tax liability = NONE
Free money from the gubmint = Total credits - total income tax = $472 - $266 = $206
So, the FACT of the matter is that a person making $12,500 per year pays no net income tax at all and instead gets tax welfare
Now, let's say we dance the Commie/Liberal Two-Step and call the payroll taxes paid the "poor" to be "taxes" while we ignore Social Security, Medicare, Medicaid, Disability, SSI, etc.
A person who makes $12,500 per year will pay 4.2 percent of his income in payroll taxes, or $525.
So the total federal taxes paid by a person earning $12,500 = Payroll tax - tax credit = $525 - $206 = $319
So... If you figure all the federal taxes together and if you count the payroll tax (and ignore social security and medicare payments) the total percentage of income paid to the federal government = $319 divided by $12,500 time 100 = 2.5%
CONCLUSION: The claim that someone who makes $12,500 per year pays 16% of his or her income in taxes is ludicrous. Such a person pays less than 3% of his or her income in federal taxes.
Let's ride the Reality Train all the way into the station, shall we?
http://www.irs.gov/pub/irs-pdf/f1040ez.pdf
http://www.irs.gov/pub/irs-pdf/i1040ez.pdf
#17 Posted by padikiller, CJR on Fri 23 Sep 2011 at 07:45 PM
Yeah, the working poor get more from the fed than they put in. Why is that? Because the poor, and by poor I mean everyone below the top 20% have watched the fees for their state and municipal services go up while their quality went down, watched their payroll taxes go up for benefits that are cut while the age limit for coverage increases, watch as the top 10 percent walk away with 3 times the revenue they had in the seventies while they - as Ellen Shultz details get their pensions screwed with after their wages have stagnated over the last 30 to 40 years, these guys need a little extra or they can't survive. Americans are generous enough to give them bare, demeaning survival and it's still too much for conservative plutocrats.
The rich have transferred billions of income from the lower classes to themselves the top 1% accumulating 696 billion for themselves at the cost of billions for the bottom 90% and it's still too little for conservative plutocrats.
The rich are tired of paying the bare minimum for the poor. Poor Kochs, who had only increased their fortunes by 800% in the last ten years because they became really good energy speculators, they should get to keep it all. What do they owe their country? Nothing. What breaks should the poor get in order to raise their families and help with their childrens' health? Nothing. When you are retired, what should you expect in care and services paid for by your years of contributions? Nothing. Plutocrats are damned awful company.
#18 Posted by Thimbles, CJR on Sat 24 Sep 2011 at 03:11 AM
Thimbles wrote: these guys need a little extra or they can't survive
padikiller wonders: So you would think they would work a little extra, huh?
But why work when the gubmint sends you a check every month, right?
The commie/liberals think that the "rich" keep cash under their mattresses. In fact the wealth of the "rich" drives the economy and the reason that the "poor" are staying that way is that the commie/liberal "Great Society" policies have stagnated the economy and subsidize poverty.
Bill Gates doesn't keep $50 billion in his sock drawer. His wealth is in Microsoft stock. In good times, that capital is used to hire people, to innovate, to donate to charity, etc. In bad times, it is held in reserve.
The way to help lower income people is to PUT THEM TO WORK.
They way to put them to work is easy:
1. Stop paying them not to work, and
2. Make it attractive to people like Bill Gates to risk capital in business ventures by reducing taxes on business ventures and by removing or reducing regulation that interferes with business.
The more people who work, the more wages will increase and the more wealth will flow to lower income Americans.
It ain't complicated. ECON 101.
The way things are shaping up, we will see a recovery in less than a year and a half. Prediction: If Obama loses the election next November (at it appears he will) then by inauguration unemployment will drop by more than half a percent and the stock market will increase by double digits.
American investors and business owners are anxious to make money. They want to hire people, but why on Earth would they do so with the Dems screwing up as badly as they have? The Dems haven't had a budget since Obama was inaugurated for Pete's sake! They passed Obamacare, which will cost businesses HUGE amounts of money without even reading the bill. The new "jobs bill" lets applicants sue employers who don't hire them!
With this kind if stupidity in government, what business would choose to take a risk?
The commie/liberal schtick is always the same - the Reverse Robin Hood - the Sheriff of Nottingham taking from the "rich" to give to the "poor". We've tried it. It doesn't work. It has never worked anywhere in the world. It will never work.
If Obama loses, then the economy will take care of itself.
#19 Posted by padikiller, CJR on Sat 24 Sep 2011 at 09:38 AM
a) David Brooks is so far to left of any true conservative he is basically just another Leftist, just like you - so you are arguing with yourself.
b) Stick to Journalism - get someone else to do your math/econ analysis...
c) Tax net worth, not income, starting with Obama's!
#20 Posted by Ed Franks, CJR on Sat 24 Sep 2011 at 06:00 PM
Padi: you seem to be deliberately missing the point: we are talking about total tax burden (which includes sales tax, for example) while you confine the analysis to a subset of the tax burden: Federal Income Tax.
#21 Posted by garhighway, CJR on Tue 27 Sep 2011 at 12:38 PM
If we're talking about the "whole" "burden" then we should also talk about government welfare (including corporate welfare) benefits - in this reasoned analysis, the "poor" of America receive food stamps, SSI, S/CHIP, Medicaid, earned income credit, etc.
A fair calculus includes these payments. And when they are so included, the truth of the matter is discovered - namely that HALF of Americans take more from the treasury than they put in. We have created a government-dependent underclass.
State sales and income taxes vary from state to state, but are typically progressive - income taxes progress with higher marginal rates in higher income earners and sales taxes typically exempt food and medicine. But, yes, state taxes have increased as the burden of doling out commie/liberal nonsense has shifted to the states.
The solution to the nation's economic malaise does not involve taking money from the "rich" to dole out to the "poor".. It involves creating an economy wherein the "rich" are encourage to hire the "poor" to do work that free people want to have done, thereby increasing the size of the economy and benefiting all of society.
Work, and only work, elevates the human condition. Churning resources (a la commie/liberal, Robin Hood-style "wealth distribution") adds no work - it creates no added value.
It's just a silly idea.
#22 Posted by padikiller, CJR on Tue 27 Sep 2011 at 04:10 PM
Padi left FICA taxes out of his equation, which could tilt the argument a little more in favor of the poor-as-paying-more narrative. But then FICA is (1) the most regressive tax there is, and (2) fanatically supported by the kinds of people hostile to Padi's arguments. Maybe that's why, from David Cay Johnson on down, have, uh, 'forgotten' to mention Social Security taxes as a factor pushing up the burden on lower-income folks.
#23 Posted by Mark Richard, CJR on Wed 28 Sep 2011 at 12:53 PM