The New Republic

Noah-nothing misses again. Actually, more like deliberately misleading moonbats (I guess that is in his job description) OECD data actually undercuts his book --- read below. The notion that the productive 10% are under-taxed is entirely refuted. ** The top 10% of earners in the U.S. pay 35% more of the income tax burden than in Sweden and 22% more than in France. These figures—from the 2008 OECD publication "Growing Unequal?"—include all household taxes imposed on income at the federal, state and local level, including social insurance taxes. In an eternal irony unique to large welfare states, it is the expansion of government in the name of the poor and middle class that always costs poor and middle-class families the most. When the U.S. collects 16.1% of GDP in income taxes, the top 10% of taxpayers pay 7.3% and the other 90% pick up 8.9%. In France, however, they collect 24.3% of GDP in income taxes with the top 10% paying 6.8% and the rest paying a whopping 17.5% of GDP. Sweden collects its 28.5% of GDP through income taxes by tapping the top 10% for 7.6%, but the other 90% get hit for a back-breaking 20.9% of GDP. If the U.S. spent and taxed like France and Sweden, it would hardly affect the top 10%, who would pay about what they pay now, but the bottom 90% would see their taxes double. Since OECD members have significantly higher consumption taxes on average than the U.S., the total tax burden of bigger government is even more heavily borne by lower-income citizens in developed nations than these numbers suggest. The real and alarming message in these OECD numbers is that there appear to be limits in the real world to how much tax blood can be extracted from rich turnips. With much higher marginal income-tax rates, countries that are clearly willing to soak the rich have proven to be incapable of doing so. Proposals to raise taxes on high-income Americans in the name of "fairness" not only threaten economic growth. The experience of nations with large governments shows that this argument is simply a red herring for a massive tax increase on middle-incom

- mr_rationale

April 6, 2012 at 12:38pm

Oh how my heart bleeds for those poor rich turnips!

- Sophia

April 6, 2012 at 1:31pm

Hide this chart! Because the Republicans continue to claim it's NOT a "revenue problem".

- AllanL5

April 6, 2012 at 1:36pm

The echt Heritage moonbat keeps evading my anecdote about Friedrich Hayek, the darling of the libertarians. Hayek did not spent one day in his life working in the private sector. He was the ultimate parasite. No wonder rationale runs every time I bring this up.

- liberalref

April 6, 2012 at 2:01pm

It's true that European tax systems are less progressive than in the United States. But when you combine tax and spending European governments are more progressive than the U.S.

- Timothy Noah

April 6, 2012 at 2:21pm

In 1956 the combined (employer and employee) payroll tax rate was 4% and the wage base (the earnings subject to payroll taxes) was $4,200. Today, the combined rate is about 15% and the wage base is about $110,000. Payroll taxes are imposed on gross earnings, with no exclusions or deductions. For a working American with a median income, 1956 looks relatively good. Noah makes an excellent point about comparing effective tax rates in the US and European countries: you can't. Besides much higher public spending in Europe on health care, retirement, and unemployment benefits, such things as public transportation are much better funded in Europe than in America. Of course, a major difference in public spending in the US is the much, much higher spending on defense as compared to Europe. There's also a major difference in payroll taxes in the US and Europe that makes it impossible to compare the payroll tax rate here and the payroll tax rate in Europe. In the US, economists say that the employee bears most if not all of the employer's share of payroll taxes in the form of lower wages. Not so in Europe.

- rayward

April 6, 2012 at 2:45pm

So Ray, why is it in Europe the employee doesn't bear the cost of the payroll tax? I figured that wages would be reduced to pay for them no matter where.

