Talk:Progressivity in United States income tax

Untitled

Added article consisting of material from Taxation in the United States as part of project to improve that article. This is a content fork with nothing added except the introductory sentence. Retained as part of WP policy on nondeletion of sourced material. Forked under WP:UNDUE. I have reviewed the content other than to determine that it is too long for the revised article. Oldtaxguy (talk) 21:22, 13 March 2011 (UTC)

Bias inherent in source information used in table

I would caution that the source used for the table is clearly flawed. The Tax Foundation study, according to Appendix B thereof, did not rely on any actual tax or income statistics. Rather, it took Census bureau population data and BEA national accounts data, made material adjustments to the data in ways not generally accepted, made assumptions that were very material to the outcomes, then did calculations. According to Appendix C, many of the allocations of taxes among income groups was based on arbitrary assumptions and income percentages. For example, they state that all taxes (as adjusted) are allocated to individuals. The table on pages 111-113 indicates how certain taxes are apportioned mechanically; example: gasoline taxes 50% to individuals, 35% to wages, 15% to owners of capital (shareholders of corporations) (the latter two in a two-tier allocation). Many of the allocations are quite arbitrary, and the ultimate allocation among quintiles of income distribution is far from transparent.

The definition of income in the study is quite different than may be understood by most readers. Use of this data requires that the income upon which the allocations are based be explained.

I suggest that the changes be either reverted until alternate sources are found, or flagged as disputed. Oldtaxguy (talk) 00:37, 11 July 2011 (UTC)

The source used goes to Kiplinger, which quotes "The latest numbers from the IRS". I don't see where it references the Tax Foundation. I'm open to getting additional sources though to best reflect the current distribution for income taxes. There was no intent in bias, I think I just did a search for 2008, since that was the latest data published by the IRS at the time. Morphh ^(talk) 02:19, 11 July 2011 (UTC)

Oh, sorry, I thought you were talking about the table I added this weekend for Income taxes. I now see you were referring to the Breakdown section. I'm fine with removing the tables, but I think we should keep the opinion of the Tax Foundation in the paragraph to represent that point of view. If there are alternative viewpoints published, then we should include that position as well. Morphh ^(talk) 02:26, 11 July 2011 (UTC)

Are corporate taxes included in the individual tax burden?

This article says nothing about corporate taxes, which are included in some analyses of tax burden. The Tax Policy Center, for example, imputes corporate taxes to the individual tax burden (apportioned according to corporate ownership). This has the effect of adding several percentage points (as much as 5 points in some years) to the reported tax rate of the upper quintile, and as much as 10 points to the upper 1%. See Historical Effective Federal Tax Rates for All Households from the Tax Policy Center.

This article describes the various components of the individual tax burden, then ends with the overall burden. Corporate taxes do not appear in the enumeration of components. If they are included in the overall rates-and-burdens, perhaps that should be mentioned for completeness. M.boli (talk) 07:07, 21 September 2011 (UTC)

I guess any measure of corporate taxes (and associated employer payroll taxes) is going to be subjective and dependent on the tax incidence of that industry. In many cases, the taxes get passed on in the form of higher prices, which would spread the burden to all quintiles. I'm open to including a section that covers the progressivity effects of these other income taxes if we have sources for it. Just make sure we attribute the opinion as the incidence distribution is subjective. Morphh ^(talk) 14:09, 21 September 2011 (UTC)

It looks like the CBO does the same thing. They calculate the effective federal tax rate for each tranche of the income population as the sum of individual income tax, social insurance tax, corporate tax, and excise tax. I guess for most of us the excise taxes are collected on things like gasoline and telephone service. So they must have a way of estimating how much corporate tax to impute to the taxpayers, although I understand what you are saying about tax incidence and how you can't just apportion it all as revenue lost to stock holders. It must be a hairy mess.

I'm far from expert on this topic, I was trying to read up on it and understand the tables I was looking at. But maybe I will try to mention that the overall tax burden is computed from four components, not just the two already discussed in the article. It will be a few days before I can get to it. M.boli (talk) 19:37, 21 September 2011 (UTC)

Before including anything on indirect incidence in this article on progressivity, please discuss the proposed addition here, with citations. Generally, progressivity discussions do not include any indirect incidence analysis. Also, all indirect incidence analyses I've seen have been based on theoretical conclusions rather than hard data. There is considerable debate among economists as to incidence of corporate tax. Those who argue that all corporate tax falls on either shareholders or customers ignore the potential for corporations to accumulate vast liquid assets (examples: Microsoft, Cicso), where their stock starts having value in great part due to those assets.

