Rich people pay most of the income tax?

This is a humbug because the payroll tax is a capped, flat 16% income tax that is paid on every dollar of income by the working class. Even people with an earned tax credit pay 8% because their employer's half is not returned and it comes out of their total compensation package. The payroll tax goes right into the treasury and is spent for current budget needs same as every other tax.

Social Security is a universal welfare system and there is no legal connection between SS and the tax. Why no connection? Because Congress could repeal the SS benefits.

Second, very rich people don't pay income tax. They have very little income except for dividends and interest payments. They pay 15% capital gains on the money they draw for personal expenses. When Bill Gates was CEO of MS he was regularly reported as being the worst paid CEO in western Washington. He didn't need to draw a salary.

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If I take $10 from a rich

If I take $10 from a rich person and give him $8 in return, while I take $4 from a poor person and give him $6 in return, how is that bad for the poor person? Social security is structured in this way: The rate of return on your "contribution" (to use their terminology) is considerably higher for poorer people than rich. So I don't say how people can credibly claim that social security isn't progressive, even if the tax itself is regressive.

Trying to make theft fair is

Trying to make theft fair is pretty damned hard I imagine. Maybe even *gasp* impossible?

Four points of clarification

Not sure I get the entire picture, but here's my understanding:

1. I am not persuaded that the collective effect of US society's costs and burdens results in net harm to the interests of the wealthy. (I am unmoved by McCain's alarm over "redistributionist policies," in that most or all government policies both cost something and benefit someone. Taxes that pay for police and courts to protect property rights arguably have the effect of "redistributing" wealth from taxpayers who have less property to people who have more, yet I don't hear McCain complaining about such policies.)

2. That said, FICA taxes putatively pay for Social Security, not income taxes. And in the US I expect that the rich pay the bulk of federal income taxes. By definition, the rich have more income, right? True, the rich also pay the bulk (nearly all?) of capital gains taxes, but that doesn't preclude them also paying income taxes.

3. That said, the federal government borrows the money raised by FICA taxes to finance government operations generally. In this sense, FICA taxes are merely a substitute for other sources of federal revenues, including income taxes. (Thus people who argue that “privitizing” Social Security would result in an economic stimulus overlook the fact that the privatization plan would, ceteris paribus, coincide with an offsetting increase in other taxes or government borrowing to fund general government operations.) So perhaps this is what billwald means when he lumps together income taxes and FICA taxes.

4. For what it's worth, the FICA tax may be more regressive than you know. While the law places the duty to pay FICA taxes (in econ jargon, the "incidence" of the tax) 50% on employers, the actual burden of the tax falls 100% on employees. People tend to consume any good or service up to the point where the cost of consuming one more item equals the benefit anticipated from that item. The employer's cost of consuming the services of one more hour of an employee's time includes the cost of paying 50% of the FICA taxes. This tax depresses the amount that the employer would otherwise be willing to pay the employee by the exact amount of the tax. That is, the employer's share of the FICA tax is deducted from the compensation package that might otherwise have been available to the employee.

I don't dispute the

I don't dispute the incidence falls mostly on the workers. In my example above, 100% of the burden fell on workers. That doesn't change the fact that a program that transfers money from rich to poor is by definition progressive. Some of the transfer is lessened because the rich live longer, but the net effect is still a transfer.

I support the concept of SS

and object to the argument that poor people don't pay any income tax. As noted, the payroll tax goes right to the treasury. Even the few people with children who receive the earned income tax credit still pay the 8% of the employer's tax out of their total compensation package. I am curious to know how much payroll tax is payed by people who don't make enough to file an income tax return. (strange name for a tax bill you supply)

A country as rich as ours can afford to take care of the old people.

Median pay in the US is less than $15/hour. Boggles my mind that people making 10 bucks an hour worry about the tax bill for those netting $250K after taxes. And no, the real rich don't create living wage jobs by "investing." Buying an existing stock does NOT increase jobs. Buying consumer goods creates jobs. Old saying - nothing happens until someone sells something.

Tax burden, Stock market

Boggles my mind that people making 10 bucks an hour worry about the tax bill for those netting $250K after taxes.

Everyone should worry some about everyone else's tax bill, because the tax isn't just paid by the person who is nominally paying the tax. Taxes shift supply curves, which shifts prices, which means that you end up helping to pay a rich guy's tax bill. As a matter of fact it doesn't matter who nominally pays a tax on a market transaction. The real fraction of the tax bill that each party ends up paying depends entirely on the supply and demand - specifically on elasticity.

So when you hear that some guy making $250K a year had his taxes increased, keep in mind that the hurt isn't limited to him - everyone is hurt who buys his services, because they all share the burden of the tax increase, and they don't share any smaller of a fraction of that burden just because the government taxed the one guy as opposed to taxing all his customers.

