[FoRK] Re: Limeys can't comprehend US tax law? ;-)

Stephen Williams <sdw at lig.net> on Fri Apr 25 01:19:38 PDT 2008

The current system is partially progressive and reasonably "fair" from a 
certain point of view.  There are other ways of looking at it that could 
come to a different conclusion.  Recent changes to the tax system, such 
as withholding zero income tax on the first $15K, seem to be addressing 
this to some extent.

You could argue from the point of view of disposable, or sort of pro 
forma disposable marginal net income.  I have often evaluated current, 
past, and future situations based on disposable income, in various 
senses.  In the most generically fair way of looking at it, you would 
assume some lower bound on basic middle-class living expenses for a 
particular area.  There are pros and cons of areas you could get complex 
about, but there is a measurable baseline of a two bedroom apartment 
near enough that you could commute to a particular level of job.  When 
comparing incomes, and taxes, to different "classes" of people, you have 
to mainly consider a ratio of marginal income to taxes paid.

For instance, in an area where basic average living costs are $2000/mo., 
someone getting about $2200/mo. has $200/mo. marginal net income.  
Someone making $4400/mo. net is making not twice the other person, in 
marginal net income terms, but 11 times.  Someone making much more has 
almost an infinite ratio, at least in the eyes of the person making 
$2200 or less.

So, should that be taxed differently than it is now?  Probably not 
because it would quickly venture into regressive territory, however it 
is a useful metric to keep in mind.

sdw

Owen Byrne wrote:
> And the next paragraph says...
> "Other taxes in the United States with a less progressive structure or 
> a regressive structure, and legal tax avoidance loopholes change the 
> overall tax burden distribution. For example, the payroll tax system 
> (FICA), a 12.4% Social Security tax on wages up to $97,500 and a 2.9% 
> Medicare tax (a 15.3% total tax that is often split between employee 
> and employer) is a regressive tax on income with no standard deduction 
> or personal exemptions. The Center on Budget and Policy Priorities 
> states that three-fourths of U.S. taxpayers pay more in payroll taxes 
> than they do in income taxes.[12] The Tax Foundation has stated that 
> the burden of the corporate income tax (a 15-39% tax) falls on 
> customers and workers of the corporations, who are often not rich.[13]"
>
> Owen
>
> On Apr 25, 2008, at 12:51 AM, Jeff Bone wrote:
>
>>
>> On Apr 24, 2008, at 10:38 PM, Kevin Elliott wrote:
>>
>>> But anyone who thinks it needs it because "the rich aren't doing 
>>> their part", is officially an idiot...
>>
>> Right on!
>>
>> Fyi, here's a rather interesting blurb (not fact checked) from 
>> Wikipedia about the distribution of taxes in this country...
>>
>> Tax distribution
>>
>>  http://en.wikipedia.org/wiki/Taxation_in_the_United_States#Tax_distribution 
>>
>>
>> There are about 117 million taxpayers in the United States.[8] The 
>> Treasury Department in 2006 reported, based on Internal Revenue 
>> Service (IRS) data, the share of federal income taxes paid by 
>> taxpayers of various income levels. The data shows the progressive 
>> tax structure of the U.S. federal income tax system on individuals 
>> that reduces the tax incidence of people with smaller incomes, as 
>> they shift the incidence disproportionately to those with higher 
>> incomes - the top 0.1% of taxpayers by income pay 17.4% of federal 
>> income taxes (earning 9.1% of the income), the top 1% with gross 
>> income of $328,049 or more pay 36.9% (earning 19%), the top 5% with 
>> gross income of $137,056 or more pay 57.1% (earning 33.4%), and the 
>> bottom 50% with gross income of $30,122 or less pay 3.3% (earning 
>> 13.4%).[9][10] If the federal taxation rate is compared with 
>> thewealth distribution rate, the net wealth (not only income but also 
>> including real estate, cars, house, stocks, etc) distribution of the 
>> United States does almost coincide with the share of income tax - the 
>> top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% 
>> (wealth 57.2%), top 10% pay 68% (wealth 69.8%), and the bottom 50% 
>> pay 3.3% (wealth 2.8%).[11]
>>
>> "Progressive" taxation indeed.  Yeah Geege, you're right:  I'm a 
>> "regressive tax protectionist."
>>
>> jb
>>
>>
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