60/60 #26
Taxes are a big issue. They affect government revenue, which affects the budget. They also affect our bank accounts, so they have an influence on how we spend or save money, which affects the economy. We pay lots of them: income taxes to the federal, state, and sometimes city government. There's the payroll tax (which funds medicare and social security); sales taxes, property tax, capital gains tax.
Today's statistic is a table of statistics (below). These show the effective federal tax paid based on income level. Your "effective" rate is what you pay after you take all the deductions - it's your net tax liability. The chart shows a couple interesting things. It shows that the top 20% pretty much all pay a 20% effective tax rate. It shows that the less money you make, the less you tend to pay in taxes. It also highlights that rich people tend to get their income from capital gains and interest, which is taxed at 15%. We can change the top rate from 35% back to 39% as a symbolic gesture to soak the rich, but it's not really going to affect them (or net gov't revenues) because they get so much of their income from sources other than a paycheck.
Obama wants to soak the rich because that's popular. It's a sentiment that gets votes. Romney promises to cut your tax rate, but also promises that his tax scheme will be "revenue neutral." Translation: he's going to take the same amount of money out of your wallet, he's just going to do it in a different manner. He has to, because of two things he's told us 1) he doesn't believe in redistribution (which is the whole point of our tax system, but whatever) and 2) he promises any tax code changes will be revenue neutral.
The point? Taxes don't matter in this election. Neither candidate is going to actually soak the rich, or more importantly collect the extra revenue needed to balance the budget.
Today's statistic is a table of statistics (below). These show the effective federal tax paid based on income level. Your "effective" rate is what you pay after you take all the deductions - it's your net tax liability. The chart shows a couple interesting things. It shows that the top 20% pretty much all pay a 20% effective tax rate. It shows that the less money you make, the less you tend to pay in taxes. It also highlights that rich people tend to get their income from capital gains and interest, which is taxed at 15%. We can change the top rate from 35% back to 39% as a symbolic gesture to soak the rich, but it's not really going to affect them (or net gov't revenues) because they get so much of their income from sources other than a paycheck.
Obama wants to soak the rich because that's popular. It's a sentiment that gets votes. Romney promises to cut your tax rate, but also promises that his tax scheme will be "revenue neutral." Translation: he's going to take the same amount of money out of your wallet, he's just going to do it in a different manner. He has to, because of two things he's told us 1) he doesn't believe in redistribution (which is the whole point of our tax system, but whatever) and 2) he promises any tax code changes will be revenue neutral.
The point? Taxes don't matter in this election. Neither candidate is going to actually soak the rich, or more importantly collect the extra revenue needed to balance the budget.
| Quintile | Average Income Before Taxes | Effective Income and Payroll Tax Rate | Income from Capital Gains, Interest and Dividends |
|---|---|---|---|
| Lowest | $18,400 | 2.0% | 1.3% |
| Second | $42,500 | 9.1% | 1.6% |
| Middle | $64,500 | 12.7% | 2.5% |
| Fourth | $94,100 | 15.7% | 3.7% |
| Highest | $264,700 | 20.1% | 21.4% |
| Top 10% | $394,500 | 20.7% | 26.7% |
| Top 5% | $611,200 | 20.9% | 32.1% |
| Top 1% | $1,873,000 | 20.6% | 43.4% |
| Top 400[9] | $344,831,528* | 16.6% | 81.3% |
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