Tax / Inequality Fact Sheet

One of the main issues facing us in this election is taxation — who pays how much, who should pay how much, and how is income distributed, and how should it be distributed.

Tax Rates

Single, Rich
Single $48K == 2012 Avg
Single with child, $25K
94.0% + Corp 25.0%
91.0% + Corp 30.0%
77.0% + Corp 27.0%
70.0% + Corp 34.0%
22.0% – EIC
28.0% + Corp 28.0%
15.0% – EIC
31.0% + Corp 28.0%
15.0% – EIC
39.6% + Corp 28.0%
 00.0% – EIC
35.0% + Corp 25.0%
10.0% – EIC
35.0% + Corp 25.0%
10.0% – EIC

Source Tax Foundation

The $48K value and the $25K value are in 2011 dollars.  Per captita GDP is about 350% of what it was in 1945, so at that time the $25K person was well above average — quite well off for the time.

1945: End of Depression / WWII
1960: Just before the JFK tax cut
1964: Just after the JFK tax cut
1980: Just before the Reagan tax cuts
1988: Just after the Reagan tax cuts
1991: Just after “read my lips” raised taxes
1993: Just after Clinton raised taxes (and eliminated them on the poor)
2003: Just after W’s tax cut (and increase on the poor)

“+ Corp” Most of the money the rich make is through ownership of investments, such as stocks.  The earnings of a company you own stock in is subject to the corporate tax, and that basically comes out of the pockets of the shareholders, in other words, the rich.  A large corporation is currently taxed at the highest individual tax rate.  So the present tax rate for the very rich is actually much higher than 35.0% (unless they can find some MAJOR deductions).  For historical corporate rates, see chart
“- EIC” The $25K person with a child was eligible for 2 deductions, or $7400 in 2012, a substantial fraction of their income.  These deductions are less significant for the other two people.  The $25K person is also eligible for the EIC “Earned Income Credit” (a ridiculous name — it’s a credit for not having earned much).  After the 2 deductions, at 10% tax, the poor person pays about 7% tax.  The EIC winds up being about 6.7% of their pretax income, so they really pay about 0.3% tax.The EIC was instituted in 1975 and gradually increased since then, so all the figures marked “- EIC” are in fact paying a lot less than that amount of tax.The two single people aren’t eligible for the EIC, which is mostly for poor people with kids — without kids, you really have to be starving to qualify for it.

Tea Party Myth: Tax rates on the rich are at an unprecedented level, and raising them any more will have catastrophic, hard to predict consequences.

Fact: Tax rates on the rich are at 37% of what they were at the end of WWII, and 45% of what they were in the late ’60’s.  We have had some major economic boom times under drastically higher tax rates on the rich.  Obama wants to raise the marginal tax rate on the rich, but only by 13% back to Clinton Era (boom time) levels.

Tax Burdens

Year % Paid by Top 1% % Paid by Top 10% % Paid by Bottom 50%
2000 37.4% 67.33% 3.91%
2002 33.71% 65.73% 3.50%
2007 40.42% 71.22% 2.89%
2009 36.73% 70.47% 2.25%

Source: National Taxpayers Union

OWS Myth: The rich are hardly paying any share of the taxes, the little guy is carrying most of the burden.

Fact: The rich are paying a large share of the taxes, the little guy is hardly paying anything.

Federal Budget in Inflation-Adjusted FYI 2005 Dollars

Year Federal Budget Federal Revenues Deficit
2000 2.04 Trillion 2.31 Trillion -270 Billion
2003 2.30 Trillion 1.90 Trillion 400 Billion
2007 2.56 Trillion 2.41 Trillion 150 Billion
2011 3.13 Trillion 2.00 Trillion 1.13 Trillion

Source Tax Policy Center

Myth: Tax cuts alone are why we have a deficit.

Fact: Spending is up 53% since 2000.  So we don’t just have a revenue problem, there is also a spending problem.  Also, revenues had more than recovered from W’s tax cuts by 2007.  The recession clobbered revenues.

Spending Growth in Inflation-Adjusted FYI 2005 Dollars

Year Social Security Medicare Defense
2000 462 Billion 222 Billion 332 Billion
2003 497 Billion 261 Billion 425 Billion
2007 552 Billion 353 Billion 519 Billion
2011 632 Billion 420 Billion 610 Billion


Inflation Data:

Myth: Defense costs have reduced since we got out of Iraq.

