clutchy

I guess the super wealthy in this country are getting richer, tax revenue was up 13.5% this year over last largely at the expense of the rich. Seems like a pretty big deal, and it's good for the treasury.


http://online.wsj.com/article/SB1148...lead_story_lsc



EDIT: I guess you have to subscribe to view the article, here it is...

WASHINGTON -- As America's rich get richer, the taxes they pay on their increasing income is yielding a windfall for the U.S. Treasury.

The Bush administration and its supporters point to a recent surge in tax receipts as vindication of the 2001 and 2003 tax cuts that critics say favored the wealthy. And even opponents of the tax cuts acknowledge that the surge in unanticipated revenue is coming from the rich.

With wealthy Americans taking an increasing share of total household income and paying a greater share of total taxes, "what we're seeing is a repeat of the late '90s, where you get a flood of tax revenues from the hyper-rich," said Rudolph Penner, a former Congressional Budget Office director now at the Urban Institute think tank. "It may raise some worries socially, but it certainly is good for revenue."

The Treasury reported last week that tax receipts in April jumped 13.5% from a year earlier to $315.1 billion -- much of that increase coming from taxes on investments and other sources of income more important to the wealthy. Receipts from these so-called nonwithheld taxes in April, a month when many tax returns are filed, were up about 17% from a year earlier. (Most Americans have the bulk of their taxes withheld from wages paid through the year.)

Treasury Secretary John Snow, in a speech to the Bond Market Association Friday, said: "The results are in, and they are clear: Economic growth has led to a surge of tax revenues and shrinking deficits. Despite the cries from our critics, it cannot be denied that low taxes truly are consistent with rising federal revenues, which of course help bring the deficit down."

Surging tax receipts have led government and Wall Street analysts to scale back their projections of the federal budget deficit. The CBO said earlier this month that it expects the budget deficit for the fiscal year ending Sept. 30 to be significantly narrower than $350 billion, an improvement over its previous $371 billion projection.

A surge in corporate profits is also helping to fill Treasury's coffers. Corporate income-tax receipts are up $40 billion, or almost 30%, so far this year, well above the CBO's projected 9% increase.

Some states are enjoying a similar windfall. California is expecting a $7.5 billion surplus. Much of that, state finance officials say, is coming from an increase in personal income taxes fueled in part by the exercise of stock options by Google Inc. employees.

Mr. Bush earlier this week signed legislation extending for two years, until 2010, the 15% tax rate on capital gains and dividends. And he has been pressing Congress -- without success -- to extend lower tax rates on ordinary income, which are set to expire in 2010.

Because the U.S. taxes each additional dollar of income earned by the best-off families at rates of up to 35% while taxing a dollar earned by others at 15% or, in some cases, zero, the Treasury benefits when the fruits of economic growth go disproportionately to those at the top, as they have in recent years.

Tax collections are up "not because economic gains have been dramatically faster than expected," said Issac Shapiro of the Center on Budget and Policy Priorities, a liberal advocacy group critical of Bush policies, "but [because] the gains that have occurred have been concentrated among high-income people." Put another way, he said, it's "a good thing for the federal Treasury, [yet] the rich are getting richer but the middle is not benefiting."

Administration officials argue that the Bush tax cuts were necessary to spur the economic growth that has produced rising tax receipts -- proving, they say, that critics of the tax cuts are misguided. "Part of our strategy to cut our deficit in half is to continue to grow this economy," President Bush said earlier this week. "Tax relief has helped a growing economy, which means more tax revenue for the federal Treasury."

Though the Bush tax cuts mean that the best-off Americans face lower effective tax rates than under President Clinton, they do pay a bigger share of all federal taxes. Data from the CBO and projections by the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution think tanks, show that the top 10% of income earners (with incomes above $251,400) will pay 56.2% of all federal taxes this year, up from 52.2% in 2000. That includes income and payroll taxes, Social Security and the like. The growing tax take from the rich reflects their growing share of the nation's income. In 2006, the top 10% is projected to receive 44.7% of all household cash income, up from 40.6% in 2000.

