How “Progressive” is our Tax System?

Professor and chairman of the economics department at Harvard University, Greg Mankiw, took the latest CBO report and ran some numbers for 2009, the most recent year for which we have records.   He wanted to look at not only the amount of taxes someone paid, but also how much money individuals got BACK from the government in the form of refundable tax credits, welfare payments, entitlements and other government goodies.

So here are his calculations for the taxes each income level pays.  What this economist measured here is the amount of taxes the members of these income groups paid TO the government minus the amount of money these people got back in the form of various government payments:

Bottom quintile: -301 percent
Second quintile: -42 percent
Middle quintile: -5 percent
Fourth quintile: 10 percent
Highest quintile: 22 percent
Top one percent: 28 percent

As Mankiw explains the bottom quintile of Americans are essentially receiving $3 in UNEARNED income from the taxpayers for every dollar they earn.  He also points out something rather critical, and this is the fact that the middle quintile of taxpayers is in the negative, which means that they are net tax consumers.  That is almost a 20 point swing since 1979, when middle income earners were tax contributors.

This explains how 50% of Americans pay no income taxes at all … and instead absorb tax money paid by others.

As Ben Franklin has said:

Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote.

When the people find that they can vote themselves money, that will herald the end of the republic.

http://jpetrie.myweb.uga.edu/poor_richard.html

These FACTS do not bode well with the proggy LIE, in their class warfare, that the “rich are not paying their fair share”!

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41 thoughts on “How “Progressive” is our Tax System?

  1. Cluster July 19, 2012 / 11:57 am

    Pretty much dispels the notion of “fair share”. This is just another good example of how dishonest liberals can be, and how gullible their minions are. The other day, Larry O’Donnell of MSNBC was decrying the fact that Romney plans to lower the tax rates for the rich. Oh what a horror this would be claimed Larry and proof positive that Romney only cares about the rich.

    What Larry didn’t talk about was that Romney plans to lower the tax rates for everyone, AND that by lowering the tax rates and eliminating many of the exemptions and loop holes, the rich will actually pay a little more, and overall, federal revenues will increase especially if the economy begins to take off. But that doesn’t fact fit with Larry’s agenda, so he simply chooses to foam up the ignorant liberal base, like bozo, Diane, James, etc. with half truths. I guess we can’t blame him – it seems to work pretty well considering the posts we read from those morons.

    • Diane Valencen, D.S.V.J., O.Q.H [Journ.], ArF J., M.F. July 19, 2012 / 4:41 pm

      Okay Cluster let’s do away with all government safety net programs then. Give everyone over the age of 50 all the money they put into Social Security, Medicare and Medicaid in one lump sum payment that they can invest as they like and suspend payments and services. End SNAP and TANF on 1 February 2013 no matter who is elected President. End SSI payments to the disabled and move to a 15% flat tax and a 5% National Sales Tax with no refunds and no complicated filing. The total savings of that one time action is enough to save $1.6 trillion in the first year and more than 20 trillion over the first decade.

      • Count d'Haricots July 19, 2012 / 5:09 pm

        I don’t see a down-side to this.

        If we could just expel all the socialists at the same time we’d have a more perfect union.

      • neocon1 July 19, 2012 / 5:40 pm

        duane visqueen MF, BS, BJ. arf woff

        more forker BS

        come back when you have a real solution.

      • neocon1 July 19, 2012 / 5:53 pm

        count

        If we could just expel all the socialists at the same time we’d have a more perfect union.

        you racist you…..(sarcasm)

      • Amazona July 20, 2012 / 10:32 am

        Diane has accidentally stumbled upon a good idea here. Of course that was not her intent, as she was, rather clumsily, attempting to engage in a debate tactic called “reductio ad absurdum” or overstating an opposing point so extravagantly that it appears ridiculous, supposedly then revealing the original point itself to also be ridiculous.

        It is what people try when they can’t argue a point on its merits.