Fact: Defense spending has continued to rise, up 258 billion FYI 2005 dollars since 2000, Medicare and Social Security put together are up 170 + 198 = 368 billion dollars.  Defense spending is up 84% since peacetime, Social security is up 37%, and Medicare is up 89%.

Historic After-Tax Household Income Distribution, FYI 2005 Dollars

Year 0-20% 20-40% 40-60% 60-80% 80-100% 90-100% 95-100% 99-100%
1979 14K 29K 42K 54K 96K 121K 158 326K
1990 14K 29K 42K 58K 119K 160K 223K 552K
2000 16K 33K 48K 67K 160K 228K 340K 978K
2005 15K 34K 50K 70K 172K 246K 370K 1072K

Source: Crouch?

Historic Per-Captita GDP in FYI 2005 Dollars

Year Per Capita GDP % Increase
Since 1979
1979 25K 0%
1990 32K 28%
2000 37K 48%
2005 43K 72%

Note the numbers are lower than the chart before it because ‘Per Captita’ is per individual, including dependents, while the above chart is ‘Per Household’, which often includes two incomes.

Source: Visualizing Economics

Historic % After-Tax
Household Income Change Since 1979 (FYI 2005 Dollars)

Year 0-20% 20-40% 40-60% 60-80% 80-100% 90-100% 95-100% 99-100%
1979 0% 0% 0% 0% 0% 0% 0% 0%
1990 0% 0% 0% 7% 24% 32% 41% 69%
2000 14% 14% 14% 24% 67% 88% 115% 200%
2005 7% 17% 19% 29% 79% 103% 134% 228%

Source: Derived from the ‘Crouch’ data in the table two tables before this one.

Distribution of Net Worth (Inluding Homes) 2007

Percentile of Wealth 0-80% 80-90% 90-95% 95-99% 99-100%
% of Total 15% 12% 11% 27% 35%
Average Wealth Relative to Average 18.75% 120% 220% 675% 3500%

Source: University of California at Santa Cruz

I remember back in the ’60’s / ’70’s, liberals used to go on and on about poverty.  Now they mostly talk about inequality.  This is because poverty hasn’t gotten any worse (nor has it gotten better), but inequality has grown.

Unlike most liberals, I do not lie awake at night dreading the possibility that anybody else may be better off than me.  I do not see wealth or inequality as problems. I do worry about the people who are worse off.

We should not expect increases in per capita GDP to be distributed equally throughout the population.  That is not how the marketplace works.  The spoils go to those who have contributed to the increase, which means those with skills.

That said, I am surprised the people in the 60-80% range, who must include a lot of fairly skilled people, aren’t seeing a larger share of the gain from increasing productivity.

On Atheist Strategy

I feel that some of the strategies employed by some atheists, especially formally organized atheist groups, leaves a bit to be desired.

Lawsuits over Nothing:  A private restaurant in Pennsylvania offered discounts on Sundays for anyone who brought in a religious bulletin and  John Wolff, a local atheist, is suing them for discrimination.  Several churches made it clear that anyone was welcome to enter into their church lobbies and pick up a bulletin for free, and the restaurant says they are setting no requirement that anyone believe anything or actually attend services.  That’s not good enough for John.

Is this the way to make ourselves liked?  Can we sue our way to popularity?  Can we expect the rest of society to react positively to being confronted by yet another god damned militant, touchy minority that exudes a sense of entitlement and a victim mentality?

We seem to be faced with an ever-expanding circle of groups about whom honest opinions cannot be expressed, who must be treated with kid gloves no matter how harmful their actions.  It’s gone further in Europe; in Germany it’s illegal to call a convicted murderer a murderer once he’s served his time:

There are some things that shouldn’t, and can’t, be just given as a gift, that have to be earned.  Admiration is one of them, and liking is another.  If we want people to like us, we should do good deeds, not file annoying lawsuits.

The War on Christmas: The American Atheists have been choosing Christmastime as a good time to run billboard campaigns against religion.  Is that the best time to be complaining?

It’s like, if you’re trying to discourage kids from going to the doctor, you make your pitch when he’s giving them a shot, not when he’s giving them a lollipop at the end of the visit.  Good luck turning kids off on lollipops.

