The Rich Really Do Pay Lower Taxes Than You

David Leonhardt, who won the a Pulitzer Prize run 2011 for his columns on the financial crisis, has a new piece in today’s New York Times titled, “The Rich Really Do Pay Lower Taxes Than You.” If, like me, you’re concerned about issues like wealth inequality and our inability as a nation to appropriately fund things like infrastructure, education and scientific research, it’s worth checking out. Here, to get right to the heart of it, is a graphic produced by the New York Times which shows how precipitously tax rates for the most wealthy Americans have fallen over the past seven decades.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.” -David Leonhardt

If this is something you care about, I’d encourage you to check out Elizabeth Warren’s idea for an ultra-millionaire tax. Here’s an excerpt.

For decades, the wealthy and the well-connected have put American government to work for their own narrow interests. As a result, a small group of families has taken a massive amount of the wealth American workers have produced, while America’s middle class has been hollowed out.

The result is an extreme concentration of wealth not seen in any other leading economy. The 400 richest Americans currently own more wealth than all Black households and a quarter of Latino households combined. According to an analysis from economists Emmanuel Saez and Gabriel Zucman from the University of California-Berkeley, the richest top 0.1% has seen its share of American wealth nearly triple from 7% to 20% between the late 1970s and 2016, while the bottom 90% has seen its share of wealth decline from 35% to 25% in that same period. Put another way, the richest 130,000 families in America now hold nearly as much wealth as the bottom 117 million families combined.

Our tax code focuses on taxing income, but a family’s wealth is also an important measure of how much it has benefitted from the economy and its ability to pay taxes. And judged against wealth, our tax system asks the rich to pay a lot less than everyone else. According to Saez and Zucman, the families in the top 0.1% are projected to owe 3.2% of their wealth in federal, state, and local taxes this year, while the bottom 99% are projected to owe 7.2%.

While we must make income taxes more progressive, that alone won’t straighten out our slanted tax code or our lopsided economy. Consider two people: an heir with $500 million in yachts, jewelry, and fine art, and a teacher with no savings in the bank. If both the heir and the teacher bring home $50,000 in labor income next year, they would pay the same amount in federal taxes, despite their vastly different circumstances. Increasing income taxes won’t address this problem.

That’s why we need a tax on wealth. The Ultra-Millionaire Tax taxes the wealth of the richest Americans. It applies only to households with a net worth of $50 million or more—roughly the wealthiest 75,000 households, or the top 0.1%. Households would pay an annual 2% tax on every dollar of net worth above $50 million and a 3% tax on every dollar of net worth above $1 billion. Because wealth is so concentrated, Saez and Zucman project that this small tax on roughly 75,000 households will bring in $2.75 trillion in revenue over a ten-year period…

And that’s money that we could use to shore up social security, put a renewable energy infrastructure in place, increase educational opportunities for disenfranchised Americans, bring back manned space exploration, and any number of others things that are critically important to the future of our nation and humanity.

I could go on, but I spent the day hiking the Warren Dunes and I’m beat.

update: Apparently AOC agrees with me.

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27 Comments

  1. dogmatic dolt
    Posted October 6, 2019 at 9:22 pm | Permalink

    Aloha, for those who want to do comparison shopping Bernie and Liz side by side

    https://www.facebook.com/photo.php?fbid=2978661135483205&set=a.130389670310380&type=3&theater

  2. EOS
    Posted October 7, 2019 at 6:33 am | Permalink

    The rich don’t pay lower taxes. When the tax rates are the same, a person earning ten times more than another pays ten times more taxes. If a person earns 100 times more, they pay 100 times more. That would only be fair. A just government would never attempt to take 70% of the earnings of any private citizen.

    The Federal tax rate was about 2-3% until 1941 where it skyrocketed and never returned to previous levels. In the early 70’s, state taxes rose significantly and continue to grow and have never returned to previous levels.

    When the income tax started, it only applied to the very wealthy in our country. It didn’t take long until nearly everyone had a significant tax bill. If you allow the government to take 70% of the earnings of any segment of our society, soon everyone will be taxed at that level. If you have no control over your earnings, you no longer have any freedoms. Just go to the back of the line and wait to see what the government has deemed is sufficient for you and hope they don’t run out before you get to the front.

  3. dogmatic dolt
    Posted October 7, 2019 at 7:57 am | Permalink

    Aloha EOS, you do live in a separate reality. The history of the Federal Progressive Income Tax, tells a different story than the lies you want to spread.