        But the thing is, what she snidely suggests, believing that it will suddenly strike everyone who reads it with the realization that we are all just so deeply, profoundly wrong in objecting to federal entitlement programs that we will fall down in grief and shame at our foolishness, embracing collectivism and the nanny state and discarding the Constitution once we see the error of our ways, is actually an excellent first step.

        The next step would be to excise all the federal charity programs, all the federal “economic justice” programs, all the federal social engineering programs, and get the federal government back to the only job with which it was ever tasked and the only job it can legally do—that is, the job outlined in the duties enumerated in the Constitution.

        Then, when taxes can be reduced to reflect the substantially reduced expenditures of the federal government, states can increase their taxes to pay for the programs they choose to implement to replace the programs they think are of value.

        Presumably the states, or at least some of them, can manage these programs much more efficiently than the federal government has, and can provide better oversight as well. And if a state manages its programs as poorly as the fed has, well, there are 49 options for citizens. (Or 56…)

        An interesting side note to this would be the dramatic reduction in overall power emanating from Washington D.C. and the accompanying reduction in its attraction to those seeking power. The Founders always intended power to be retained at the state and local levels, which is why they wrote the Constitution to try to make this mandatory.

    • Cluster July 19, 2012 / 10:15 pm

      Well first of all Diane, I said that I couldn’t blame Larry O.’Donnell for doing what he does because it worked so well, but you have proven that it works better than I thought.

      I have no idea how your response reflects anything that I said, but since you brought up safety nets, of which I support for those truly in need, do you think those benefits are best administered at the federal or state level?

      • Amazona July 19, 2012 / 10:33 pm

        Or, Diane, to phrase Cluster’s question slightly differently, once we agree that there is a problem that asks for a solution, do you believe there is a legal responsibility to find a solution that fits within the confines of the United States Constitution, or do you believe that the Constitution is irrelevant and that solutions need not take it into consideration?

  2. Retired Spook July 19, 2012 / 12:02 pm

    This certainly explains how a single mother of 3 working a minimum wage job has more disposable income than a married family of 4 making $60,000/year.

    And Ben Franklin was spot on. The only two questions that remain are (a) when will we reach the tipping point, and (b) what will the looters and takers do when the people pulling the wagon decide they aren’t going to do it anymore?

  3. GMB July 19, 2012 / 12:13 pm

    “(b) what will the looters and takers do when the people pulling the wagon decide they aren’t going to do it anymore?”

    Usher in a golden age of socialism where we are as rich as the common man of cuba, as well fed as the common man of north korea, and as free from environmental disasters and pollution as the common man of china.

    Also we will sit around campfires singing kumbayah counting all the skittle farting unicorns we see.

    Fun stuff eh?

    • Amazona July 20, 2012 / 10:33 am

      GMB, this is a great post. I loved it.

  4. GMB July 19, 2012 / 1:06 pm

    Jobless claims surge…
    REPORT: Foreclosure crisis hits older blacks, Hispanics hardest…
    Factory activity contracts…
    Home sales drop 5.4%, fewest since October…
    Grocery bills on rise as corn prices near record highs…

    Great headlines. Must make the Windy City messiah smile inwardly with glee.

  5. watsonredux July 19, 2012 / 1:48 pm

    According to the CBO report that Greg Mankiw bases his calculations on, Social Security and Medicare payments are considered transfer payments, which Mankiw subtracted from the taxes paid by the recipient in order to come up with his numbers. He then tells us, “The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned,” implying that the only people receiving government handouts are families.

    And yet, it is obvious that virtually all old, retired people receive Social Security and Medicare transfer payments, and a large percentage of those do not have other substantial forms of income nor pay substantial taxes, and therefore receive more in transfer payments than they pay in taxes–much more.

    But you guys will conveniently ignore that because many of you are collecting Social Security and Medicare from the government. Just more B4V hypocrisy.

    • watsonredux July 19, 2012 / 2:12 pm

      And just to put a finer point on it, I emailed the author, Greg Mankiw, and asked, “I looked at the CBO report you referenced and it appears to include Social Security and Medicare payments as transfer payments. That would lead me to believe that a lot of retired people received more–a lot more–in transfer payments than in taxes paid. Wouldn’t that be a significant percentage of folks in the negative category?”

