What's annoying me is that every article I click on is giving me different data, and I can't track any of it down. David Brooks has this:
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.
Fair enough, but I can't find the specific CBO or IRS reports referred to.
However, according to Fox:
Data compiled by the nonpartisan Tax Policy Center show households pulling in more than $1 million pay about 29.1 percent of their income in federal taxes. By contrast, households making between $50,000 and $75,000 pay about 15 percent.
Or how about:
Also, raising taxes to pay for current spending has proved more effective at restraining spending than allowing the government to finance its outlays with deficits. Every time we have tried to cut spending by restraining taxes, we have failed. In the 1980s under President Ronald Reagan and in the past decade under President George W. Bush, taxes fell, but spending rose. The only time in the past 30 years when spending fell was in the 1990s, under President Bill Clinton, when taxes were also raised.
Even the massive tax increases during and after World War II – amounting to a permanent rise of 10% to 15% of gross domestic product – and the much smaller tax increases in 1990 and 1993 did no discernible damage to U.S. economic growth.
If we are going to raise taxes as part of the fiscal solution, the tax burden on high-income, high-wealth households needs to rise. The recently enacted debt deal contains only spending cuts and has little or no impact on high-income households. Rather, it puts the entire burden of closing the fiscal gap on low- and middle-income households. High-income households should not be exempted from helping resolve the nation's fiscal problem.
Households in the top 1% of the distribution can afford to contribute. They have done enormously well during the past 30-plus years. In 1979, their income accounted for 10% of total income. According to the most recent data (from 2008), their share of total household income more than doubled to 21%. In contrast, real income for middle-class workers has remained roughly constant over the same time frame.
While we're on the topic, an excellent report from the Tax Policy Center written by Leonard Berman (I urge you to read the full report):
The insurance aspect of progressive taxation is less well understood. With taxes, government becomes a kind of partner—albeit an involuntary one. When taxpayers do well, they pay a lot of tax. When things go badly, they pay less (or even get a net subsidy). Even a flat tax reduces the variance of after-tax returns (since the government takes on a fraction, t, of any gain or loss, where t is the tax rate), but a progressive income tax allows for a higher level of consumption when things go badly than a flat tax system that raised the same amount of revenue. Effectively, it provides insurance in the case of bad luck.
Economist Hal Varian, who developed the theory of taxation as insurance in a seminal paper, argued that this aspect of taxation might argue for especially high tax rates on people with very high incomes—say over $1 million per year. The logic is that incomes that high must have a substantial luck component. It is not plausible that people reach that level of income simply by working especially hard or saving more much than their neighbors. To the extent that very high incomes derive from factors outside taxpayers’ control, taxing those incomes at high rates might have little or no effect on their behavior. ..
As noted, the obvious downside of progressive taxation is that it weakens economic incentives. However, most economic evidence suggests that taxpayers’ real responses to the individual income tax are small. One might expect high tax rates to deter work and saving, but in fact, the effects are ambiguous... Empirically, the total response appears to be very small or even zero on average.
As for those with very high incomes, their labor supply is unlikely to be very responsive to taxation. Otherwise, people earnings millions of dollars a year would be working hundreds or thousands of times as hard as people with moderate incomes, which is implausible. (One theory of wage inequality at the top is the “winner take all” model, which suggests that the people at the very top echelons earn many times as much as people who are quite talented, but a rung below. This suggests that the penalty to slacking off, even a little bit, would be much more than could be effected by taxation. Compare the salaries of vice presidents with CEOs, triple-A baseball players with major league starters, summer stock actors with Broadway stars. It seems highly unlikely that top performers would slack off in response to higher taxation. And, as noted earlier, luck plays a larger role in the incomes of the super-rich than the rest of us. Overall, evidence suggests that their labor supply is insensitive to tax rates. ..
There is an upper bound on productive tax rates—in the sense that higher rates could actually reduce revenue (an effect made famous by Arthur Laffer and his napkin). A new survey by economists Peter Diamond and Emmanuel Saez estimated that the revenue-maximizing federal income tax rate was “conservatively” 48 percent assuming the existing tax base and could be as high as 76 percent if the tax base were much broader. Evidence from other studies also suggests that current rates are safely below the unproductive level...
The argument for a lower dividend tax rate is that corporation income is already taxed at the company level. Taxing the dividends again corresponds to double taxation. A similar argument is often made to justify lower capital gains tax rates. However, the lower rate is a very imperfect offset. While some corporations pay a lot of tax, some are able to use tax breaks to significantly reduce their effective corporate tax rate.
That's enough. You should really read the whole report, there are sections quite relevant to what I was writing about regarding capital gains in the last post.
My main point, however, is that if you're going to cherry pick data to support preferred outcomes you should really be careful about linking precisely to the data you've cherry picked lest someone like me come along and actually read the friggin reports which show the objections being expressed to be nonsense. It's nice for reporters to imagine some magical post-partisan land where both sides are equally right and a straight down the middle compromise is ideal. However, if you actually read the policy experts, they say this is bullshit. The rich aren't getting a raw deal, things are already distorted in their favor. The empirical data tends to point in the direction of higher taxes on the rich. It also points in the direction of higher consumption taxes and taxes on goods that produce externalities but since no one is arguing for these policies there is no conceivable world in which compromise takes the form of lower than desired taxes on the rich as well as base broadening through consumption taxation and gas taxes. It's not on the table, what is on the table is a choice between deficit reduction strategies that work, more taxes (economists often express a preference for lowering spending rather than raising taxes based on their models, there are few instances of this actually happening in isolation), and a deficit reduction strategy that only works in models, cutting spending. Since this is life and not SimPolicyWonk, our choice is between going with what works and believing in unicorns and pixie dust.
The Credit Fairy is unlikely to appear and fix our deficit.