    In 1913, the top tax bracket was 7 percent on all income over $500,000 ($11 million in today’s dollars1); and the lowest tax bracket was 1 percent.2 The highest income tax rate jumped from 15 percent in 1916 to 67 percent in 1917 to 77 percent in 1918. War is expensive. After the war, federal income tax rates took on the steam of the roaring 1920s, dropping to 25 percent from 1925 through 1931. Congress raised taxes again in 1932 during the Great Depression from 25 percent to 63 percent on the top earners.
    As I mentioned earlier, war is expensive.
    In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars3). That’s a high tax rate. Over the next three decades, the top federal income tax rate remained high, never dipping below 70 percent. The Economic Recovery Tax Act of 1981 slashed the highest rate from 70 to 50 percent, and indexed the brackets for inflation.
    Then, the Tax Reform Act of 1986, claiming that it was a two-tiered flat tax, expanded the tax base (ie. Reagan began taxing lower earners at a higher rate) and dropped the top rate to 28 percent for tax years beginning in 1988.4 The hype here was that the broader base contained fewer deductions, but brought in the same revenue. Further, lawmakers claimed that they would never have to raise the 28 percent top rate.
    The 28 percent top rate promise lasted three years before it was broken.
    During the 1990s, the top rate jumped to 39.6 percent.
    However, the Economic Growth and Tax Relief and Reconciliation Act of 2001 dropped the highest income tax rate to 35 percent from 2003 to 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 maintained the 35 percent tax rate through 2012.
    The American Taxpayer Relief Act of 2012 increased the highest income tax rate to 39.6 percent. The Patient Protection and Affordable Care Act added an additional 3.8 percent on to this making the maximum federal income tax rate 43.4 percent.
    2018-2019
    The highest income tax rate was lowered to 37 percent for tax years beginning in 2018. The additional 3.8 percent is still applicable, making the maximum federal income tax rate 40.8 percent.
    Either of the tax the rich proposals would only raise the maxiume tax rate to the mid or high 40% (on a much higher income than in the past), STILL WELL BELOW THE LEVEL of Taxation before the Reagan swindle.

    https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx

    EOS, you will believe any amount of bullshit won’t you. You allege you are educated, but put out such obvious lies–I don’t think you actually are a self thinking aware person–just a repeater for the lies you want to believe.

  4. Lynne
    Posted October 7, 2019 at 10:53 am | Permalink

    FWIW, societies with heavy taxation tend to be happier. See most Scandinavian countries. The USA was not harmed either by having high rates for the rich. I would go so far as to say that our current spending with such a high percentage for military spending which mostly benefits the interests of the rich is related too. The rich have been running things and unfortunately, they own media outlets like Fox which brainwash the EOS’s of the world into supporting taxation schemes which benefit the super-rich.

    LOL, I think we should tax libertarians who like to claim that taxation is theft at 99% !

  5. EOS
    Posted October 7, 2019 at 6:34 pm | Permalink

    DD,

    Apples and oranges. What was the median or average rate for those years. Do you, like Mark, think the rich pay less taxes than the middle class?

    Lynne,

    Those happy people who are taxed at more than 50% of their income come home after working all day to tiny little apartments that don’t even have refrigerators to store food. I wouldn’t want to trade places with them. I’m glad I live in the greatest country in the history of the world where I get to keep 80% of what I earn to spend based on my personal preferences and not by governmental dictates.

  6. ElsieGal
    Posted October 7, 2019 at 7:38 pm | Permalink

    “Income” is a complicated term, since it means so much more than what one earns through paid work (e.g., traditional 40-hour week or part-time work or gigs via Uber or YouTube channels). The tax laws seem to make it easier for people with other sources of income to pay a lower rate on that income than on actual earned-through-labor income, hence the assertion that the very wealthy pay less on total income from all sources than the average working person. That’s my take anyway.

    My real reason for commenting tonight is to recommend a trip to Warren Dunes to everyone! What a great place it is. Also check out its lesser-known cousin Warren Woods (closing for the season soon) that offers glorious old growth trees and amazing flora and fauna. Closest thing to the west coast redwoods I’ve ever seen, and only 2.5 hours away,

