Tax Burden vs. Net Worth: Why Federal Taxes are unjust

[DFLer4edu]

The Bush white house has told us how unfair federal taxs are on the upper class. He uses this to justify cutting taxes for the ultra rich. I thought I might put Republican claims of taxes being unfair to the rich to the test. Their famous mantra is that everyone should be taxed equally, the same percentage should be taken from every person. Well, I thought I'd put this theory to the test and see if the rich were paying their just dues. Below I compared the wealth of each group, to the percentage of the federal tax burden it picks up. The numbers are just sick. Here are my sources: http://www.ufenet.org/research/wealth_charts.html
for Net Worth(wealth) and
http://www.cbo.gov/showdoc.cfm?index=4514&sequence=3&from=0
for Federal tax liabilities


Group Wealth federal tax liabilities % of just tax liability paid
Top 1%: 38.1% 25.6% 67.2%
96-99%: 21.3% 15.8% 74.2%
90-95%: 11.5% 10.8% 93.9%
80-89%: 12.5% 14.5% 116.0%
60-79%: 11.9% 17.4% 146.2%
40-59%: 4.5% 9.8% 217.8%
Bot40%: .2% 5.9% 2900.0%

Note: I used the federal tax liabilities for 2000 and net worth statistics from 1998(latest I found). I figured this was fair as the tax rates on the top 3 groups were higher in 2000 than in 1998 and this way no one can say that Clinton drastically changed tax burdens in his last 2 years in office. This doesn't even begin to take into account the Bush tax cuts!!!!

[buckeye1]

1. The real problem is corps.

Not only do they pay far less than they have historically,they get huge subsidies from us. They dodge paying their fair share by gimmicks and mail drops off shore BS.

Don't tell me that they just pass it on. I can choose what I buy and who from. If I have no choice then it must be a monopoly and its time to change that situation.

The Kennedy tax plan reduced the corps. from 52% to 48%. It is 30% today.

The taxes that people and small biz pay is a red Herring. A non issue. The real trouble is corps. that use the infrastructure to make profits.

Privatize the profits,socialize the costs.

[DFLer4edu]

2. I agree

but the mantra the Republicans use isn't about corporate taxes. They preach about personal taxes being too high. They offer corporate tax breaks "to give companies incentive to invest in certain areas."

[Guinness]

12. Corporations should be abolished.

When Bush and Ashcroft commit crimes under the guise of "national security", they can hide behind their government position to avoid prosecution.

Likewise, when a corporate officer commits a crime, he can hide behind his corporation to avoid liability.

Corporations are basically pseudo government entities, anyway. They pay protection money to the government and the government subsidizes their activities or looks the other way when they commit crimes.

I say abolish the corporations and let the free market work its magic.

[Frodo]

3. The problem is determining "wealth" by net worth instead of income.

Think about the grandparents who are approaching retirement. If they've got half a million dollars in the bank to buffer the difference between Social Security and their monthly needs at retirement... are they "wealthy"???

Someone in his thirties with the same net worth is doing pretty well, not wealthy perhaps, but pretty darn close.

This type of measurement penalizes the frugal plumber making 35k a year and saving 10% of it and BENEFITS the junior executive making 100k who is a spendthrift and saves nothing.

We can't look at "the rich" as simply a measurement of net worth. it really should be a comparison that somehow incorporates income, net work and age group.

[rapier]

5. notes

Nobody saves anymore. Only fools save with interest rates so low. Added to which is the promise that the currency will be debased and destroyed. Savings in todays world are discouraged because we need the money to keep flowing into the economy to buy stuff, and keep things going.

The thing now called savings is speculating in stocks, financial assets, and real estate.

While refining the stats to account for the things you mention might be a valuable job the main point will not change. When the top 1% own 125% more assets than the bottom 40% we have a situation.

[Frodo]

6. It's silly to say "nobody saves anymore"

You cannot limit "savings" to just what sits in the bank (though speaking as a banker, I would LOVE to see that shift). Partial ownership in companies is not "speculationg", and real estate certainly is not.

If you are NOT setting aside a portion of your income (regardless of the level of that income) as some form of "savings" (even at 0%), you are acting foolishly. If you are a parent, it's reckless and irresponsible. Savings can be putting your money into any thing of value that does not lose value faster than inflation (over time). If you want to buy and store antique cars - that's fine with me. But if you're fifty with no assets you better have hit a hell of a run of bad luck. If you had plenty of income and just spent it all because 1% isn't very attractive to you? Don't look for my sympathy.