To most people, progressivity means the actual tax rates, ignoring economic incidence issues. A discussion involving taxes purportedly indirectly borne by others should be in a separate section and clearly labeled as based on economic theory and not actual law. Oldtaxguy (talk) 21:44, 21 September 2011 (UTC)

The Breakdowns section contains all the tabular data on share-of-tax and share-of-income, by stratum. There are two tables, one from CBO and one from Tax Foundation. (First two paragraphs of text summarize the CBO table, third paragraph summarizes TF table.)

• I agree with Oldtaxguy that "To most people, progressivity means the actual tax rates, ignoring economic incidence issues." It was certainly what I thought, before I started looking up tables.
• However every breakdown that I find does apportion excise taxes and corporate taxes in the computation. That includes the tables in this article.
• I don't want get into a discussion of tax incidence. Seriously. Both of you have persuaded me of that.
• I propose we include a short paragraph of explanation that explains the table but avoids a deep discussion of tax incidence. The citation is the CBO report used in this article (#16 in the current list of references). Here is a first draft of an explanation:

Computations of the tax burden of each segment of the population usually contain estimates of taxes that people do not pay by themselves directly. An example is the corporate income tax, which may be thought of as indirectly taxing the corporation's customers (through higher prices) or its owners (through lower dividends or profits). Another example is excise taxes, e.g. on gasoline, which may be paid from throughout the economy without recording individual contributions. The Congressional Budget Office computes household taxes as the sum of income tax, payroll tax, corporate income tax, and excise taxes. It attributes corporate taxes to households "according to their share of capital income" and apportions excise taxes "according to their consumption of the taxed good or service."^{[cite CBO report]} The CBO report shows each part of the taxes (income, payroll, corporate and excise) separately in addition to the total.

• It might be appropriate to add to that paragraph a link to another Wikipedia article that discusses these issues more completely (in addition to tax incidence), or perhaps an external link. Any ideas?
• The CBO has a newer version: Average Federal Tax Rates and Income, by Income Category (1979-2007). I might take some time next week to update the article with the new numbers. The explanation of corporate and excise taxes quoted above is the same.

What do people think? M.boli (talk) 12:20, 23 September 2011 (UTC)

The proposed paragraph is excellently written and on point. Go with it! Oldtaxguy (talk) 20:48, 23 September 2011 (UTC)

Thanks muchly! Done. I also rearranged the text so that the CBO paragraphs precede the CBO table and the Tax Foundation paragraph precedes the TF table. (Still could use newer numbers though. I'll probably get to that.) M.boli (talk) 01:18, 25 September 2011 (UTC)

Reverting essay and OR

I have reverted 3 edits by a fairly new editor. The edits added essay-like text and deleted a table. Oldtaxguy (talk) 20:56, 2 May 2012 (UTC)

Questions for Oldtaxguy

Hello Oldtaxguy, I suspect I am your "fairly new editor," and I need some help or at least some questions answered.

What specifically did you find “essay-like” or opinion-like? I thought I was just describing the data in a WSJ article, an article that was already referenced at the end of the original section I edited. Was it the last two sentences? They are repeated next in brackets for your convenience?

[Reporting just IRS taxes can produce misleading statements such as “the top 20% of income earners paid 70% of federal taxes … meanwhile, 46% of taxpayers don't pay any federal income tax.” When total taxes paid are compared to income received, payments to government are just mildly progressive across income groups.]

Note that the text in quotes is from the WSJ article and “mildly progressive” is precisely what the data table in that article shows. Would it help if my edit said “ACCURATE but misleading statements?”

I removed the original Wikipedia table because the data it reports is older than overlapping information about income share which the WSJ article also reports (2009 versus 2011). The non-overlapping information in the original table is covered by a more recent (April 2012) article I referenced. http://www.cbpp.org/cms/index.cfm?fa=view&id=3505 Why retain the 2009 data table from the Kiplinger article?

I am most interested in your thoughts. If you no longer have access to my original edit, I would be happy to post it here first so you can make specific comments. Please reply and excuse any violations of Wikipedia protocol; this is my first attempt at a “talk.” Relmasian (talk) 02:27, 5 May 2012 (UTC)

Thanks for your comments. Among the essay-like aspects are inherently opinion phrases like "remarkably similar", "There are two reasons why", etc. Two reasons only? In addition, the opinion piece you cited was not a reliable source: it was an opinion piece by a lobbying group.

I suggest that you become familiar with WP:Editing policies, prohibition of original research, WP:What Wikipedia is not, and other guidelines as a first step to editing. You might start by creating your own WP page, with talk page. Handy links will likely appear within 2-3 days.