- tmmats

April 6, 2012 at 3:55pm

mr_rat: "The top 10% of earners in the U.S. pay 35% more of the income tax burden than in Sweden and 22% more than in France." Not this again. This kind of stat has been shown to be bogus over and over, but it doesn't seem to stop people from using it. Maybe the top 10% of earners in the US pay more of the income tax burden than elsewhere because there's more income inequality here than elsewhere. Without knowing more about the income distribution, this stat tells us pretty much nothing. And leaving out that essential information only allows people to draw invalid conclusions. (And people quoting other people's articles should at least provide a cite/link.) Saying that X% of earners pay Y% of taxes tells us nothing about rates or progressivity. For instance, if 9 people make $10k and one person makes $100k and there is a flat tax of 1%, then the "top 10%" pays over 52% of the total taxes--even though the rate is low and not progressive at all. Still, it sounds totally unfair, no? But it's a consequence of the income distribution, not the tax rates. (And I can make sound even worse. If one provided an exemption for those making under $15k, then that top 10% would be paying 100% of the income taxes--though the system is barely progressive and the top rate is only 1%.) Please, let's put this bogus stat out of its misery once and for all. Anyone who uses it without providing more information is simply not interested in making an honest argument.

- dsimon

April 6, 2012 at 9:12pm

Noah's Data is not consistent here. Median Family of Four Income is roughly $ 60,000 depending on where you live. That tax Rate is 14%. There is no debate about this, it's the US Tax Code and you can check the tax tables. Noah reports that this tax rate is now down to 5.6%. Can't be. People may be paying 5.6%, but that is not what he says. The table is mis-labeled. I believe the tax burden heading is correct, but the line about tax rates is not accurate. And Noah is less than honest in his implication here. To lower your tax rate from 14% to 6% you have to have a pretty big mortgage deduction. So spending $ 3,000 a month to save $ 1,000 in taxes isn't exactly the 1956 most people remember.

- CRS9TNR

April 6, 2012 at 10:05pm

CRS9TNR: "Median Family of Four Income is roughly $ 60,000 depending on where you live. That tax Rate is 14%. There is no debate about this, it's the US Tax Code and you can check the tax tables. Noah reports that this tax rate is now down to 5.6%. Can't be." Sure it can. Remember that we're talking about the effective tax rate, not the top marginal tax rate on the last dollar of income. For married couples filing jointly, the rate is 10% for income up to about $17,000, and 15% for the income between $17,000 and $70,000. But then there's a personal and dependents exemption to $3,700, and a standard deduction for joint filers of $11,600 (numbers for 2011). Plugging $64,200 (I think median household income for 2011 is more than $60k, though it's not easy to find on the Web) into this tax calculator for 2011, http://www.moneychimp.com/features/tax_calculator.htm, and using joint filing with four exemptions (self, spouse, and two kids) results in a tax of $4820, or about 7.5%. But there's also a $1000 per-child tax credit, which would bring the rate down to 4.4%. I'm no tax expert (do you have to itemize to claim the per-child tax credit?) but these calculations show that the effective income tax rate for a family of four's median income can easily be what Noah says it is. I'd happy to defer to those with more tax expertise, though.

- dsimon

April 7, 2012 at 1:31am

As I understand the Republican argument, taxation must be too low because giving money to politicians to decide how it is spent is undersireable. But the rich are making such large financial contributions to politicians and what does that say about the relationship between their low tax rates and the business investment that such rates are supposed to stimulate?

- Nusholtz

April 7, 2012 at 3:07am

DSimon, You are missing my point here. I took the Tax Rate directly from IRS Tax Tables. That is the tax rate. Nothing to do with last dollar or anything. The Tax Rate is 14%. If Mr. Noah says the tax rate is less than that he is not accurate. I know that this tax rate can be lowered with dependents and other exemptions, but that is not what Noah is saying. He is saying the tax rate is less than 6%. That is what the taxes that are paid. This brings up the whole Buffet Rule. Why should a family of four get a 50% reduction in their taxes, when lowering income familes have to pay more of their tax rate? It's not fair. And my analysis is closer to what I paid last year in Fed Taxes. If I remember correctly, I was paying somewhere around 12-14%.

