Taxpayers in High Cotton

Or so says NBC News.  “American taxpayers have had it easy for decades.”  If by “taxpayers” you mean “able-bodied adult Americans” that answer might be just a teensy-weensy little bit correct.  If you’re talking about that subset of able-bodied adult Americans who actually pay taxes, well, not so much.

According to that notorious den of political hacks, the Congressional Budget Office, between 1979 and 2007, the percentage of total federal tax liabilities, by household income quintile, with additional break-outs for the top 10%, top 5% and them mean, nasty, awful top 1%ers, looks a bit like this:

The bottom quintile went from 2.1% to 0.8%, a 61.9% drop.

The fourth quintile went from 7.2% to 4.4%, a 38.9% drop.

The middle quintile went from 13.2% to 9.2%, a 30.3% drop.

The second quintile went from 21.0% to 16.5%, a 21.4% drop.

The top quintile went from 56.4% to 68.9%, a 22.2% increase.

Within that top quintile, the top 10% went from 40.7% to 55.0%, a 35% increase; the top 5% went from 29.6% to 44.3%, a 49.7% increase, and them awful 1%ers went from 15.4% to 28.1%, an 82.5% increase. 

Just by the numbers, according to total federal tax burden, the total tax burden is not only “progressive,” but it has become massively more so in the past three decades.  What, however, if you want to look at just the individual income tax?  Curiously enough, the CBO is ready to oblige:

Bottom quintile:  change from 0.0% to -3.0%, which produces meaningless number as a percent decrease.

Fourth quintile:  change from 4.1% to -0.3%, which produces a 107% decrease.

Middle quintile:  change from 10.7% to 4.6%, a 57% decrease.

Second quintile: change from 20.2% to 12.7% a 37.1% decrease.

Top quintile:  change from 64.9% to 86.0%, a 32.5% increase.

Within the top quintile, the top 10% went from 48.1% to 72.7%, a 51.1% increase; the top 5% went from 35.6% to 61.0%, a 71% increase, and the nasty ol’ 1%ers went from 18.3% to 39.5%, a 115.8% increase.  The same picture emerges if you look at share of corporate taxes, which the CBO also conveniently provides:

Bottom quintile:  change from 1.8% to 0.6%, a 66.67% decrease;

Fourth quintile: change from 4.1% to 1.4%, a 65.85% decrease;

Middle quintile: change from 6.7% to 3.3%, a 50.75% decrease;

Second quintile: change from 10.5% to 6.8%, a 35.24% decrease; and,

Top quintile: change from 76.5% to 86.8%, a 13.46% increase.

Within that top quintile, the top 10% went from 66.7% to 80.0%, a 19.94% increase; the top 5% went from 57.9% to 73.0%, a 26% increase; and, them ol’ 1%ers went from 37.8% to 57.0%, a 50.79% increase.  To put a slightly different lens on it, the top 5% of households by income paid in 2007 a share of the total corporate income tax lick almost equal to the entire share paid by the entire top quintile in 1979.

I’ll just come on out and say it:  There is no intellectually honest way to characterize the U.S. tax system as being either not “progressive” or not “progressive” enough.  When those whom you most wish to plunder are already paying more than everyone else put together, there isn’t much more room to go up on their tax burdens.

What is especially interesting about this tripe is that NBC actually produces the chart of spending and tax receipts as percentages of GDP since 1990.  It’s pretty easy to trace out the rising tax receipts of the internet bubble in the late 1990s, followed by its bursting.  Likewise it’s easy to see the slowly-decreasing spending curve, beginning after the sniffles which cost Geo. H. W. Bush his job.  The spending continued on a more-or-less steady downward incline until 2000-01, when it was equal to the 50-year average of tax receipts.  Great!  And then the internet bubble burst and we got attacked.  The tax receipts dropped precipitously, and spending bounced back up.  Here’s the interesting thing, however:  Despite Dear Leader’s harping about “two wars fought on a credit card,” spending never did get back to its 50-year average, and in fact by 2003-04 had more or less hit a plateau (it went up for a year or two, and then went back down).  Right about the same time tax receipts started to pick back up, and by roughly 2007-08 were back to their 50-year average. 

And then, as the cross-talk act would say, “The front fell off.”  Spending rocketed to its highest percentage of GDP since World War II — 24.1%.  That spending did . . . what for outright unemployment?  Did what for growth in GDP?  Did what for underemployment?  Did what to stem the tide of foreclosures?  It did precisely just about bugger all, in round numbers.  Meanwhile tax receipts plummeted to where they are now, at 15.4% of GDP.  We’re borrowing $0.40 of every dollar we spend, except we’re not really.  We’re just making it up, since over 90% of long term Treasury paper is being “bought” by . . . the Federal Reserve Bank.  Really?  The left pocket is shovelling the stuff into the right pocket and the guy inside the trousers is crowing about how solvent he is in consequence.

Now the proposal is to ratchet up the tax burden on those same folks who are already accounting for 72.7% of the total income tax liability in the country.  If you went ahead and socked the entire federal income tax liability to just the top 10%, that would require only a 37.6% increase in their overall tax burdens to accomplish.  That would mean, for example, going from a 35% marginal rate bracket to less than a 50% bracket (anyone’s effective tax rate is always less than his marginal rate, so to increase the total tax burden by 37.6% on someone in the 35% bracket would not require increasing the top marginal bracket to 48.1%, but rather some percentage less than that).

Don’t forget that socking the entire federal tax liability to the top 10% still only gets you to 15.4% of GDP, and you’ve got that yawning chasm between 15.4% and 24.1%.  That difference, kiddoes, is 56.5%.  That’s right, to close each year’s deficit (we haven’t even touched the $16.4 trillion in accumulated debt) we’d have to increase our tax yield by over a full half.  In the middle of a “recovery” so weak that it’s not even really clear that there is a recovery.  Even just to get tax receipts back to the 50-year average spending level entails a 40%+ increase in actual tax yield. 

Uummmmmmm . . . . aaaahhhhhhhhh . . . where the hell is that money going to come from?  Goobers like this feller at NBC seem to think that poor people create jobs, that some guy who is scraping by on unemployment and what he can raise doing odd jobs around town is going to start a business, hire eight or ten people, and suddenly become a wealth generator.  He isn’t.  He can’t.  Even if he knows how, even if he wants to work so badly he can taste it, if no one is hiring, and if he’s burned through every dime he’s ever managed to put by in order to keep his children in their house, he’s got nothing to move forward with.  The only kind of a job the government can “create” for him is a government job, which usually entails people doing things others don’t want them to do.  It doesn’t, in other words, create wealth, but only transfers it.

If you want true economic wealth generated, it’s going to have to come from those whom you so dislike.  They are the ones who have capital available to them to figure out something that other people want and are able and willing to pay for, and then go out and do it.  If you strip from them their available surplus, you’re not left with “social justice,” or a more “equitable distribution of wealth,” or any of the other holy grails of the left.  You’ll have a nation full of people whose only skills are in government make-work, and the permanent effects of which will evaporate six minutes after they leave the building.  And you’ll have a ruined capitalist class.  You’ll be left with East Germany.

Finally, from a purely moralistic perspective, is it seriously contended that the 90% of us deserve a free ride on the top 10%?  If it is, I want to hear the arguments in support of that proposition.

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