Hopefully this was helpful. :) Oldtaxguy (talk) 02:59, 5 May 2012 (UTC)

Oldtaxguy -2

Thank you for your “remarkably” quick response. I did not expect such quick help. I had already looked at most of the Wikipedia sources you recommend, although I had not thought of starting with a standalone article as you suggest. I need, however, more than just a sample of your thinking to understand your perspective. Most important, do you agree or disagree that the data table in the WSJ article indicate that when most taxes to local, state, and federal government are included, payments to government are in nearly the same proportion as income?

For your reference, below is a slightly modified version of my first edit that accommodates your current specific suggestions. Edit it as you please to show how one should convey that the current tax system is just mildly progressive when all taxes are considered, not just federal income taxes. If you disagree with the point, please explain how you understand the data. Relmasian (talk) 14:53, 5 May 2012 (UTC)

  *=* =*= *=*

When all taxes paid to local, state, and federal government are included, low, middle, and high income groups pay a similar share of their income to government. The Wall Street Journal using 2011 estimates of total income received versus total taxes paid reported that the lowest 20% in income paid 2.1% of total taxes while receiving 3.4% of income. The middle 20% paid 10.3% of taxes while getting 11.4% of the income, and the top 1%, those with yearly incomes averaging $1,371,000, paid 21.6% of taxes while getting 21% of total income. Across eight income groups whose data were reported, the largest difference between total taxes paid and total income received was just 1.7%.

There are two main reasons why the various income groups share of taxes paid are similar to their share of the nation's income. First, the progressive federal income tax is counterbalanced by many regressive taxes. The poor pay a much larger share of their income to sales tax, social security tax, gas tax, etc. than the rich. And second, the wealthy have more opportunities to reduce or shelter reported income. For example, capital gains are taxed at 15% not 35% and those with high income can often deduct things like depreciation, property taxes, and business expenses. Reporting just IRS taxes can produce accurate but misleading statements such as “the top 20% of income earners paid 70% of federal taxes … meanwhile, 46% of taxpayers don't pay any federal income tax.” When total taxes paid are compared to income received, payments to government are just mildly progressive across income groups.

Moved from Regressive Tax article

I'm moving this from the Regressive tax article as it is better placed in this article. I think some of the information is unbalanced and technically inaccurate, but here it is for placement as it best fits into sections of this article. Note that some content is state/local and not an income tax. Morphh ^(talk) 21:59, 27 February 2013 (UTC)

United States

According to Congressional Budget Office estimates, the federal tax system is a progressive tax system for earners all but the richest 1% of Americans. According to the study, the lowest earning 20% of Americans (24.1 million households earning an average of $15,900 in 2005) paid an effective federal tax rate of 3.9%, when taking into account income tax, social insurance tax, and excise tax. The highest earning 5% (5.8 million households earning an average of $520,200 in 2005) paid an effective federal tax rate of 21.5%. However, the highest earning 1% of Americans (1.1 million households earning an average of $1,558,500 in 2005) paid an "effective" federal tax rate of 21.3%.

According to the Institute on Taxation and Economic Policy, state and local tax systems are regressive at all income levels. Examining state and local tax laws enacted through January 2, 2013, and subtracting the deduction for federal income taxes paid, ITEP finds that the lowest earning 20% of Americans pay 11.1% of their income in state and local taxes, while the middle 20% pay 9.4% and the richest 1% pay 5.6%.

Investor and multi-billionaire Warren Buffett has criticized the US tax code as highly regressive, citing himself as anecdotal evidence: Buffett stated that with an income of over $46 million, he pays a tax rate of 17.7%, whereas his receptionist pays a tax rate of 30%.

While Buffett's critique focuses on significantly lower tax rates applied to certain forms of investment income (including capital gains), such regressive elements of the American taxation system should be considered in conjunction with other progressive factors (mainly the higher tax rate for higher income brackets), considering that tax codes have many interdependent variables.

The marriage penalty, particularly on those engaged in Shared Earning/Shared Parenting Marriage, creates a regressive tax system in the United States, so much so that economist Justin Wolfers has said that there is strong disincentive to have children within marriage or to marry at all. The National Bureau of Economic Research has also reported a study showing "that two earner couples--the horses that pull our economic plow--pay for the second job with taxes that are far beyond the well known marriage penalty."

The issue includes not only regressive tax, but also progressive benefits, where two-earner couples and single people are subsidizing one-earner/one-nonearner parent couples in a number of ways. For example, in Social security and Medicare, two-earner couples pay for their own benefits through employment taxes, while one-earner couples receive an extra, unfunded benefit of 50% or more in Social Security (a total of 150% or more) and 100% or more in Medicare (a total of 200% or more).