- CRS9TNR

April 7, 2012 at 8:35am

When considering the taxes paid by someone with a median income, forget the income tax. It's the payroll tax that working Americans pay; the income tax is the tax that upper middle and upper income Americans pay. I have commented many times that we have two tax systems, one for working Americans, the payroll tax, and one for the affluent, the income tax. It can make comparisons of income quartiles/quintiles very confusing. Indeed, the WSJ has made an art form of intentionally confusing its readers when reporting on who pays "taxes". But the confusion isn't limited to the WSJ. If the payroll tax is a flat tax of roughly 15%, with no exclusions or deductions, how can someone with a median income pay less than a 15% effective tax rate? There are a couple of possible explanations. One, although economists say the employee bears the employer's share of payroll taxes (in the form of lower wages), some studies of taxes paid don't make it clear whether it includes both. The report Noah is alluding to doesn't make it clear, although the 2011 CBO study on which the update is based seems (seems) to include both by this sentence in a footnote : "Social insurance, or payroll, taxes are attributed to households paying those taxes directly or paying them indirectly through their employers". Second, "income" for these purposes includes items not subject to payroll tax (or income tax), such as transfer payments and contributions to retirement plans ("income" received by working Americans) as well as interest, dividends, and capital gains (income received by the affluent). Third, the EITC can result in someone paying income tax at a negative rate, thereby reducing his "effective" tax rate. Yes, it's confusing, I would say intentionally so (but then I am a cynic when it comes to controlling the "facts" underlying class warfare). I believe it was the WSJ that said poor people aren't poor because they have cable television, the WSJ's measure of poverty/affluence when it comes to class warfare. I spend most of my time working with physicians, who seem to have a "protocol" for most everything. It would be illuminating if economists and others were to have a "protocol" when reporting on "income" and "taxes". But then they would lose control of the "facts".

- rayward

April 7, 2012 at 8:47am

CR, you appear not to know the difference between marginal and effective, or average, tax rates. The marginal rate is applied to the last dollar (and only after deductions). The effective rate is what you end up paying in actual dollars income. It is the actual money that matters, not the way your taxes are calculated. If everyone's last single dollar, at whatever level of income, were taxed at 100%, it would hardly matter. You would still be out only a dollar. Mr. Noah is perfectly correct, and you are wrong. Rat peddles standard right-wingnut lies. First, he fails to account for the fact that income is much more skewed in the US than in most countries. If everyone has the same income, everyone, including "the bottom," pays the identical rate. Hence the claim that our top pas a higher share of taxes than elsewhere is utterly meaningless. They have a lot more of the income to begin with. The relevant comparison is of after-tax net income distributions and, by this measure, the US is an extreme outlier amongst countries with any sort of per capita GDP. Only Chile and Turkey are worse amongst industrialized economies. Also, our system is much less redistributive. So the after-tax gini effect is not just that we start out with a more skewed distribution; our tax system is less progressive too. Finally, rat fails to account for the fact that, while the bottom may pay more in nominal taxes than here, they also have such things as free health care. If you make an apples-apples comparison, we are again far less progressive than almost all of the rest of the industrialized world. And our budget deficits are the plainly the result of the insane failure to collect taxes, not of excessive spending, the nuttery initiated by Romney and his voodoo economics. Pure right-wingnut wackery. Timothy -- soi-disant means self-declared, not so-called. :-)

- roidubouloi

April 7, 2012 at 8:57am

rayward, When it analyzes the tax burden, the CBO does, I believe, attribute the employer's share to the employee and also considers direct income transfers. But its approach is flawed for two reasons: a lot of income is omitted (in the range of $3 trillion or more) because they start from defined taxable income. All of wage-earner income gets counted because that's all they have and there is withholding. The "missing" income that escapes taxation is all at the top. Second, when counting tax benefits as negative taxes, they only count direct transfers. Tax subsidies to things used by the wealthy, or other de facto benefits they receive, are not counted.

- roidubouloi

April 7, 2012 at 9:03am

Even with its flaws, the CBO reports make clear the decline in the progressivity of the American tax system.