It doesn't change the facts. My parents are retired and have no "income" from work. Only Social Security and what they have saved. The fact that they saved enough over their lifetimes does not make them "rich". The fact that dozens of less responsible people spent all of their income over 40-50 years of work and saved nothing ALSO does not make my parents rich. It makes the other people irresponsible.

[rapier]

9. notes

Stocks are a speculation and stocks do not represent 'ownership' in a company in any sense that isn't a nice fariytale.

Why are stocks a speculation? The value of an investment can only be determined by it's expected rate of return. I mean real cash flow return, like a dividend. Any gain in the value of an asset above inflation cannot be counted on. You can hope for it and wish for it in other words you can speculate on it.

Every one of those 'long term stocks return 10%' stories is a lie. Inevitably they are based upon indexes and the thing about indexes is that the bad are thrown out and the good put in. The Dow has only 1 stock in it from the 20s now I think. The Dow or S&P averages over time logically are a measure of nothing real. If the makeup of an average changes over time your comparing apples and oranges. Another thing about those long term claims is that stocks used to pay good dividends. Dividends returns accout for a large part of the gains claimed by the touts. THe thing is that now dividends are for shit. On the S&P something line 1.75%. That is pathetic on historic terms. At the height of the bubble in 99 the touts said, of course, stocks are savings and their gains should be calculated into the savings rate. When $7 trillion disapppeared from gross stock capitalizations you might have noticed that all that talk disappeared. Wonder why?

Stocks are 'valued' based upon the liquidity ebbing and flowing into them. So it is with any asset class. Stocks have now reached the stage of a religion or a fetish, with 3 networks and forests worth of print touting them. Most people belive the investment crap. So it goes. You cannot limit savings to simple interest bearing accounts but to the idea that the majority of ones 'savings' are in a speculative stocks is beyond absurd.

As to your parents and their savings they don't even figure into this. Nobody called them rich.

[Frodo]

11. Reply

As to your parents and their savings they don't even figure into this. Nobody called them rich.

Well, I doubt their net worth falls into the "top 1%" category (which I think starts somewhere in the 2.5Million category), but depending on how you choose to calculate it, I bet they fall in the top 5%, without ever being in the top 10% of income. My grandparents lived through the Depression and instilled a strong savings discipline in their kids. (Plenty of people here consider that "rich")

Stocks are a speculation and stocks do not represent 'ownership' in a company in any sense that isn't a nice fairytale.

Sorry, but that just isn't so. It depends on the companies you choose to "own". Don't expect a whole lot of control if you own .0001% of IBM. If you want control of a computer company, buy 51% of "Dan's Computers" and have him come out with the "Rapier" model (the name has some panache').

You can hope for it and wish for it in other words you can speculate on it.

While I see where you are going here, is you've got a broad mix of investment classes (say Spiders), you're really "speculating" on the overall profitability of the whole economy. This isn't really "speculation" if you're talking about a long term investment. If you mean "this year" then it IS.


Every one of those 'long term stocks return 10%' stories is a lie. Inevitably they are based upon indexes and the thing about indexes is that the bad are thrown out and the good put in.

Again... not so. While 10% is certainly too much to expect, something more like 8% over time is pretty reasonable, and is borne out by the total market, not just the Dow. And, of course, the idea is to pick solid companies that do well over the long haul... there are any number of companies that WELL exceed 10% over time and plenty of mutual funds as well.

Another thing about those long term claims is that stocks used to pay good dividends. Dividends returns account for a large part of the gains claimed by the touts. The thing is that now dividends are for shit. On the S&P something line 1.75%. That is pathetic on historic terms.

Well, YOU get to pick what stocks you invest in. There are plenty of companies paying solid dividends. Invest in THEM if you think that's a sign of stability (and I tend to agree). The company I work for now is around 3.5% and has increased the dividend every year for decades. Even 1.75% is nothing to sneer at when YOU were the one pointing out the miserable savings rate (well below 1% for most people).


You cannot limit savings to simple interest bearing accounts but to the idea that the majority of ones 'savings' are in a speculative stocks is beyond absurd.

Well, I'm pretty "traditional" there. It's true that you should not mingle "investments" with "savings". Don't go dropping $1,000 into some tech stock because you want $2,000 next month. THAT IS speculation.