      His response: “Yes.”

      So all you retired B4V folks–NeoClown and all the rest–are bigger moochers than those poor families of four. Glad we cleared that up.

      • Retired Spook July 19, 2012 / 2:35 pm

        So all you retired B4V folks–NeoClown and all the rest–are bigger moochers than those poor families of four. Glad we cleared that up.

        You didn’t clear up anything, Watson. I doubt there is a single retired Conservative on this blog who wouldn’t have opted out of Social Security and Medicare if that had been an option. Please explain how our taking payments from something we paid into, in my case 51 years for Social Security and 47 years for Medicare, is mooching.

      • Count d'Haricots July 19, 2012 / 4:05 pm

        Waddy’s math doesn’t add up because inclusion of transfer assets would also mean a much more significant percentage in the positive category as the higher wage earners can never pull out an amount equal to the amount paid in.

        that’s what we call a diversion.

      • neocon1 July 19, 2012 / 5:46 pm

        waspstooge

        That would lead me to believe that a lot of retired people received more–a lot more–in transfer payments than in taxes paid. Wouldn’t that be a significant percentage of folks in the negative category?”

        So all you retired B4V folks–NeoClown and all the rest–are bigger moochers than those poor families of four. Glad we cleared that up.

        Only a complete dumbbell or LIAR would state that…Oh Wait!!

        It has been PROVEN here to YOU before for those of us who paid into this PONZI SCHEME for our lifetimes will NEVER EVER live long enough to break even to draw out more than put in with minimal growth is IMPOSSIBLE unless we live to 120 yo.

      • tiredoflibbs July 19, 2012 / 9:04 pm

        So watty, as one who does not want to support moochers, can we count on your vote to elect those (conservatives) who want to REFORM the system and give Americans the option of Soc. Security and Medicare?

        …or do you want to vote for those (proggies) who fight for keeping the status quo???

        We can’t opt out of the system. We are forced to use it. If I had the option, I would not be part of it. The most conservative investment would yield more than I would receive from the government and it would by MY money to pass on to my children.

        You bitch about those conservatives who use the system, but are predictably silent about those who game the system, have never contributed and want to keep it on its failing track.

        Who’s the bigger hypocrite?

  6. GMB July 19, 2012 / 2:58 pm

    Get government out of healthcare completely and you will see medical costs plummet. You will see people who are considered poor be able to pay cash for their health care.

    Put hundreds of thousands of government bureaucrats out of work.

    We can only dream.

    • Count d'Haricots July 19, 2012 / 4:27 pm

      But they be too broke for the 60″ Plasma Screen TVs, the Galaxy S III or iPhone 4, the sparkly diamond-studded Grill or other Bling if they have to pay for the doctor’s visit for all they kids and baby-mommies.

      You be heartless.

      • GMB July 19, 2012 / 5:05 pm

        Oh yeah!!

        That and 25 bucks will get you a chance to have a family photo with barky but mostly the 25 bucks.

        Say cheese!!

        😛

      • neocon1 July 19, 2012 / 5:48 pm

        GMB

        Limburger cheese for Ubama.

      • neocon1 July 19, 2012 / 6:01 pm

        Ubama and OPM, aint communism grand?

        US PARTNERS WITH MEXICO TO BOOST FOOD STAMP ROLLS

      • Count d'Haricots July 19, 2012 / 6:15 pm

        neo,
        I ordered my I Built My Business, Mr. President T-Shirt.

        Did you?

      • neocon1 July 19, 2012 / 6:15 pm

        The Odd Theology of Van Jones: ‘God Doesn’t Know Who You Are’

        “Is the human species a species of locusts…”

        I thought some were monkeys? Im confused?

      • neocon1 July 19, 2012 / 6:19 pm

        count

        I would love a bumper sticker with that on it,
        I would put it on my trucks right under our company name…..