And if they are using his services as inputs to further production - for example, if he makes glass and they use his glass in constructing buildings - then that affects their own supply curve, which affects the price. In short, the burden of one person's tax can be, and typically is, spread widely through the economy.

So that's one reason everybody should care about everybody else's tax. Not out of the goodness of their hearts, but for perfectly self-interested reasons. This works both ways. The rich should care about the tax burden on the working class, because this affects the bottom line of the rich as well.

And no, the real rich don't create living wage jobs by "investing." Buying an existing stock does NOT increase jobs. Buying consumer goods creates jobs. Old saying - nothing happens until someone sells something.

But if you bought an existing stock then someone sold that existing stock. So the old saying doesn't distinguish between the two cases. And it should not. Buying existing stock creates new jobs in much the same way as buying a consumer good.

If you buy a consumer good, what job are you creating? Are you creating the job of the person who already created the consumer good? Not in any straightforward way, because he already did his job before you bought the consumer good, and you can't cause things to happen in the past. Well then, are you creating the job of someone who creates that same good in the future? Again, not in any straightforward way, because you are not promising to buy that good in the future.

So the way in which buying consumer goods creates jobs is not at all straightforward. So how does buying consumer goods create jobs, exactly? Here's the simplest way I can explain it. When you buy a consumer good, you convince the person that you buy it from that there is a market for that consumer good. His expectation of the future is based on your current and past behavior. Since he expects to be able to sell that good in the future, he is willing to hire (or retain) someone to make that good for a future sale.

Buying an existing stock works in much the same way. When you buy an existing stock you convince other people that there is a market for stocks. So they are willing to buy stocks for future sale. All of you together, in turn, convince people to create new stocks. Every existing stock, after all, starts out as a new stock, which starts out as a business, and a new business creates new jobs. In short, then, buying an existing stock encourages the creation of new businesses - in much the same say that buying a consumer good creates jobs. They do it by affecting people's expectations.

This is, of course, only a small part of the story. My point is only to briefly show how it is that buying consumer goods and buying existing stocks play an analogous - and important - role in the economy.

Stocks,Bonds, Cash,Goods and Services.

What you pay is a signal that the thing you bought is worth so much.You were the one who sent the signal by deciding to pay what you paid instead of buying something else.Normative and metaphysical considerations determined by others are removed from the equation. The alternative is to have third parties such as,political or religious personalities and authorities decide these things for you. Who do you want deciding what happens to your assets?
PS this is a reply to Billwald,sorry if the indention is wrong.


May not increase jobs but keeps them steady

"Buying an existing stock does NOT increase jobs."

It does however prevent what would otherwise be a drop in jobs. The person selling obviously values current cash flow over future. Perhaps he has retired and wants to consume his savings. If there are no buyers for his capital then his other option is to stop investing in upkeep of his capital and slowly consume it that way.

For instance without buyers for his apartment building he continues to take rent but fires the janitor, doesn't hire plumbers and carpenters, and roofers. He slowly lets the building deteriorate by reducing jobs.

I agree with you. I would

I agree with you. I would rather see people spending untaxed money to create more jobs. This country needs tax resolution. It always seems that the governments answer is to tax more when in need. Why don't they look at other solutions?

OK, but in the bad old days

OK, but in the bad old days people bought stocks of sound companies that sold a good product at a fair price. These days most stocks are bought and sold by computer programs playing "my program is smarter/faster than yours." Last week I think I heard a guy on TV touting a stock that was selling 80 times earnings. This is an investment?

A stock can be valued at infinity times earnings.

If you have a company that hasn't earned a penny yet, it's still possible to reasonably value the company well above zero, because you expect the company to earn something in the future.

Computer programs are just doing what they're programmed to do, so it's ultimately people making the decisions.

OK, three aces can be valued above zero

OK, three aces can be valued above zero but I wouldn't invest my pension money in them.

one thing that is common

The system is bankrupt, and your retirement is always at risk. When paying your income tax to a system that is bankrupt, how can that be secured for your retirement benefits? Ron Paul the congressman, repeatly stated this fact, consistently, that is why his supporters are growing. The documentary by Aaron Russo, "Freedom to Fascism", explained that the whole system is a theif. There is nothing you can do until the fed reserve, the virus, is out of the system, otherwise more symptoms will come. Well, I don't know, i listen to both sides, so far the side with Ron Paul has not lost. Another admirable person is a renowned investor Jim Rogers, he points the same.

Like Ron Paul's pension . . .

my pension comes from tax money so we both will do OK. Thanks, taxpayers.