- roidubouloi

April 7, 2012 at 10:23am

CRS9TNR: "The Tax Rate is 14%. If Mr. Noah says the tax rate is less than that he is not accurate." What "Tax Rate" are you referring to? Again, Noah wasn't writing about the top tax rate for the last dollar earned for a typical family of four. Here is what he wrote: "This year the average family of four at the median income can expect to pay 5.6 percent of its income in federal income taxes." That means taking into account different tax rates for different levels of income and all the deductions and exemptions, not just looking at the tax rate on the last dollar earned. It's the effective tax rate on all the dollars after figuring out what's actually owed, not the top marginal rate on the last dollar. If I make $50k, and there's an income tax rate of 15%, but there's an exemption of $25k (so there's a 0% rate on income up to $25k), then I can "expect to pay" a rate of 7.5%. That the "Tax Rate" is 15% doesn't reflect what I'm actually going to pay or even expect to pay because there is an exemption. And that's what this article is about: what the median family of four actually expects to pay these days. "I know that this tax rate can be lowered with dependents and other exemptions, but that is not what Noah is saying." Just read what he wrote, because that is exactly what Noah is saying: the 5.6% rate is what a median family of four can "expect to pay." That means the money actually sent to the Treasury, which is calculated after all deductions and exemptions, not the amount that one might send if the code were different than what it actually is.

- dsimon

April 7, 2012 at 10:51am

dsimon, do you understand basic math or logic? useful idiot though Top 10% of earners are the top 10% regardless of underlying income distribution or country. 10% of earnings is 10% of earnings regardless of underlying income distribution or country. The point that top 10% in US are taxed more than top 10% elsewhere applies no matter the distribution. My point is that US is not under-taxing the productive 10% when compared to the rest of the world. This point is not understood by any liberal. As to your example (which has nothing to do my point) For instance, if 9 people make $10k and one person makes $100k and there is a flat tax of 1%, then the "top 10%" pays over 52% of the total taxes--even though the rate is low and not progressive at all thus the top 10% makes 52% of income and pays 52% of Taxes I WOULD LOVE THIS. Sign me up.

- mr_rationale

April 7, 2012 at 12:02pm

dsimon -- never mind, Saturday morning reasoning

- mr_rationale

April 7, 2012 at 12:31pm

http://super-economy.blogspot.com/2010/03/income-distribution-in-us-and-sweden.html interesting link Better to be middle class in US than Sweden

- mr_rationale

April 7, 2012 at 12:32pm

Sorry, rat, that guy is massaging his data and god knows how: 2011, nominal GDP per capita in Sweden is $60K to US $48K http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita PPP basis, Sweden is $40K to our $48K. So, right off the bat US average income is 20% higher. But, given the skewness of income here, and the fact that such things as higher ed and health care are state financed in Sweden, you can be sure that the crossover point at which US residents are better off than the Swedes is a lot higher than the middle of the spectrum. This is typical lying with statistics, no comparison between like things. Frankly, if healthcare, education, and pensions are publicly financed (not to mention childcare in the Scandanavian countries), people only have to pay directly for their own food, clothing, housing, travel, and entertainment. Given the public transportation system, the middle class in Sweden does not struggle the way the middle class here does. We are preyed upon in the US by the wealthy parasitic class that uses its political power, derived from wealth, to ensure that they extract a hugely disproportionate share of national income. All the right wing-nut lies, ever more desperate, cannot cover up that simple truth. The 99% are starting to catch one.

- roidubouloi

April 7, 2012 at 1:46pm

I really don't see the significance of taxation in Sweden. We have huge national debt. The only question is whether raising the top rate will damage the economy. That's it. There isn't any other question. Because, if it won't then we need to raise the rates to climb out of the hole we are in.

- Nusholtz

April 7, 2012 at 3:13pm

Raising rates at the top would only help the economy, big time. Right now, the amount of the deficit is funded by borrowing money from the wealthiest, who have a surplus. They aren't spending that money; they are lending it back to the Treasury. We could take the exact same dollar amount from them through taxation and just not give them back a piece of paper that says they are owed money by the Treasury. The result would be the deficit would disappear, our trade balance would improve (a second order effect), our long-term fiscal situation would be vastly improved, and the whole economy would be less sclerotic. We should actually take the opportunity to lower taxes from the bottom 90%. That would help demand and get the economy back on track. So, we should raise rates at the top by more than necessary to eliminate the deficit.