      • neocon1 July 19, 2012 / 6:48 pm

        we can always count on da count…….LOL

        I will order some tonight and send you a pic.

      • Amazona July 20, 2012 / 10:56 am

        neo, I suggest that you look more deeply into things before you post them. I googled your comment on the partnership between the U.S. and Mexico, and one of the things I found said this:

        “The partnership — which was signed by former USDA Secretary Ann M. Veneman and Mexican Secretary of Foreign Affairs Luis Ernesto Derbez Bautista in 2004 — sees to it that the Mexican Embassy and Mexican consulates in America provide USDA nutrition assistance program information to Mexican Americans, Mexican nationals working in America and migrant communities in America. The information is specifically focused on eligibility criteria and access.

        The goal, for USDA, is to get rid of what they see as enrollment obstacles and increase access among potentially eligible populations by working with arms of the Mexican government in America. Benefits are not guaranteed or provided under the program — the purpose is outreach and education.

        Some of the materials the USDA encourages the Mexican government to use to educate and promote the benefit programs are available free online for order and download. A partial list of materials include English and Spanish brochures titled “Five Easy Steps To Snap Benefits,” “How To Get Food Help — A Consumer’s Guide to FNCS Programs,” “Ending Hunger Improving Nutrition Combating Obesity,” and posters with slogans like “Food Stamps Make America Stronger.”

        When asked for details and to elaborate on the program, USDA stressed it was established in 2004 and not meant for illegal immigrants.

        “The partnership with the Mexican embassy was established in 2004,” a USDA spokesman wrote The Daily Caller in an email. “USDA does not perform outreach to immigrants that are undocumented, and therefore not eligible for SNAP.” (RELATED: USDA buckles, removes Spanish food stamp soap operas from website)

        Alabama Republican Sen. Jeff Sessions, who has been pushing for reform of SNAP, sent a letter to Secretary of Agriculture Tom Vilsack on Wednesday demanding more answers and documents pertaining to the partnership.

        The agency has yet to supply documents and information requested by Sessions’ Senate Budget Committee staff, including the Memorandums of Understanding between USDA and the Mexican government regarding the food assistance partnership.

        In an interview with TheDC, Sessions explained that the little-known partnership raises questions not just about where tax money is going, but about America’s immigration policy.

        “It’s a very disturbing policy, gone on for some years, and it raises very serious questions about American immigration policy as well as fiscal policy,” Session said. “Let’s get back to the fundamentals. What happened with the ‘96 welfare reform was to say that if want to you come to America you come legally, you assert you’re not coming for welfare benefits but you’re coming to work or otherwise be independent. >b>There is no logic behind an immigration policy that would encourage immigrants who can’t successfully operate within this society.”

        There are certainly plenty of things to find objectionable in the plan, but we do have to be fair and look at when it was signed.

        My WayBack machine is broken so it would be foolish to go back and chastise Bush for this, but we do still have an out of control Department of Agriculture expanding its power base by getting involved in telling people how to eat, etc. “outreach and education” are not the proper purposes for a department of agriculture, but this does help explain how the agency got so bloated.

  7. casper July 19, 2012 / 7:13 pm

    Something interesting in the report:

    “Average Federal Tax Rate for All Households Reached the Lowest Level Seen in the 1979–2009 Period

    Average tax rates depend on tax laws and economic conditions. The average federal tax rate—that is, households’ federal tax liabilities divided by their income (including transfer payments) before taxes—was 17.4 percent in 2009 for all households and ranged from 1.0 percent for households in the lowest quintile to 23.2 percent for households in the highest quintile (and to 28.9 percent rate for households in the top percentile).
    The overall average federal tax rates of 18.0 percent in 2008 and 17.4 percent in 2009 were the lowest in the 1979–2009 period and were well below the previous low of 19.4 percent in 2003 and the average of 21.0 percent over that period. For most income groups, the 2009 average federal tax rate also was the lowest observed in the 1979–2009 period. The pattern in the intervening years is more varied, reflecting the interaction of numerous changes to tax law and changes in the composition and distribution of income.”

