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Thread: Analysis of latest CBO report on US earnings and US taxes paid

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    Default Analysis of latest CBO report on US earnings and US taxes paid

    With many thanks to author Bruce Krasting at http://brucekrasting.blogspot.com/20...ot-income.html


    (snip)"The Congressional Budget Office (CBO) wrote on this topic last week, presenting the following chart to describe what is happening:





    The CBO used the actual IRS tax data from 2009, so this info is an accurate description of who made what and what taxes were paid. The results confirm the problem. The top 20% of income earners make 51% of all income. This same group pays fully 68% of all Federal tax dollars.

    So who are these “fat cats” who are on top of the income pile and how much are they making? The results are surprising, the following shows the incomes for those in the top 20%:


    81st to 90th percentile = $137,500

    91st to 95th percentile = $175,800

    96th to 99th percentile = $271,800

    Top 1 percent = $1,219,700


    So who are these "wealthy" people in America?

    Nearly half of those “rich folks” are a husband and wife who each make $65,000 a year. I understand that there are plenty of folks who don’t earn this much, but if those same people think that the households that bring in $132k a year are “rich”, they are wrong. The people in this group are not fat cats, they are not rich and they are not bastards. This is your Dr., Dentist, accountant, small business owner. This group is what fuels the economy. Take half their income away and you have a big fall.

    If you’re wondering who fits into this income group (91st to 95th percentile) consider that every Senator and Congressman is in this bracket.

    We get up to the stratosphere of income when household income averages $272,000 a year (96 -99%). The folks in this group have nothing to complain about; they are doing fine. But I ask the question, “Are they truly getting rich?”

    Then you get to the top of the pile. The average salary for the top 1% is a whopping $1,220,000. So the reality is that the top 1% includes:

    - Damn near every pro athlete.

    - Any face that you see on the silver screen.

    - The bozos you see on TV every day (including the “names” on CNBC).

    - Paul Krugman (His book sales this year will make him a 1%er.)

    - Mitt Romney. But we shouldn’t forget that Obama is also in the 1% group. In 2010 the Prez made nearly five times the average income of those top 1% earners.


    Now lets see who is paying federal income taxes. This chart from the CBO report includes transfers from the federal government:





    - The negative tax rates for the bottom 40% (minus 9.3% for the lowest quintile, and minus 2.6% for the second lowest quintile) includes payments of Social Security, Medicare/Medicaid and other government transfers.

    - The middle 20% has an average income of $64,000 but pays only an average of 1.3% in Federal taxes.

    - Those who make $93.5k (the fourth highest quintile) are still only paying 4.6% of their income in federal taxes, on average.

    - The highest 20% of income earners pay 13.4% of their income on average. The breakdown of tax rates among this group are:





    Many people are advocating raising taxes on people who are making the "big bucks".

    What would happen if there was a giant increase in taxes? Assume that those "fat cats" that earned more than $250k had to pay 50% in income taxes and the “super rich” (top 1%) had to pay 75% of their income in Federal taxes. Would that solve the problem?

    The answer is yes and no.

    If taxes had been 50% for the 96-99% group and 75% for the top 1% in 2009, it would have generated addition tax revenues of $770B. A very big chunk of change. Projected deficits as far as the eye can see are in excess of $1 Trillion. Raising taxes on the top 5% would eliminate three-quarters of the shortfall. This result would be close enough to a balanced approach to take most of the budget pressure off of the table.

    If we truly sock it to those with high current incomes, we can solve one problem. But another one is created. If we raise income taxes to levels that now exist in France, the result will be that 5% of the working population will be paying 80% of all income taxes!

    A large percentage of American’s might like an outcome like this. A manageable deficit; paid for by soaking the rich. I’m sorry to tell them that it won’t work. A plan where 5% pay 80% is not going to work. A plan that sucked $3/4 of a trillion of income out of the economy would result in a near immediate depression.

    I look at the information provided by the CBO and conclude that there is no way out of the revenue hole the country is in by raising income taxes. While tax increases are part of the fix, cutting expenses has to provide the heavy lifting. But that is a joke, as there are very few places to cut expenses without also cutting entitlements. So cutting expenses is another political dead end.