- roidubouloi

April 7, 2012 at 4:52pm

Roid I am not sure if you are right about the lending from the treasury because interest rates are so low and investors are looking elsewhere. But there is a reason to believe that higher top rats will help the economy. The backward bending supply curve of labor suggests that at some point, when incomes are high enough, people begin to work less and take more vacations. Under that theory, raising the rates at the top of the income curve, actually encourages more work. This is not inconsistent with the poor economic activity after the Bush Tax Cuts and good economic activity after Clinton's tax increases.

- Nusholtz

April 7, 2012 at 5:18pm

Ah, yes, Karl, that wealthy parasitic class that overwhelmingly voted for Barack Obama in 2008. You are a constant source of mirth out here.

- liberalref

April 7, 2012 at 9:16pm

The Mistake is in the graph from The Center on Budget and Policy Priorities, and how they switch data sets in 1996, while labeling this graph with the term tax rates. They swtich from Treasury Data to Urban Brookings Tax Policy Data in 1996, and the data is a bit suspicious. I don't recall tax rates dropping from 9% to 3.5%. If someone can explain this to me, I would welcome this. DSimon, I understand taxes and that's why I went to the tax tables at the IRS. A family of 4 making $ 60,000 has an expected tax payment of $ 8,154. That is your tax rate before deductions and exemptions. This has nothing to do with Marginal or Effective Tax Rates, this is what the Tax Rate is. This data that Mr. Noah presents is fishy, and not consistent with how most major media outlets would present data like this. It's probably the Lef Wing Poilicy Center he got the story from.

- CRS9TNR

April 7, 2012 at 10:46pm

You just keep making up whatever stupid stuff you want, don't you lib. http://economix.blogs.nytimes.com/2010/12/15/is-anything-the-matter-with-kansas-a-look-at-income-class-and-voting/ You are too banal to provide much mirth, but your desperation to say something consequential never ceases to amaze. _________________ The backward bending labor supply curve may exist, nush, but not for very many people I don't get your point about borrowing. The Treasury is having no trouble with funding at these low rates.

- roidubouloi

April 7, 2012 at 11:07pm

I doubt either chart tells the whole story. All taxes as a percent of GDP would be better. The US has some significant state taxes. I still doubt the US would be at the top of this list.

- karlwk

April 7, 2012 at 11:31pm

I believe that the chart does show all taxes as a percent of GDP. According to the Tax Policy Center, total US taxes are 26% of GDP, just what the chart shows.

- roidubouloi

April 8, 2012 at 10:06am

roid That makes sense, they are lending to somebody. I withdraw my objection.

- Nusholtz

April 8, 2012 at 11:04am

roid I meant, "borrowing from" and, come to think of it, why aren't they borrowing from the Chinese instead?

- Nusholtz

April 8, 2012 at 11:07am

They do effectively borrow from the Chinese, but the source of the foreign debt is the trade deficit, not the budget deficit. You can think of it as the private sector trading its surplus (the opposite of the budget deficit), in the form of government bonds, for Chinese stuff. In this manner, the budget deficit does facilitate the trade deficit by giving people something they can use to buy imports without draining their cash, selling assets, or running up private debt.

- roidubouloi

April 8, 2012 at 3:52pm

roid I thought your point was "the amount of the deficit is funded by borrowing money from the wealthiest, who have a surplus." I had suggested this was not the case because the wealthy are looking for a higher rate of return and suggested that it is the Chinese instead. But now you seem to be addressing the trade deficit. Am I not reading you correctly?

- Nusholtz

April 8, 2012 at 4:07pm

By "banal" Karl means that I stick to the evidence. When you say whatever comes into your head like K. does, then you are "colorful." No amount of empirical evidence is going to cause Karl to drop the cardboard stereotypes that he employs.