You can get my advice out of any one of dozens of financial planning books. Have 3-6 months (sometimes 12 if you are heavily commission-based) of salary in "cash reserves", which MUST be liquid (checking,savings,certain CD's, or money-market accounts). Then conservative "investments" for mid-term needs (buying a car, college for teenage children - that could be in a mixture that includes some stocks. Then a third category of long-term investments (retirement, college for younger children, etc.) that MUST be invested in instruments that can be expected to grow well above the rate of inflation.

So I'm not advocating the "majority" of one's savings go into "speculative stocks" (accepting the "speculative" term for the moment). I want people to own a solid mixture. Which for most includes real estate and international investing as well.

For decades, a "cut of the profits" was limited to those top percentiles. Today it can be anyone with a 401(k). I have no doubt that you believe that corporations exist to make outrageous profits. I also doubt you appreciate the conflict you propose that the average Joe should not be in for a cut of the profits (s)he helped create (on the production side AND consumption side).

[rapier]

13. notes

I don't really want to attack or argue with you. Stock will almost certainly offer the best return over the next 2 decades, the period of most import to those here I would guess. Assuming the economic/political world does not shift on it axis.

The modern bussiness corporation is in my opinion is the most successful method of organization in human history. That would include government, especially government. Corporations are in the process of superceding or co opting government. Joining or buying into them is the most rational 'investment' choice. (There are great ironys in this since corporations are a legal creation of government. It must be understood that corporations are a field on the ground created by government. Until now at leaset. A philosophical discussion for another place I suppose)

Know however that buying them is a political decision. Thru them power and wealth will continue to concentrate. THe more successful they are in becomming the government the more they will return to their 'investors'. While it probably seems crazy to you or most here it has come time to draw a line in the sand politically between those who want an 'ownership' society and those who want a democratic society. You can no longer buy stock and hope to retire comfortably and still be a progrssive. Screw comfotable. The level of corruption in the financial/government elite is now so total that there is no longer any middle ground.

[dace]

15. Your right

Those bastards that own 125% more should be shot. How dare they go out and be more successful and accumulate what they work so hard for when there are people who want so much more and aren't willing to put in the blood, sweat, and tears to get it. Redistribute the wealth....long live Marx.

[jwcomer]

16. People are saving today

While it is true that net savings has gone down, private savings has gone up for the last three years. It is government sector savings that has turned sharply negative during that time and caused net savings to sink lower.

[Frodo]

17. ???Government sector savings???

Do you have a link?

[DFLer4edu]

8. Good point

I think that taxes should be set according to many different factors, including net worth, income, and age group. However, I do think you have to start somwhere, and net worth should effect the tax rates of the top 1% regardless of age or income. The formulas are debatable, but the problem is not. There is a problem when the top 1% controls 190 times more than bottom 40%.

[rapier]

10. notes

That's where the inheretnece tax kicked in. Or did. While the propoganda against the inheretence tax is logically powerful that's mostly because very few are willing to face up to the elephant in the room. That being that 'capitalism' inevitably, inherently, concentrates assets at the top. The democratic basis of pure capitalism as far as distributing wealth is not real.

Sure, inheretence taxes are obviously redistributional. So what. The system is built so that the top NECESSARILY gets execss return. Pure libertatians may say so what but democracy cannot survive if this continues. In fact it's arguable if it really has. At the most basic leverl there was some truth to Nader's claim of no difference between the parties. That would be where government meets corporations, corpratism, and finance.

[rapier]

4. notes

I can't quite figure out that table. What is the last column?

Of course your measuring assets, not income. That mixing is always a source of confusion on these issues and downplaying the asset distribution is an important part of the class war fought and won by the top.

Still, the main tax is an income tax. Taxing property is and always will be verbotten in America for all sorts of reasons, except local property taxes of course.

The inflation of financial assets, which is now the lynchpin and first job of the Federal Reserve has skewed the asset distribution more to the top. This inflation of paper assets probably will end eventually and the obscene tilt at the top will become less obscene.

Taxes are never going to cause a big shift in this asset distribution. What will is open to debate, I have some ideas but no room here.

[DFLer4edu]

7. The last Column

is % federal tax liabilities divided by % of wealth.

[Cary]

14. DFLer, I hate to burst your bubble, but. . .

I don't think the percentages in terms of wealth correllate, necessarily, with the percentages in terms of income.

It's a great idea, though. If I'm correct in my interpretation of the data, that it doesn't necessarily correllate, I don't know how to correct that.