    There is no combination of cutting expenses and raising income taxes that would actually be effective (snip)

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    Quote Originally Posted by Melonie View Post
    With many thanks to author Bruce Krasting at http://brucekrasting.blogspot.com/20...ot-income.html


    (snip)"The Congressional Budget Office (CBO) wrote on this topic last week, presenting the following chart to describe what is happening:





    The CBO used the actual IRS tax data from 2009, so this info is an accurate description of who made what and what taxes were paid. The results confirm the problem. The top 20% of income earners make 51% of all income. This same group pays fully 68% of all Federal tax dollars.

    So who are these “fat cats” who are on top of the income pile and how much are they making? The results are surprising, the following shows the incomes for those in the top 20%:


    81st to 90th percentile = $137,500

    91st to 95th percentile = $175,800

    96th to 99th percentile = $271,800

    Top 1 percent = $1,219,700


    So who are these "wealthy" people in America?

    Nearly half of those “rich folks” are a husband and wife who each make $65,000 a year. I understand that there are plenty of folks who don’t earn this much, but if those same people think that the households that bring in $132k a year are “rich”, they are wrong. The people in this group are not fat cats, they are not rich and they are not bastards. This is your Dr., Dentist, accountant, small business owner. This group is what fuels the economy. Take half their income away and you have a big fall.

    If you’re wondering who fits into this income group (91st to 95th percentile) consider that every Senator and Congressman is in this bracket.

    We get up to the stratosphere of income when household income averages $272,000 a year (96 -99%). The folks in this group have nothing to complain about; they are doing fine. But I ask the question, “Are they truly getting rich?”

    Then you get to the top of the pile. The average salary for the top 1% is a whopping $1,220,000. So the reality is that the top 1% includes:

    - Damn near every pro athlete.

    - Any face that you see on the silver screen.

    - The bozos you see on TV every day (including the “names” on CNBC).

    - Paul Krugman (His book sales this year will make him a 1%er.)

    - Mitt Romney. But we shouldn’t forget that Obama is also in the 1% group. In 2010 the Prez made nearly five times the average income of those top 1% earners.


    Now lets see who is paying federal income taxes. This chart from the CBO report includes transfers from the federal government:





    - The negative tax rates for the bottom 40% (minus 9.3% for the lowest quintile, and minus 2.6% for the second lowest quintile) includes payments of Social Security, Medicare/Medicaid and other government transfers.

    - The middle 20% has an average income of $64,000 but pays only an average of 1.3% in Federal taxes.

    - Those who make $93.5k (the fourth highest quintile) are still only paying 4.6% of their income in federal taxes, on average.

    - The highest 20% of income earners pay 13.4% of their income on average. The breakdown of tax rates among this group are:





    Many people are advocating raising taxes on people who are making the "big bucks".

    What would happen if there was a giant increase in taxes? Assume that those "fat cats" that earned more than $250k had to pay 50% in income taxes and the “super rich” (top 1%) had to pay 75% of their income in Federal taxes. Would that solve the problem?

    The answer is yes and no.

    If taxes had been 50% for the 96-99% group and 75% for the top 1% in 2009, it would have generated addition tax revenues of $770B. A very big chunk of change. Projected deficits as far as the eye can see are in excess of $1 Trillion. Raising taxes on the top 5% would eliminate three-quarters of the shortfall. This result would be close enough to a balanced approach to take most of the budget pressure off of the table.

    If we truly sock it to those with high current incomes, we can solve one problem. But another one is created. If we raise income taxes to levels that now exist in France, the result will be that 5% of the working population will be paying 80% of all income taxes!

    A large percentage of American’s might like an outcome like this. A manageable deficit; paid for by soaking the rich. I’m sorry to tell them that it won’t work. A plan where 5% pay 80% is not going to work. A plan that sucked $3/4 of a trillion of income out of the economy would result in a near immediate depression.

    I look at the information provided by the CBO and conclude that there is no way out of the revenue hole the country is in by raising income taxes. While tax increases are part of the fix, cutting expenses has to provide the heavy lifting. But that is a joke, as there are very few places to cut expenses without also cutting entitlements. So cutting expenses is another political dead end.

    There is no combination of cutting expenses and raising income taxes that would actually be effective (snip)
    Which is why I have repeatedly said that we must control entitlement spending and increase revenues. I am sorry but Grover Norquist is WRONG and almost every Republican in Congress knows it. Most do NOT adhere to his dogma that any changes to the Tax Code must be "revenue neutral". "Starve the beast" doesn't work and helps account for our current fiscal mess. Read Senator Tom Coburn's excellent Op-Ed in Monday's N.Y. Times. How to increase revenues is the question. I have repeatedly advocated what has proven to work in the past for Coolidge, JFK and LBJ , for Reagan and for Clinton: Cut the rates BUT simplify the Tax Code and eliminate all the crony capitalist tax breaks. Couple that with controls on entitlements starting with means testing and we will get a leg up on the deficits. Go to a flat or flatter tax and economic growth will help a lot.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    ^^^ Not wanting to dwell on the political aspects, but ...