  7. dogmatic dolt
    Posted October 7, 2019 at 7:40 pm | Permalink

    EOS, —if you bothered to read MM post you would see he was talking about tax rates and the relative amount of a person’s wealth—you were talking apples and oranges–I decided to make fruit juice
    Those people taxed at or near the 50% tax rate by either Warren or Sanders would already have 10 BILLION dollars of wealth—they have servants like me to fill those refrigs.
    I will never forget the time I was standing in line at Disney World next to a German family on vacation. This was maybe four years after unification. Because of unification the German income tax rate was at 57%. He was from Leipzig in east Germany on his annual one month paid vacation. Was a factory worker and brought his family of four to spend 2 weeks in Florida. Because of that 57% tax rate (down to 47.5% now) Germany was able to integrate the east German population with the more prosperous west in short order with little to no social dislocation. (I’ve never had a position in this country that paid me for a one month vacation). And by the way EOS, the work week in Germany is 35 hrs. I just saw where German metal workers just won a 28 hr work week.

    https://money.cnn.com/gallery/news/economy/2013/07/10/worlds-shortest-work-weeks/5.html

    Germany’s income taxes are hardly “progressive”. The lowest rate is 42% the highest 47%. Either Sanders or Warrens only raise taxes on the most wealthy 1% of tax payers. The middle class taxes would not go up, but what we get for those taxes would greatly increase. Combine Sander or Warrens tax program with Tulsi’s foreign policy (end the new cold war, and stop the regime change wars) and everyone could get a tax cut.

    EOS you must either be extremely wealthy or are a tax cheat. Between Social Security, Medicare, FICA, State Income tax, (you are at about 23%) plus property taxes and you are paying closer to 30%—throw in your medical insurance, (my daughter pays over 20% of her pay for her medical insurance) and your over your 50% with far less to show than in other countries.

  8. Jeffrey Prescott by proxy
    Posted October 7, 2019 at 9:16 pm | Permalink

    As someone who spends all day thinking about national security, *this* may well be the most significant threat to our long term prosperity and security.

  9. Anonymous
    Posted October 8, 2019 at 5:01 am | Permalink

    Obligatory “You didn’t build that!” “You lie!” rant.

  10. EOS
    Posted October 9, 2019 at 4:31 pm | Permalink

    I know Mark meant to say tax rate, but the editor who made the headline/title didn’t get the message. I wouldn’t want to live in Germany.

    I’ve had a month’s vacation every year for the past 30 years. I pay $160 a month for very good healthcare – my employer pays the bulk. I choose the plan among a number of options, I could pay more and I could pay less. I very much appreciate the fact that I choose what is best for me. Property taxes are less than 4K per year. I wasn’t considering Social Security, or Medicare, or FICA, but neither was the original post. I tax defer 20% of my income, and that further reduces my taxes.

    No where near 50% and I enjoy more freedoms in the USA than any other nation I am aware of.

    I don’t envy the rich. They work hard to accumulate the wealth they have. I don’t want to be rich, Iprefer to spend my life pursuing other things.

  11. Posted October 9, 2019 at 5:37 pm | Permalink

    Aloha, EOS given how you live, many of us would call you one of the top earners in America. sorry you are clueless about how most of us live.

  12. dogmatic dolt
    Posted October 9, 2019 at 5:45 pm | Permalink

    Aloha, Tulsi ‘s statement on Trumps hypocrisy and the Kurds

    https://www.facebook.com/TulsiGabbard/videos/1141222359403215/UzpfSTEwODE2MDU3NDk6MTAyMTc0MTc1ODg5MjY2MTc/

  13. anonymous
    Posted October 9, 2019 at 5:46 pm | Permalink

    “They work hard to accumulate the wealth they have.”

    Yes, people do work hard to be born to rich parents.

  14. EOS
    Posted October 9, 2019 at 8:15 pm | Permalink

    DD,

    Top earner? Hardly. I make less than the median, but I live within my means. The house is paid off and I don’t have a credit card balance. I don’t want for any material thing. I am blessed.

  15. EOS
    Posted October 10, 2019 at 6:42 am | Permalink

    We could eliminate income tax altogether for the majority of taxpayers. Impose tariffs on Chinese goods.

    If China wants to sever economic ties with the NBA because a citizen exercised free speech and voiced support for a Hong Kong democracy, then we should make them pay. And if the NBA restricts the speech of any American as a result, all Americans should sever economic ties with the NBA.

  16. dogmatic dolt
    Posted October 10, 2019 at 7:46 am | Permalink

    Aloha EOS, “We could eliminate income tax altogether for the majority of taxpayers.” Excellent idea–I’m on board. We now just need to sort out who should pay the tariffs on Chinese goods, and how high we are going to tax the minority (the top 1 or 2 percent I say) of folks who we will still demand an income tax from.

    See that is not so hard to find some common agreement. Do you think just the top 1 or 2 percent, or would you go deeper, the top 5 or 10%? I also think that the tariffs should be paid by those same folks, where are you at on that issue?