    In other words, the TEA party was protesting high taxes at a time when Americans were paying their lowest tax rate in 30 years.

    • neocon1 July 19, 2012 / 7:23 pm

      catspuke

      interesting video/.

    • Count d'Haricots July 19, 2012 / 7:31 pm

      Your “analysis” is a crock of crap which I’ve discredited many times on this blog alone.

      Since you don’t seem (or want) to understand basic accounting I’ll explain it this way; the greater number of wage earners paying no federal income taxes the more the wage earners that do pay federal income taxes must pay in taxes. That’s what an “Average” is.

      Those of us that pay, now pay a higher percentage than at any time since the first Reagan Administration. Additionally, the bottom marginal group also are paying a higher percentage than they have since the Bush 41 was in office. Those not paying have grown from a third to half of the wage earners.

      In other words, you lie, no … wait … in those very words.

      But I do find it intriguing that that you want your pResident and the dimocrats to take credit for an ever increasing number of people making less income.

      Good luck with that. Maybe put that on a bumper sticker;

      OBAMA: A Race to the Bottom

      • Count d'Haricots July 19, 2012 / 7:36 pm

        Obviously my response is directed at “Casper’s” flawed “In other words” analysis.

      • neocon1 July 19, 2012 / 7:48 pm

        count
        there is only one numbnut present it could have been directed to,

        so…………you ment to say…….blah blah blah.
        arguing with idiots 101

    • tiredoflibbs July 20, 2012 / 6:01 am

      “Average tax rates depend on tax laws and economic conditions.”

      So, putting the economy in the crapper and cheering about “lower” taxes (which obAMATEUR has done BTW these are income taxes only mind you) is a good thing?

      ‘TEA party was protesting high taxes at a time when Americans were paying their lowest tax rate in 30 years.”

      As we have shown DOZENS of times before, for your dumbed down talking point, taxes AS A WHOLE (you know – THE BIG PICTURE) have gone up, especially after obAMASCARE gets fully implemented.

      But the whole point of the post, which you fail to grasp AGAIN, is that the proggies are shifting the tax burden in order to buy votes and strengthen their hold on Washington (the middle quintile should have been a BIG HINT – but as we have seen before you have trouble connecting the dots). We can hear the rhetor now, “If you elect a Republican your taxes will go up”, “If you elect a Republican you will lose “tax credits””, etc. etc. – more fear mongering from the proggy left.

  8. dbschmidt July 19, 2012 / 10:59 pm

    Abraham Lincoln stated and still holds true today;
    They are the arguments that kings have made for enslaving the people in all ages of the world. You will find that all the arguments in favor of king-craft were of this class; they always bestrode the necks of the people, not that they wanted to do it, but because the people were better off for being ridden. That is their argument, and this argument of the Judge [i.e., Stephen Douglas] is the same old serpent that says you work and I eat, you toil and I will enjoy the fruits of it. Turn in whatever way you will—whether it come from the mouth of a King, an excuse for enslaving the people of his country, or from the mouth of men of one race as a reason for enslaving the men of another race, it is all the same old serpent …

    • neocon1 July 20, 2012 / 7:22 am

      Holy travon batman………..

      14 SHOT DEAD AT BATMAN SHOWING

      ——————————————————————————————

      Rubio likens Obama to ‘left-wing third-world leader’…

      well he IS Kenyan, and Indonesian. But I dont think is is good enough to be a left-wing third world “leader”…..welllll Somalia – MAYBE

  9. dbschmidt July 20, 2012 / 2:57 pm

    “Every movement that seeks to enslave a country, every dictatorship or potential dictatorship, needs some minority group as a scapegoat which it can blame for the nation’s troubles and use as a justification of its own demands for dictatorial powers. In Soviet Russia, the scapegoat was the bourgeoisie; in Nazi Germany, it was the Jewish people; in America, it is the businessmen.”

    –Ayn Rand

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