OK, so I’ve blithered about the concepts surrounding ‘soak the rich’ and how futzing about with income tax rates doesn’t mean much to people who already have huge wealth. But what about this current round of tax manipulations?
Here is a description of what we’re talking about. Just look at the tables towards the bottom. Mostly, and ignoring the exact percentages, this sort of structure looks about right to me – everybody (in theory) who makes any money has to pay *some* income tax – it’s important conceptually that *everybody* who isn’t totally destitute is a tax payer, at least nominally, as a small step toward countering the ‘them versus us’ of politics.
Now, for specific examples – plain vanilla, net taxable income:
If I make $50k, my tax bill goes down $536 (Note: median household income in the U.S. is $52K);
If I make $100k, $1,569;
If I make $200k, $3,682;
If I make $300K, $5,682;
If I make $500k, $12,867.
OK, then: the reduced tax rate is worth about $500 to your typical American household. If your livin’ in Fat City, it could be worth a couple grand or more.
Let’s do another little math trick – let’s estimate how much all this is worth in terms of government revenues. This is rougher math (it’s tedious to work out the details, I don’t think increasing accuracy buys us much here):
– we’ve got about 60 million families earning around $50k in America. The tax break is worth about $27B per year, or just under one third of the AIG bailout;
– about 13 million families make around $100k. That’s around $20B, or around the amount of government bailout Goldman Sachs “earned” last year, almost half of which went to bonuses;
– about 1.4M families make the big bucks – the top 1% of people reporting taxable income (remember, this number may or may not include people with incredible wealth – say, $50M in net worth or more – who may or may not pay income taxes) average around $1.2M in income, for a total of about $400B in taxes paid, or under 20% of the officially recognized bailout (so far).
The point to ponder here: the tax revenues being fought over tooth and nail, with much wailing and gnashing of teeth, look pretty silly compared with the size of several very dubious, not to say criminal, payouts by our government over the last few years. I’d much rather have the rich hang on to a few grand in tax money than fund Goldman Sachs’ billion-dollar bonuses, for example. While I have no real problem with the level of taxation in this country – I want it simpler and less prone to being gamed, but the level doesn’t strike me as outrageous on its face – I’ve got loads of sympathy with the ‘taxes are just giving crack (spending money) to an addict (the federal government)’ crowd.