Despite the strong economy, wage growth among most Americans has barely kept up with inflation even as income at the top level has continued to rise as corporate executives, athletes, celebrities and other highly paid individuals enjoy fatter paychecks.

Though reliable data on the incomes of the best-off Americans aren't yet available for 2005, there are indications that the past few years have treated them well -- better than those in the middle and the bottom. According to the Census Bureau, the top 20% of households in terms of income received 50.1% of total household income in 2004, up slightly from each of the two previous years -- and that tally doesn't include all income that accrues to the very richest.

Estimates, based on tax and other data, by economist Emanuel Saez of the University of California at Berkeley suggest that the share of income going to the top 1% of households (excluding capital gains, which are taxed at a lower rate) fell when the boom of the 1990s ended, and then rebounded after 2002. Mr. Saez estimates the top 1% got 16.2% of all income (excluding capital gains) in 2004, just shy of the 16.5% peak reached at the top of the boom in 2000.

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LK was treated unfairly

thanks X

ialsohaveadream

In before the lock or the disappear!

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gwilks98

Probably should have put this in the financial forum. It'll live longer there.
Economically speaking, it seems ill timed to give the rich a tax refund when the lower and middle class are hurting.

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MikeD

In.

Interesting article, though. Thanks for the link...

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nickel

you got a case of the Mondays?

you are supposed to post as light and airy as you can and then cross your fingers.

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mcs328

Seems mathematically sound to me.

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ialsohaveadream

Exactly.

And the tax revenue is surging because of the following: a housing bubble that fueled tons of speculation and profit for several years, huge profits for energy companies, and a surge in the stock market because of those two things.

In other words, the tax revenues would've gone up anyway, regardless of the tax cuts. If you don't believe me, see "dot com bubble".

zippyjuan

Your title makes it sound unfair that people who made more money are paying more in taxes. "on the backs of the rich." It seems natural that if you make more money you pay more in taxes. That should be true for all income levels. Those of us at more moderate income levels are not doing as well.

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clutchy

my whole point in posting this was to say tax revenue is up, which is a good thing. maybe it's the bubble, maybe it's the tax cuts... who knows. What i do know is that the wealthy in this country are paying more in taxes even after all the tax cuts. Get it?

tax revenue remains flat no matter what the tax% rate.

ialsohaveadream

No, I don't get it, because unless I'm reading you wrong, you're saying something entirely different from the article.
Uh, no.

zippyjuan

Yes, they are paying more than they were. That is because they are making more than they were. Those poor rich people!

clutchy

uh, yes. If i had the graph i'd show it to you but i don't. It's been relatively flat for the last 25 years and beyond.

ialsohaveadream

I like how your qualifier there ("relatively") is loose enough that no matter what evidence is shown, you can claim to be right. But you're not.

zippyjuan

If income levels do not change and things which effect taxes like deductions do not chage, then what happens to tax (or any) revenue if you change the rates? An increase in tax rates will result in an increase in tax revenue. A decrease in tax rates will result in a decrease in tax revenue. If the economy is producing say a trillion dollars in taxable income and the tax rate is ten percent, then the government will recieve $100 million. If the tax rate is increased to fifteen percent, then the government recieves $150 million.

If the government raises tax rates, people will not decide to reduce how much money they make. Most want to maximize their income reguardless of the tax rate. It will reduce how much money they (citizens) have left over to purchase other things. Thus a tax rate increase may have some slowing effect on the growth rate of the economy, but will not result in flat income for the government. The effect on the economy will depend on where the tax increases or cuts are made. Tax cuts or increases on lower incomes have a larger impact on economic growth than tax cuts or increases on higher incomes because those at lower incomes spend a larger portion of their income on purchasing items and that purchasing would be more effected by a change in disposable income brought about by the tax change. A change in tax rates for the highest incomes does not result in any changes in their spending and in turn on the economy as a whole.

