Plain facts: IRS: 235,413 million-dollar earners

According to the CBO, those making over $250k in the highest quintile earned roughly 56% of all income in 2007. That's 56% of$13,886,422mil.
That's 56% of $13,886,422,000,000 (roughly 14T).

56% of that is $7,776,396,320,000 or about 8T.

So if these guys were taxed at 100%, that would yeild about 8T in revenue.

Using only 2007 numbers to try and stay consistent.
Now in 2007, these guys were taxed at a total combined rate of 68.9%,
Let's just say 69%. That means they supposedly yielded $5,365,713,460,800 in revenue.

That means that the difference in revenue in 2007 generated from taxing them at 100% (assuming no other variables) would be $2,410,682,859,200.
Roughly 2.5T.

If we had that sort of extra revenue now in 2011,
the 1.2T deficit would instantly turn into a 1.3T surplus.
The U.S. national debt, currently just under 15T,
would then be paid off in just over 11 years.

Not that I'm saying we should tax the rich at 100% or anything.

source
source2

-Meta

 

Other than the GNI number, I got all of those numbers from the CBO.
For the total share of taxes from the highest quintile,
check the 6th chart down in the first source titled,
"Share of Total Federal Tax Liabilities". For 2007 it says 68.9%.

That the total revenue actually received by the government was around 5.2T instead of 5.3T plus whatever the poor people were supposed to contribute,
what that indicates to me is that a lot of people didn't pay their share of taxes,
or at least not a those rates. I'm guessing that is due to corporate loopholes and such, straight up tax evasion, and possibly other causes.
It is definitely a significant amount of lost revenue.

-Meta

 

Oops, and that is why you do not want me in the congressional budget office.
In that case, let's just look at individual income taxes since that's what the hypothetical situation is concerned with anyway. (7th chart in source)

[For 2007]
Total federal individual income taxes were $1,163,500,000,000. (1.16T)
Highest percentile payed 86% of those which is $1,000,610,000,000. (1T)

In 2007, there were 23,700,000 households (23mil) in the highest percentile.
With an average pretax income of $264,700 per household,
together they made around $6,273,390,000,000. (6.27T)
So about 15.95% of that group's collective income was collected through federal individual income taxes.

If they were taxed at 100% individual income,
they would pay an additional $5,272,780,000,000 in federal income taxes.
(5.27T)

1.2T deficit turns into 5.3T - 1.2T = 4.1T surplus.
15T debt would be payed off in under 4 years.

Now, I'm new to this whole tax business
so correct me if I've made any further mistakes.

source3

-Meta

 

And ironically, 1/3 is about the amount they should have been paying anyway.
33% - 35% rather than the 16% they payed in 2007.
This seems like a good time to bring loopholes back into the discussion.

Current Tax-brackets (2nd chart)

-Meta777

 

Actually, that's not quite accurate.
The calculation does take government spending into account.
What it doesn't take into account, is increases in the rate of spending.
So what you can say then, is that if government does not increase the rate then the debt will be payed off in under 4 years.

But let's assume for a moment that the government doesn't maintain the current rate of spending.
Lets say that each of those 4 years the government spends an additional $1T every 2 years or 2T over 4 years which is concurrent with the 2 graphs.

$4.1T surplus * 4years = $16.4T - $2T = $14.4T
We would still have a surplus over the 4 years and after the 4 years we would have still just about payed of the debt.

Its obvious to me that we can't just keep increasing the spending rate without also increasing the rate that revenue comes in.
But the problem here isn't just one of spending.

That is all relating just to the number of households in each group,
not the actual income levels,
so I'm not really sure what point you're trying to illustrate here.

The tax brackets are determined by pretax income though.
So it doesn't matter if their after tax income is less than the threshold,
they've already been taxed at the appropriate level.

What do you mean?
Just because they spent it on equipment doesn't mean it wasn't income.
Its still income, if they decide to spend it on equipment, that just means that that's what they decided to use their income on.

Obviously if you tax them at 100% then they are going to lose all traditional incentive to generate any income at all.
But hey, it wasn't my idea to tax them at 100%.
Taxing at 100% would be bad, but how exactly do you figure that means that increasing a tax rate in general is bad and decreasing it is always good?
How do you figure that?
After all, wouldn't it also be bad to tax everyone at 0%?

Anyways, like unrealist42 and I already pointed out,
even if they were only taxed at 1/3rd their income,
which is what they should be paying right now,
we would still have a surplus.
In other words, if we were to simply eliminate all the loopholes that turn 33-35% into 16%, then we would be on our way to paying off the debt.

-Meta

 

Spend twice what we spend...Interesting...

Oh, are you talking to me? Because I never said anything about spending not being a problem, quite the opposite in fact. Its clear from that graph that we have two problems. An increase in spending and a simultaneous decrease in revenues.

Note, that if you extrapolate our rate of revenue from 2000, then you see that we would not even have a problem right now if that rate of revenue had continued.
Now, what happened between 2000 and 2005?
That's right, Huge Tax breaks!

Again, I'm not saying there's not a spending problem,
I'm saying spending isn't the only problem.

16.9% of all tax-paying households, but what I'm saying is that I don't understand why that matters. Why did you bring it up??

And your point? I already know there are loopholes like that,
that's the sort of thing that causes the top quintile to pay 16% of their income instead of 33%-35%.