  17. dogmatic dolt
    Posted October 10, 2019 at 8:05 am | Permalink

    Aloha EOS, ” And if the NBA restricts the speech of any American as a result, all Americans should sever economic ties with the NBA.”

    I did not know you were a secret Sandernesta. Soak the rich, and engage in economic boycotts over free speech rights. Love it. I can only assume you are boycotting everything about the NFL since its whole sale abuse of Kappernic, and its restrictions on the free speech rights of all of its players.

  18. EOS
    Posted October 10, 2019 at 8:21 am | Permalink

    DD,

    No, I don’t think we should penalize those who are the most successful.

    How about letting the people who continue to buy goods from such an immoral country be those who pay the tariff indirectly. It could be a self-selection process.

    Did you know that political dissidents in China are used for organ transplants? The wait time for an organ in China is sometimes less than a week.

    https://www.wsj.com/articles/the-nightmare-of-human-organ-harvesting-in-china-11549411056

  19. EOS
    Posted October 10, 2019 at 8:24 am | Permalink

    We can both boycott the NBA or any other business we want for any reason we decide is appropriate. Isn’t freedom great?

  20. Anonymous
    Posted October 10, 2019 at 8:51 am | Permalink

    We are free to be hypocritical,
    A trait that we each exhibit-ical.
    Many here are afraid to admit it at all.
    But I will openly own up to it all,
    For I am a human after the Fall.

  21. EOS
    Posted October 10, 2019 at 9:08 am | Permalink

    Yeah, NBA is one thing, but I draw the line at the Patriots. Go Brady – GOAT!

  22. dogmatic dolt
    Posted October 10, 2019 at 9:25 am | Permalink

    Aloha EOS, Then you must be in favor of reinstating inheritance taxes (I can get behind that too). You and I have agreed on the basic principle of getting rid of income taxes for most. I am waiting for a proposal from you. I put mine out there–you disagree, fine. The art of negotiations is that now you put out your counter proposal.

    Kapernick and every other person attached to the NFL has been denied their free speech rights by the owners—what gives them the right to deny the players their rights? I mean you want to prohibit NBA owners from doing what NFL owners have already done–ie. deny people their rights so that the owners can maximize profits–why is that alright for NFL but not NBA—I get it you like football but not that “ghetto” game eh.

    By the way spirits on the line are still high–they know they are struggling for us all.

  23. EOS
    Posted October 10, 2019 at 10:26 am | Permalink

    No way do I think inheritance taxes are fair. The money has already been taxed at exorbitant rates.

    My boss tells me what I can wear and limits what I say to others. It’s my choice to comply or get another job. Kapernick doesn’t have to play football either. He is free to say or do whatever he wants, and if he lets his boss dictate his actions, it is on him. No one has denied him any rights. You are free to boycott football.

    I love college basketball. Call me ghetto if you want. I have brackets every March (although I don’t use them to bet – just bragging rights). I just don’t get excited about the pros until the championships.

    I guess for me it’s not about denial of rights, but about the reason speech is being constrained.

    My proposal is to eliminate all income taxes and generate revenue through taxes on foreign goods. This has two benefits – raises money and also supports US companies. Win – Win.

  24. Lynne
    Posted October 10, 2019 at 2:49 pm | Permalink

    It always is interesting to me how some people make a huge moral distinction between those who don’t work because of inherited wealth and those who don’t work because of other reasons such as disability. I guess if you have money, you are better able to brainwash folks.

  25. Anonymous
    Posted October 10, 2019 at 3:19 pm | Permalink

    Given that good fortune occurs to the favored, the transitive property implies that if Lynne has good fortune, then she is favored as a true statement.

    It also implies that the inverse is true. If Lynne is not favored, then Lynne will not have good fortune.

  26. EOS
    Posted October 10, 2019 at 3:58 pm | Permalink

    The Bible has many psalms that lament why do evil people prosper? God allows evil persons to prosper and accumulate wealth because this life is all they have. Because of their choices, they have set their fate. And because they have rejected an afterlife in heaven, God allows them to prosper for the short time they have. This is not something to be envious of. Be content with what you have. You don’t Know how hard a person born into wealth may have to work.

  27. Anonymous
    Posted October 11, 2019 at 5:48 am | Permalink

    I absolutely agree. It’s a shame that we don’t pity the rich enough, as we already know that the earth will be inherited by the meek. The sperm and ova respond to internal impulses, unswayed by external abstract elements of property law and wealth.

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