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Saturday, February 27, 2016

Taxes vs. Wealth

The rich complain about how they pay most of the taxes in the nation (and they do). The social justice types complain about how the wealthy own 80% of the countries assets (it's actually 85%). Both sides presents numbers, but neither side ever presents the other side's numbers.

So, let's do that.

The tax numbers are primarily from the CBO's 2011 data, while the wealth numbers are primarily from Wikipedia's 2007 data. I tried to compare 2011 to 2011 data, but was unable to find any newer wealth data than Wikipedia's. If you know where the 2011 data is at, or where any newer data is at, let me know.

% Taxes Paid% Wealth OwnedGovt. Transfers (Raw $$)Average
Market Income
Top 1%2434.6??1447500
Top 20%68.785.111000240800
2nd 20%19.310.91410089600
3rd 20%8.941650055400
4th 20%2.50.21570031100
Bottom 20%0.6091007900

Now, you will notice a few things right away.

First, looking at the first column, it is obvious that the top quintile really does pay nearly 70% of taxes. Second, when you combine the first two quintiles, the top 40% of taxpayers pay a staggering 88% of taxes. The remaining 60% of the population pays only 12%, and most of that 12% is still in the top 50%.

Fully 50% of the population pays less than 10% of the taxes. Once you figure in government transfers, that is, money transferred directly to the taxpayer through food stamps, Medicare/Medicaid, welfare, etc., the bottom 50% does not pay any taxes at all.

Not only doesn't that bottom 50% not pay any taxes, the people in it actively make money simply by breathing and filing a tax return.

But..... this is not as rosy for the bottom 50% as it appears, because.... well...
More on that in a bit.

The second column helps explain why the bottom 50% doesn't pay any of those taxes. It doesn't have any money. The bottom 20% of this country has ZERO percent of its wealth. None. Nada. Goose egg. Empty Set. We're looking at the inside of a great big empty.

The bottom 60% of the country has less than 5% of the country's wealth.
The bottom 80% of the country has only about 15% of the nation's wealth.

Of course the wealthy pay almost all of the taxes.
They have almost all of the money.

But isn't a lot of their money transferred to the poor?
Why, yes. Yes, it is. But look at that transfer column.
The rich actually get more government transfer money, in raw figures, than the poor do. In fact, the group that gets the least money is the bottom 20%. The poorest of America's poor receive the least of America's transfer payments. The biggest payments go to.... wait for it... the middle class. But even the rich make out better than the poor do.

And please don't be tempted to say, "Good heavens, man. The difference between the payouts for the rich and the poor is a mere $2000. That's hardly a difference at all." Sure, if you're in the top quintile, making a quarter million dollars a year, then $2000 is a rounding error. But if you're in the bottom quintile, making only $7900 a year, then $2000 constitutes 25% of your income. That extra $2000 the rich pick up is, for the bottom 20%, the difference between living in an apartment and living on the street.

Here is a more complete rendering of CBO data, breaking out, by quintile, exactly how much money each group gets in income and pays in taxes, on average. The CBO does not provide the numbers for areas that have question marks.

Table 1 - Average Household Income, Transfers and Taxes by Before-Tax Income Group, 2011

Lowest QuintileSecond QuintileMiddle QuintileFourth QuintileHighest QuintileThe Top 1%
% Taxes Paid0.62.58.919.368.724
% of National Income5.3?14.1?5214.6
Tax as % of Income1.9711.215.223.429
Market Income15500296004980083300234700?
Government Transfers910015700165001410011000?
Before-Tax Income24600453006640097500245700?
Federal Taxes
500320074001480057500?
After Tax Income
24100421005900082600188200?


Note: The numbers in the second table are largely drawn from CBO Table 2. Numbers are different because " In Table 1, households are ranked by before-tax income, which includes income from government transfer programs, including Social Security and Medicare; in this section (Table 2), households are ranked by market income, which excludes income from transfer programs."

So, don't beat on the rich for not paying taxes. They do.
And don't beat on the poor for sucking at the government teat.
Compared to everyone else, they don't.

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