Social Security in the United States is also a regressive tax. Nobel Prize winning economist, Milton Friedman, describes the system in his lecture Myths That Conceal Reality as follows:

[Social Security] is not an insurance scheme. There is very little relationship to the amount of money any one individual pays and the amount of money he is entitled to receive. Social Security is a combination of a bad tax system with a bad way of distributing welfare. It's got two components, and I have never known anybody, whatever his political or other persuasion, who would defend either component separately. If you look at the tax system, who can defend a wage tax, a tax on wages up to a maximum, a tax on work which discourages employers from hiring people and discourages people from going to work, and a tax which is born by the lowest wage groups. It's a regressive tax. You could never... In millions of Sundays, you could never have gotten such a tax passed as a tax.

References

Chart that needs to be removed

If you look at the creation history of this chart (by clicking on it) you can see that it was created by VictorD7 and is sourced to an unreliable right-wing organization known as the Peter G. Peterson Foundation. If the material is reliable and worth mentioning, it needs to be directly sourced to a weighted organization, which includes scholarship coming out of academia. VictorD7 has been insistent on pushing his right-wing agenda, which is harmful to creating a neutral presentation of data.

The reason for not being able to find a reliable source presenting this chart is because there isn't one that exists. The Tax Policy Center created no chart; the Peter G. Peterson Foundation did. By leaving out the dollar figures from Footnote #1 there is no context in relation to the tax rates, which creates a highly biased presentation. -- Somedifferentstuff (talk) 11:02, 5 November 2013 (UTC)

The PGPF is a perfectly fine source (they just drew the chart anyway) and the chart's numbers come from the Tax Policy Center (feel free to compare the figures), a perfectly fine liberal source widely cited by media and scholars. I'm not sure why me being the one who gained permission for the chart's use is relevant. The CTJ/ITEP chart it replaced was drawn by a Wikipedia user (reliable source?), and its data was produced by a leftist think tank with a liberal lobbying arm. Even if one accepted your off the mark premises, the more appropriate, up to date chart should be the least of your concerns. Also, why does it need dollar figures? How is it "biased" for an effective rate chart to not have dollar figures? That would be extra information, and they change significantly over time anyway. Your comment is irrational. It's more important that it contains informative component breakdowns, which the previous (disputed, truly biased) chart didn't. Finally, your hypocritical, off the mark personal attack against me isn't conducive to a productive discussion. VictorD7 (talk) 11:21, 5 November 2013 (UTC)

Somedifferentstuff, All sources have bias, so an organization being right-wing is not equivalent to unreliable. Certainly the CTJ/ITEP was also similarly partisan. So aside from being partisan, I'm not seeing the evidence that Peter G. Peterson Foundation is an unreliable source. In any case, they're just creating a chart, not the source of the data. As VictorD7 mentioned, we can create our own charts based on data from a reliable source - so the Peterson Foundation is somewhat moot and is more akin to a secondary source. Which brings up another point, the first graph in the article was created by a Wikipedia user and appears to be inaccurate based on the data according to the talk. Back to this graph, the Tax Policy Center is fine for sourcing the data and graph. As for the lack of dollar figures, I have no objection to that and I don't see that it impacts the graph (and could likely clutter it and make it easily outdated). It appears to fit the section well and you can look at the prose in that section for more detail regarding dollar amounts, or the table in the next section (which are more easily updated) if you want to see what the latest figures are for each percentile. It certainly seems more appropriate then the prior graph for the section and the article. Morphh ^(talk) 14:00, 5 November 2013 (UTC)

If that's settled, then I propose we remove the "unreliable?" tag. VictorD7 (talk) 21:04, 7 November 2013 (UTC)

Since EllenCT tried to swap the graphs in "Taxation in the United States", I wanted to quickly comment as I read more on it. Based on the CTJ/ITEP graph description, it includes federal, state and local taxes (personal and corporate income, payroll, property, sales, excise, estate, etc.). That's not appropriate for the article "Progressivity in United States income tax". So that graph is not a replacement for Victor's graph. I'll comment on the other article with regard to its inclusion. Morphh ^(talk) 14:20, 18 December 2013 (UTC)

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Various polls by media organizations

I'm thinking about adding survey polls conducted by Fox News and CNN, but seems that per WP:FOXNEWS, Fox News's reliability lacks consensus at this point, while politics-related content are considered not reliable. Still, the thing about raising taxes toward millionaires have strong support, but CNN and NYT specified tax rate proposal, while Fox News didn't, according to Gallup op-ed.

I don't know which section the Gallup source belongs to, or I'm torn about adding a new section. George Ho (talk) 21:25, 30 October 2023 (UTC)