Well I don't know, love for your country, the goodness of your heart?
These aren't typically things we think of when we talk about incentives,
and I'm sure there are those who don't consider them incentives at all.

Do you truly understand the Laffer curve?
If so, then how did you come to the optimal tax rate, and what precisely is that rate.
I have heard in the past, that the optimal rate is somewhere around 70%.

But, just from looking at the graph in post #40,
its clear that by 2000 the tax rates had not exceeded that optimal level,
and the fact that revenues fell after the tax cuts were enacted is only more evidence of that.
So it seems contradictory to me for one to, at this point in time,
both invoke the Laffer curve and call for tax cuts at the same time.

I don't believe that many companies are going to up and leave just to avoid paying taxes.
After all, moving an entire business to another country is not easy nor is it cheap.
But these businesses that do move. Who do they sell their products to?

I believe that is an appropriate assumption to make.
Are you telling me that someone would deliberately make less money just so that they would have to pay fewer taxes?
Or are you saying they would try to make more money?

And so we learn from our mistakes, but I don't remember a time where raising taxes caused significant damage.
Clinton raised taxes, and those were some of the best years in U.S. history.
Why would any changes in taxes affect retirees specifically?

-Meta

 

I know, that's what I'm saying.
If there's a point behind it, can you explain it again please?
If not, then

What?
Just explain to me where the calculations for revenue and debt payment went wrong,
and what specifically should be done to correct the errors.

And thus,... we have traditional incentives....

I'm asking you how you determined the optimal rate.
I'm assuming you know what the optimal rate is,
because it seems like you're saying that the current tax rates are above that rate and any increases in the rates will not generate extra revenue.

Oh is that what you're saying?
Well what the Laffer curve tells me is that the economy will react in such a way that the revenue stream will be increased if taxes are increased,
and decreased if taxes are cut.
Wouldn't you agree with that assessment,
just from analyzing the idea of the Laffer curve and the chart in post #40?

Why would you work more when it means you would be taxed more?
That's simple, because regardless of taxes, you would still make more money.
Its the same thing with investments, except that with investments, unlike manual labor, there's no downside to making as much money as you possibly can. Even if for every dollar you make, you get to keep less, your still bringing in more money that you have brought in otherwise.

How do you figure that? Also, I'm not sure but you may be incorrectly assuming that businesses, corporations, and the average upper quintile are all employed by the government.

Lots of things, but my point was that tax increases did not cause damage in that instance.
And I am unaware of a time where tax increases did cause significant damage.
Also, I'm still unsure as to why retirees specifically were brought into the discussion...

-Meta

 

It doesn't provide a fixed forever rate,
but it does provide that there is some optimal tax rate for the current time.
You seem to have determined somehow that raising taxes now will not increase revenue. That can only mean that you must have somehow also determined the Laffer curve's optimum tax rate.
So how did you find that? And What is it?
Or why did you even bring the Laffer Curve up if you haven't?

Now one could argue that the high tax rates were a factor in creating the market bubbles which started in 1995.
In 1995, the tax rate for the highest quintile was at 39.6%.1995 Tax rates
That ended around 2000 and revenues started to fall,
that also happened to be the year before 9/11 occurred, after which
income tax revenue began to fall even faster,
that same year, the U.S. invaded Afghanistan.
In 2003 the U.S. invaded Iraq, and Bush lowered income tax rates significantly, down to 35% on the highest quintile.
Oddly enough, the decrease in revenue began to bottom out around the same time. They then started increasing again.
In 2005 taxes were lowered again, and it appears the rate of revenue increases slowed. it continued to rise however until 2007, after-which it began to drop significantly. At the same time, spending increased dramatically starting in 2007 and 2008 while revenue was continuing to drop.

Please note that the graph I posted plots total tax revues as a % of GDP and not simply income tax revenue.

Wouldn't it be more beneficial for the government to help the economy more directly? Relying on high income earners and corporations to help the economy doesn't seem to have worked. Its like you said, people tend to act int their own best interests, emotionally. And the emotion tends to be in the short term. That is to say that it is not always in the best interests of big businesses to use their money to help the economy, but that exactly what the government is their to do, its their job, and if they fail to do it then they are out of a job, therefore, it is in their best interests to directly help the economy. At least that's the way its supposed to work.

So now they're making $20 an hour, but it makes no sense for them to purposely lower their income even more.
If they lower their income in order to pay fewer taxes, ultimately all it means is that both the government and he will have less money.

If he changes jobs in order to maximize the money he gets to keep,
then he isn't lowering his income, he's increasing it,
and will appropriately pay an increased amount of taxes.

The thing is, the government works for all of society, not just the rich.
And if we are to assume that our rich friend is a pure capitalist,
then his only goal is to amass as much money for himself as he possibly can.
As long as he is able to make a profit,
the typical capitalist probably doesn't care if his money pays for lousy work.

And do you think that they are able to do this is a good thing?
And wouldn't they do this, no matter what rate they're being taxed?
Wont they generally always try to influence to system so that it works out in their favor?

What are you talking about? The tax rates were lowered.
I believe that because the amount of revenue was increasing as taxes were increasing through 2000, and we never reached a point where a tax increase was immediately followed by a significant decrease in revenue, that must mean that the optimal tax rate according to the Laffer curve had never been reached prior to tax rates being lowered.


-Meta

 

Not Amused, can I ask you something?
Is this how you view the Laffer curve??