Of Potato and Couch

Today, Grandmam?, while swilling her French roast, summoned us to the tube to watch a video of bread lines in the 1930's compared to a line of people waiting to buy Ipods in 2008.

Grandmam?, who believes that the motto of the Democrat Party is , "Live Free or Whine," wanted us to see the comparison because at the dinner table we tell her about how people on the forum complain about the economy. For example, on another thread, a post said that Barak Obama wants to tax rich people, and not the rest of us. When we tried to point out that taxing rich people doesn?t mean that rich people pay taxes, we got the following response.

?Millons of americans don't have or lost jobs this year alone...and who do we have in the white house tonight???? You guessed it...a republican.....rich americans don't all invest in what's good or right for anyone except themselves....hence...'the rich get richier' I wonder just who is to blame for what's happening to jobs, homes, banks, here in this country? Is it democrats,is it republicans, liberals, conservatives, who? I sure as hell don't know...but if I had a clue....you better believe I would try and fix it....putting one group of people or one political party down for their mistakes...calling them names cause you don't like or agree with them is pointless....all republicans past and present didn't do everything right and they didn't do everything wrong....same as democrats..they didn't do everything right...and they didn't do everything wrong....there is NO way that either party has done the best thing when in office....so what good does it do to say things like.."democrats screw everything up" because if you had any life experience....you would know that it is impossible for a single party to mess up this country all by themselves....it's like saying.." girls with long striaght black hair who were adopted, are nuts and insane" Would say that is a true statement?? Of course not...?

So here we have an example of someone who thinks the economy is in bad shape, and in more or less typical liberal fashion, that someone wants everybody to share the blame. In response to this we agreed that the Republicans have done some dumb things, but in the last fifty years they have been mostly correct about economic policy. Or at least the Republicans have been more correct than the Democrats, whose thirty years of encouraging of subprime loans might the reason for much of the current financial crisis.

"taxing rich people doesn?t mean that rich people pay taxes"

What does that mean?

Don't rich people (top 2%) pay something like 70% of all the taxes? I don't remember the specific number, but it was really high.

On the other hand, they pay a lower percentage of their income because they can afford expensive accountants that average people can't, and there are loopholes like no taxes on capital gains over 97K. Someone like Warren Buffet pays a super tiny fraction of their income to taxes because of that.

The top 20% of earners pay 79% of the taxes.

The top 5% pay 50% of the taxes.

The top 1% pay 29% of the taxes.

Yes, that's right. Out of a group of 100 people, just five of them are responsible for the same amount of tax as the other 95.

https://www.allegromedia.com/sugi/taxes/

Thanks for clearing that up I was a little off, lol, but the point is the same.

This image seems to demonstrate well the distribution:



and this one:

Lili in posting #3 has a good answer. Those of us, who can afford accountants, can avoid taxes because the tax code is long and complicated. The tax code is long because it has many exceptions that allow people or corporations with income to avoid taxes because they fit somehow into a non-taxed category. Some of the categories are not in the tax code. They exist because of Supreme Court decisions. One decision, we don't remember which one, ruled that federal taxes on income from municipal bonds is unconstitutional, so anyone with income from municipal bonds, like Ross Perot, pays no income tax on that income.

Many of tax loop holes begin as ways to help poor people. We're not sure of the details, but financial people have told us that corporations get tax breaks if their hire certain classes of people, veterans, handicapped people, low income people, etc.

Some tax loop holes exist because the Congress, in its wisdom(?) wants so promote some kind of commercial activity. The famous example is the oil depletion allowance.

For an example of how rich people avoid taxes, see The Young Phildephians , a movie staring Paul Newman as Anthony Lawrence. In the movie, Lawrence has a client who has property in several states. He reorganizes the assets to decrease the taxes. The movie doesn?t deal with the misfortune of the workers in the states with the higher tax rates. Maybe that might make another movie.

Rich people do go through great lengths to avoid paying taxes, but, even so, they still pay the majority of the taxes.

The numbers in those graphs aren't theoretical. Those numbers are what people actually pay.

The rich may pay the tax, or not. The one thing, that is a fact for sure, is that the government collects the taxes from the rich. That is what the graph says. To know who pays the tax, one must estimate peoples' incomes in the absense of the tax. The person's income without the tax compared to the income with the tax is the true calculation of who pays the tax. Even though the government collects the taxes from the rich, maybe poor people pay all the tax.

it seems you're misunderstanding the charts. The charts show what percentage of all taxes collected by the government come from which groups. 79% of the taxes the government collects are coming from the top 20% richest people. The top 20% ARE paying 79% of all taxes actually collected. As far as what percentage of their income that is, it doesn't say, but the rich are paying the majority of all taxes collected.

The important word is "collects." The government collects the money from rich people, but who really pays the tax? If the tax collector collects a dollar in tax from a rich man, and that causes a poor man's income to go down a dollar, then the poor man paid the tax.

Oh, I see, you're being philosophical.

That is exactly the data you're seeing.

How can poor people pay the tax when the government is collecting it from rich people?

she means that if rich people pay the taxes, they pass their loss off onto their employees, consumers, etc.

Philosophical maybe? We don't know if economists can calculate who really pays the tax, but we know of one example where a small tax on rich people caused ordinary people to pay a 100% tax. This happened before we were born, but the story goes like this.

People in our family were in the boat business. They sold, repaired, and piloted boats. Based on the theory that rich people own boats and rich people should pay taxes, Congress decided to tax boats. In response to the tax, rich people stopped buying boats in the United States. A small tax on boats caused a 100% lose of income for boat workers, which is the same as a 100% tax.