    These days the most 'successful' companies are those that are able to take advantage of 'crony capitalism' ... from GM to GE to JP Morgan to First Solar to Apple to ConAgra. 'Messing' with their tax credits, tax deductions, 'free' gov't loans, gov't grants etc. would have a significant impact on their apparent profitability.

    As far as controls on entitlements, a recently released executive order just REMOVED the Clinton Era requirement that social welfare recipients must attempt to find work or obtain additional education to prepare them for future work.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    Quote Originally Posted by Melonie View Post
    ^^^ Not wanting to dwell on the political aspects, but ...

    These days the most 'successful' companies are those that are able to take advantage of 'crony capitalism' ... from GM to GE to JP Morgan to First Solar to Apple to ConAgra. 'Messing' with their tax credits, tax deductions, 'free' gov't loans, gov't grants etc. would have a significant impact on their apparent profitability.

    As far as controls on entitlements, a recently released executive order just REMOVED the Clinton Era requirement that social welfare recipients must attempt to find work or obtain additional education to prepare them for future work.
    Too Bad ! If those companies really need tax breaks to be "profitable" then something is rotten in the boardroom. Among other places like their accountant's office.

    While what Obama did stinks and will prove to be counterproductive, welfare is NOT where the real money is concerning entitlements. The big bucks are in Medicare, Social Security and Medicaid. OK, OK, Medicaid is for poor folks but most of what is paid out goes to doctors and hospitals.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    Medicaid is for poor folks but most of what is paid out goes to doctors and hospitals
    ... which makes most of the US health care industry indirect 'crony capitalists' !


    The big bucks are in Medicare, Social Security
    That depends on your interpretation of contract rights etc. For a fact, the Social Security / Medicare portion of SSI has 'loaned' trillions of dollars to the US Gov't 'general fund' of tax revenue money over the course of the last 30+ years. If Social Security / Medicare taxes continue to be collected at 'normal' levels ( as opposed to selectively reducing the 'employee' Social Security / Medicare tax rate ), and if federal income tax revenues are given contractual priority to 'repay' the money loaned to the US gov't 'general fund' before spending federal tax revenues on defense, medicaid, green energy and other non-contractual obligations, then the Social Security / Medicare 'retirement system' is a whole lot more financially sound than the Calpers or GM 'retirement' systems.
    Last edited by Melonie; 07-18-2012 at 11:05 AM.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    Quote Originally Posted by Melonie View Post
    ... which makes most of the US health care industry indirect 'crony capitalists' !
    Lol. You musta really ate your Wheaties this morning if you seriously want to open up a discussion about all the flaws with our current "pay for service" health care system. Not to stray too far afield ( and to avoid getting too "political" ) but you are right to some extent. Although a LOT of doctors are trying to make do without Medicaid or Medicare patients i.e. they simply won't see them. And under Obamacare that will become MORE widespread.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    ^^^ probably true, but off topic. The ON topic point regarding doctors is whether or not they will continue to 'bust ass' seeing patients from dawn until dusk if the aggregate marginal tax rate applying to their 'extra effort' earnings ( with 39.6% income surtax above $250k annual, with no income ceiling on 3.9% Obamacare medicare tax above $250k annual, with higher cap gains tax above $250k annual etc. ) significantly exceeds 50% !!!
    Last edited by Melonie; 07-18-2012 at 11:27 AM.

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    Default Re: Analysis of latest CBO report on US earnings and US taxes paid

    Quote Originally Posted by Melonie View Post
    ^^^ probably true, but off topic. The ON topic point regarding doctors is whether or not they will continue to 'bust ass' seeing patients from dawn until dusk if the aggregate marginal tax rate applying to their 'extra effort' earnings ( with 39.6% income surtax above $250k annual, with no income ceiling on 3.9% Obamacare medicare tax above $250k annual, with higher cap gains tax above $250k annual etc. ) significantly exceeds 50% !!!
    What ???? You mean they don't see it as their "patriotic duty" to pay more in taxes ?

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