I would be interested in seeing your graph.

clutchy

I would too, my tax professor whipped it out and i was dumbfounded... I'll try and find it, but i'm not holding out much hope. I'll make a visit to his office this week and pick up a copy.


here's the premise for my statement. You would agree that the wealthy pay a very large portion of the tax in this country? Ok good. So when the tax rate goes down they tend to invest more in dividend producing income and stocks making capital gains etc... so even though they're tax rate is lower they're still paying in tax on top of what they would b/c they have more disposable income.

So no matter what the rate, you typically have a flat graph when compared to GDP or something. When reagan lowered the rate to 28% from 50something the revenue stayed the same...

johnnymk

So how do the rich benefit from paying more taxes? Nicer roads? Better police protection?

We've been trough this before and I still don't buy the argument that just because you earn more that you owe more. It's just another half baked socialist scheme to make it legal to confiscate from the haves and give it to the have-nots.

It really is getting old.

clutchy

where would the world be w/o qualifiers? i am right though...



I'm kinda confused. you seem like someone who is fairly well off. Enough time to kick around the beach taking pictures. You live in san diego, a very expensive place to live. Am i missing something?

zippyjuan

I live below my means. If you must know, I earn less than $40k a year before taxes. I am sure you have hobbies too. May even spend more on them than I do. That is not relevant. I doubt you are a millionare either. Do you disagree that if someone makes more money than they did last year that they should pay more total dollars in taxes than they did the year before? I have not made any statement here about which income level should pay a higher percent of their total income in taxes. Clutchy's headline implies that the rich are paying too much in taxes. It is nice to see that you are concerned about the taxes paid by people who make more than you or I ever will.

clutchy

I think it's great that you live below your means. I did that last year, and had quite a bit of money left over for fun. and I made a little under 30k last year. I saved 1/3 and then played with the rest, and this was in napa valley.

i believe in a progressive tax, and my whole point with the article was that tax revenue is up 13% largely b/c the wealthy made more and paid more.

besides, i plan to be independently wealthy at some point, doesn't matter how much you make it matters how much you can save...

zippyjuan

Good luck with your plan!

clutchy

thanks! it's not difficult you just have to make some sacrifices early on.

mcs328

Still makes sense to me the part I put in bold. I don't see the problem.

dbax791

I find it weird that the way the current tax code is set up, you are rewarded more for being wealthy and not working than actually having a high-income job.

If you live only on interest, you pay a lower capital gains tax as opposed to a wage rate you would pay if working. Also, if you don't have wages, you don't pay into Social Security.

zippyjuan

Because money is power. The rich have more to contribute to politicians and the pols are also wealthy so they write the laws to give them the breaks. Works for corporations over workers too.

Airencracken

Zippy I do believe you've hit the nail on the head. We seriously need campaign finance reform.

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clutchy

you should start with the democrats, they get most of their money from massive donations from a few people, Soros...

the average donation to the republican party is pretty small.

Airencracken

Really, did you have to make this partisan? I'm sick of all crooked politicians (all of them?). C'mon man, get off the soap box.

Hello Mr. Thread Lock, how are you today?

zippyjuan

Both parties do it- neither is more innocent than the other. The largest donors contribute to both to cover themselves whoever wins.

clutchy

I'm not going to disrespect your name, but seriously the democratic/liberal agenda is driven by elites. makes me wonder sometimes... but both sides are crooked and the republicans are going to pay dearly this fall election for not sticking with their mandate... hello bush impeachment hearings...

VTGreg

This thread definitely won't last much longer, but I agree with the comments about both parties taking advantage of campaign finance laws. Politics has become big business and everyone involved capitalizes on that.

It isn't a democrat or republican issue, it's an American issue and until some people with the best interest of American get into office it will continue as is. The problem is that person probably wouldn't get reelected. Until we have politicians who are willing to fall on the sword for the sake of the country, things will not get better.

As far as the tax code is concerned, it is flawed and overly complex. I do believe that the wealthy should pay more in taxes, but the rob from the rich to pay the poor mentality has gone too far. I am a big proponent of a national sales tax.

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