True or Not?

Just as I posted the most recent post, I read the following:

The top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S. People in the richest 1 percent pay 31 percent of their income to the federal government while the average worker pays less than 14 percent, according to the Congressional Budget Office.

This comes from an article by David Brooks, and I don’t think anybody here is likely to believe everything he says. I’d like to know, however, whether the claims he makes here are in any way true. Do people in the richest 1% pay 31% of their income in taxes? And if so, then why do we keep hearing about the need to raise taxes on the rich who somehow manage to wiggle out of their tax obligations?

I’m trying as hard as I can to understand how this works but such disparate claims come from the opposing political camps that nothing makes sense any more.

13 thoughts on “True or Not?”

  1. There is a “fact check” article from AP at news.Yahoo.com today. It seems generally supportive of the contentions of Mr. Brooks as noted in your article. You might find it an interesting read.

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      1. Oh, now I’m starting to get it: “Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.
        “So it really depends on what is your profession, where’s the source of your income, what’s the specific circumstances you face, and the averages won’t really capture that,” Geithner said.”

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  2. Matt Taibbi talks about Brooks’ article in his blog. Apparently, it all depends on what you classify as ‘income’.

    “I suspect that Brooks here is playing with the word “income,” for while it might very well be true that the richest 1 percent pay an average of 31 percent of their “income,” I seriously doubt that they pay that much of their earnings.

    No doubt people like Wall Street billionaires Stevie Cohen and George Soros and John Paulson do pay well over 30 percent on their “income,” if they have any, from speaking engagements or whatever else they do in their spare time. But the vast majority of the billions in actual money that these hedge-fund guys make is not called “income” but “carried interest,” and is therefore taxed at 15 percent.

    There’s a similar exemption for capital gains income, but let’s even leave that aside for now…”

    Google ‘Matt Taibbi Obscene Tax Break survives again’ for more information about this.

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    1. OK, now I get it. The conversation is about the people who only get taxed at about 15% because their money isn’t earned in a salary but comes to them from investment.

      Now, the question is: how many of these hedge fund managers who make billions are in existence? And how much money do the 15% they underpay on taxes come to? I don’t see anybody giving the numbers on how much money can be recovered for the economy if this tax loophole is closed.

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  3. Earned income has the 31% tax rate if earned income is over $250,000.00. As noted above, many forms of investment income are taxed at 15%. Tax shelters are also possible. There’s always the Swiss banks.

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  4. So, is it true that the rich pay a greater percentage in taxes than everyone else? I don’t know, it seems to me like different people with different views quote different statistics.

    I don’t know what to believe.

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  5. Well, after reading that AP fact check articles, it seems clear that the rich do pay their fair share and even more. So this means that the “tax the rich crowd” is full of crap and twisting the facts.

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  6. Yeah, the fact seems to be that regardless of the difference between wage and investment earnings tax rates, the top 10% of income earners pay 70% of income taxes.

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    1. ed: if you enter any email address into the comment form (even a completely fictitious one), your comments won’t be stuck in moderation every time. As long as it’s always the same email address, that is. Of course, this is completely up to you.

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