For ethnic Christians, whether they believe or not, Christmas is a fun time.  It’s the lollipop!  It’s when they visit their families and exchange gifts.  There are much better times to complain, such as:

  • When the American head of state started a trillion-dollar war in Iraq because he thought God told him to.
  • When clergy who make unhealthy, sexually confused vows wind up molesting children.
  • When Israeli Jews spend US tax dollars harassing and killing people to assert their claim to the West Bank, a claim which makes no sense unless you believe in their religion.
  • When governments of poor, overpopulated countries like the Philippines refrain from providing birth control because the main church in their country doesn’t want them to.
  • When we read things in religious scripture that make us want to vomit.

David Silverman, the president of American Atheists, went on Fox News to discuss his billboards protesting Christmas, and one of the Fox correspondents had a field day telling him to “seek professional help” for his issues about the holiday.  It was not a good day for atheism.

When religions change, people find ways to keep the old holidays.  Many of the traditions of Christmas and Easter were inherited from pre-Christian European Pagan festivities.  In the atheist former Soviet Union, they had a “Father New Year” in a red suit giving presents to children.  Even if the atheist movement is successful beyond our wildest ambitions, Americans will keep celebrating Christmas, one way or another, and we should resign ourselves to that.

Alternative Medicine

Placebo Trials

When you are trying to determine if a drug or treatment is doing patients any good, one problem you have is the placebo effect.  Many patients get better on their own, just healing themselves.  Others will say they feel better to make the doctor happy.  Others will honestly think they feel better, just because they expected the treatment to work.  Many such patients go on to give glowing testimonials of the treatment they received, oblivious to the fact that it actually did little or no good.

So it is important to do a placebo trial.  Half the patients you give the drug you are trying to test, and the other half are given placebos: pills that look just like the ones you are testing, but they have no medicine in them.  Furthermore, it is important that you do the test double-blind: the patient must never come into contact with anyone who knows which of the two types of pills they are getting, so they have no way of figuring out.  You then compare the improvement rates between the two groups.  Normally both groups improve, at least a little bit, but the drug is only considered to work if the drug itself performs significantly better than the placebo.

Double-blind placebo trials didn’t become very common until well into the 20th century.  Doctors were aware of the placebo effect for centuries before that, and often deliberately gave treatments they knew did no good, realizing that sometimes the patient would get better and be grateful for the “help”.

Double-blind placebo trials are now the normal standard for western medicine.  Any prescription drug you can buy, and any new treatment an MD does to you, has to have been proven effective in a double-blind placebo trial.  However, some old, obvious treatments like bandaging a scar or putting a cast on a broken bone probably never had to be placebo-tested.

Double-blind placebo trials take a lot of time, and are expensive.  When a new drug is developed, they first spend years testing it on animals and people, not for effectiveness, but just for bad side effects.  Then they spend years testing for effectiveness.  Patents only last for 17 years, and the drug companies complain that it’s sometimes hard to get a drug to market very long before the patent expires, at which point other companies can compete to manufacture and sell the drug as a generic, driving the price down so the company that developed the drug has a hard time making enough off it to pay for their research.

Alternative Medicine

It is illegal for an MD to give you alternative medicine.  Alternative medicine, by definition, has not proven itself in double-blind placebo trials.  There are two types of alternative medicine:

  • That which has been shown not to work.  When a substance or treatment is shown not to work, people can still write glowing testimonies of their “cures” by it in books, blogs, and magazine articles.  It’s called freedom of speech.  And in some cases, politicians allow special, non-MD practitioners to do the treatment, especially to appease traditional practices of ethnic minorities.
  • That which has not been shown to work.  When an alternative substance or treatment is shown to work, then regular MD’s start giving it out, and it is no longer “alternative”, it is just “medicine”.

I’m not sure how the government draws a line between drugs and “natural” remedies.  “Natural” remedies don’t have to prove themselves, and can be bought without a prescription.  “Drugs” cannot be bought at all unless they prove themselves, and then can only be obtained with a prescription.

There is some limitation on the “natural” stuff.  Sellers of herbs and vitamins can’t make unproven medical claims on the label.  Much as they would love to write “vitamin X prevents cancer” or “St John’s Wort cures depression” on the bottle itself, they can’t do that.  But they can and do say anything they want in the alternative medicine press.