- liberalref

April 8, 2012 at 4:23pm

You, lib? Evidence? That is an oxymoron. If you were cardboard, it would be a distinct improvement. I think banal gives you too much credit. I should have said "vapid." ______________________ Nush, by definition, if the government is in deficit and not shut out of the credit markets (as of course the US is not), it will be borrowing back what it does not collect in taxes, at whatever rate it has to pay to do it. The only other alternative would be the printing press. If, as is virtually the case, the non-wealthy spend all their income, then it can only be the wealthy who are running the surplus that is the opposite of the Treasury deficit. So, the government is just borrowing back from the wealthiest what it didn't collect from them in taxes. The trade deficit complicates matters a bit. To some not insignificant extent given the relative sizes of the two deficits, the issuance of government debt to finance the budget deficit is contributing to the trade deficit because the Treasury debt gives Americans something to trade with the Chinese who don't want to buy our goods. The external debt is even worse for us than internal debt. I think that's why I initially said the trade balance would also improve if we raised taxes.

- roidubouloi

April 8, 2012 at 4:46pm

roid I can follow this because the government can borrow from anywhere and I don't see what it would be limited even a majority of it coming from the wealthy:

"So, the government is just borrowing back from the wealthiest what it didn't collect from them in taxes."

- Nusholtz

April 8, 2012 at 7:57pm

roid I can't follow this because the government can borrow from anywhere and I don't see what it would be limited even a majority of it coming from the wealthy:

"So, the government is just borrowing back from the wealthiest what it didn't collect from them in taxes."

- Nusholtz

April 8, 2012 at 7:58pm

I believe that the chart does show all taxes as a percent of GDP. roidubouloi, yes, I was mistaken. The deficits are the problem. I knew the feds were spending near 25% of GDP, but I forgot much of that is in the form of deferred taxation (deficit spending). At all levels, government expenditures are nearly 40% of GDP in the US--that's the number I was thinking about. The major EU economies run about 50%.

- karlwk

April 8, 2012 at 11:17pm

I agree with you, nush, and was just trying to explain why. But it is hard to condense into just a few words. Another way to see the point is that deficits in any sector of the economy are merely a discrepancy between book income and what the sector is spending (including investment expenditure). But it is the real spending that represents our wealth and output capacity, not the book income. Since aggregate book income must equal aggregate expenditure (with a relatively small difference for net imports), if the income of the government is less than its expenditures, the income of the private sector must be more than its expenditures by the same amount. And, indeed, the difference is represented by the additional Treasury debt. In addition to its expenditures, the private sector has as income this Treasury debt. It is almost certainly the case that the private surplus is realized amongst the wealthiest, as everyone else pretty much spends their whole income. Thus, if taxes on the wealthiest were raised, there need be very little change in the net expenditure of any sector. The deficit is purely the result of the failure to tax. Instead of taking the revenues it needs in taxes, the government issues paper in exchange for the same revenues. This also exacerbates the trade deficit because the private sector then has stuff, government bonds, to trade to the Chinese in exchange for goods. If it didn't, there would be higher domestic demand and higher domestic output.

- roidubouloi

April 9, 2012 at 12:18am

CRS9TNR: "That is your tax rate before deductions and exemptions. This has nothing to do with Marginal or Effective Tax Rates, this is what the Tax Rate is." But the article isn't citing some abstract payment before deductions and exemptions. It's asserting what the effective income tax rate is: what is actually paid to the IRS after exemptions and deductions divided by income. Again, just read what is actually being claimed in the article: "This year the average family of four at the median income can expect to pay 5.6 percent of its income in federal income taxes." The number being cited is what the family would actually "expect to pay," not some nominal rate that no one actually pays because of exemptions and deductions. If I made $50k and "The Tax Rate" was 20% with no exemptions or deductions, then I would expect to pay $10k in taxes. But if the code allows for an exemption or deduction of $60k, then I know I won't be paying anything and that would be my expectation. (Why would I expect to pay a substantial sum that I know I won't actually owe?) "This data that Mr. Noah presents is fishy, and not consistent with how most major media outlets would present data like this." There's nothing fishy going on here. You may not like the CBPP's politics, but they don't fudge the numbers. And I think the effective tax rate is far more important than nominal tax rates. (Remember there are those complaining about those "lucky duckies" in the 47% of filers who pay zero in federal income taxes even though they have nominal rates that apply to their income levels.)

- dsimon

April 9, 2012 at 9:49am