Saturday, May 29, 2010

So, do the poor *really* not pay taxes?

In a word: No. The actual effective tax rate for each tax quintile is:

Q1: 31.6% (bottom quintile)
Q2: 28.1%
Q3: 28.3%
Q4: 28.9%
Q5: 30.1%

This is from data collected by the right-wing organization The Tax Foundation, without TTF's "fudge factor" where TTF adds in "transfer payments" that have nothing to do with taxes. This is taxes from top to bottom, from Federal to school district, as of 2004. This year's data should be relatively similar.

In short, it doesn't appear that if you are looking at the absolute percentage of taxes paid, that the United States has a progressive tax structure. Yes, Federal taxes are fairly progressive, but the states have moved heavily towards using sales taxes, which fall disproportionately upon the poor, to balance their budgets, and this is the main reason why the Q1 numbers look so bad.

Now, talking about fudge factors... the right wingers *love* to fudge numbers. They take a number, then they say that the number (the amount of someone's income paid as taxes) isn't *really* the number, and instead this *other* number -- which subtracts out money that the poor never even see, that goes to farmers or landlords or doctors -- is the "right" number. Just another reason why you should always double-check any numbers that right-wingers give you -- they love to fudge things, and if you don't double-check, they might manage to slip something by. Their silliness about "the Reagan tax cuts increased revenue!" is typical. Here's the *actual* income tax revenues for the Reagan tax cuts, in constant 1987 dollars (and remember, "tax reform" with a huge tax hike was signed in 1986):

  • 1981: $367,692 (millions) (first tax cut passed)
  • 1982: $356,366 (gosh, lower tax rates meant less taxes collected! More tax cuts passed)
  • 1983: $332,033 (still falling)
  • 1984: $328,470 (still falling. Part of tax cuts repealed in Tax Reform of 1984)
  • 1985: $354,677 (still less than before the tax cuts)
  • 1986: $359,307 (still less than before the tax cuts) (Tax Reform of 1986 passed, effectively raises taxes)
  • 1987: $392,557 (gosh, higher taxes meant more revenue!
So how the heck do righties say that revenues rose after the Reagan tax cuts? Simple. The Social Security tax rate rose from 9.3% in 1981, to 14.3% in 1987, and 15.02% in 1988. If you count the Social Security tax *revenue* as revenue, but then claim that the Social Security tax is not a tax so it wasn't really a tax hike, then you've invented the secret Right Wing Fudge Factor that they use in order to say that revenues rose despite a tax cut. But the actual income tax revenues are as I state above -- I've checked them multiple times with multiple upstream sources (OMB, IRS, etc.). In inflation-adjusted dollars, income tax cuts did exactly what you expected -- they reduced the amount of money the government took in -- and income tax hikes did exactly what you expected -- they increased the amount of money the government took in. Alrighty, then!

-- Badtux the Economics Penguin


  1. Dude I'm not a money guy, But as I remember social security was never supposed to be touched. Reagan not only raised the SSI tax,But they used it to balance the budget as well as they could. If SSI was never touched we wouldn't be in the state we are now.
    If my memory is flawed let me know.

  2. Right on, brother.

    I revealed the lie of the Reagan tax cuts here.

    When wingers say just about anything of substance, there is a lie there. you just have to dig deep enough to find it.

    Of course, sometimes it's lying right there on the surface.

    JzB who knows how to graph

  3. The Maine Democratic party is fighting tooth and nail to preserve last year's tax 'victory', where the top rate of state income tax was reduced from 8.5 to 6.5% and the sales tax extended to make up the revenue shortfall.

    This is one of the signature accomplishments of a Democratic legislature in a safely blue state.

  4. Well, Davis, here is another example of shifting the tax burden to those that can least afford it.

    The rich get richer, and the poor get poorer.

  5. Yeah. Democrat is the new Republican.

    RNC HQ is the new Bedlam.


  6. Alan Greenspan, in a burst of rare honesty, called Bill Clinton "the best Republican President of the past 30 years." I'm not seeing any signs that Barry O'Bama's administration is much different from Clinton's, his healthcare reform was quite conservative (I mean, the damned thing was basically designed by the Heritage Foundation, yo!), DADT could very well have been repealed by Eisenhower (who, recall, deployed the 101st Airborne to enforce desegregation at Little Rock High), and his financial system reform stops far short of re-instating the FDR-era regulatory environment... it is, daresay, conservative.

    But as JZB sez, the Republicans have gone batshit insane recently, trying to push a radical agenda that's anything *but* conservative. So we have the conservative party in America today (the Democrats), and we have the batshit fucking insane party (the Republicans). As JZB sez, WASF...

    - Badtux the wishing-for-better Penguin

  7. Davis, if Maine is safely blue, what's with Maine's two Republican senators?


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