Data on wealth and taxes
This New York Times article has all sorts of information about the effects of the Bush tax cuts on income, and some sweet accompanying graphics. Here's a summary of what the tax cuts did:
"There have been three tax cuts for individuals under President Bush.
The top tax rate on compensation was trimmed twice and is now 35 percent, from 39.6 percent when President Bush took office. Most compensation also faces a 1.45 percent Medicare tax, which is matched by the employer, making the effective federal tax rate on high earners 37.9 percent.
Then, the top rate for most investment income was reduced to 15 percent in 2003, from the 39.6 percent for dividends and 20 percent for profits on asset sales that were in effect when Mr. Bush took office.
A result is that the wealthiest Americans now pay much higher direct taxes on money they work for than on money that works for them."
The most interesting figure in the graphics is the "effective tax rate," which is as follows:
Income in 2003/Effective Tax Rate:
Less than $50,000: 2%
$50,000 to $100,000: 9%
$100,000 to $200,000: 14%
$200,000 to $500,000: 21%
$500,000 to $1,000,000: 25%
$1,000,000 to $10,000,000: 26%
This is NOT income tax--this is the overall tax rate on everything, including income, property, stocks, bonds, investments, asset sales, etc.
Is this fair? What should the top income tax rate be? Should the tax on dividends and asset sales be the same, more than, or less than the income tax rate?
Taking these numbers as gospel, here's another chart I made from the data:
Income group/Total Tax Paid to Government:
Less than $50,000: $43,652,296,248
$50,000 to $100,000: $172,714,138,947
$100,000 to $200,000: $162,310,472,683
$200,000 to $500,000: $120,868,503,424
$500,000 to $1,000,000: $60,214,014,360
$1,000,000 to $10,000,000: $97,087,072,902
The 6,236 members of the elite $10 million+ income group paid the government $35 billion in 2003, nearly as much as the 92 million members of the less than $50,000 group.
Total tax paid: $692 billion.
Unfortunately, the data don't break up tax bills by type, so I can't vary investment tax rates against income tax rates to see what we would come up with if, say, we made income tax flat at 20% and investment taxes flat at 30%.
So, if we go to a flat tax of 15% on everything, we get $931 billion in revenue. Good. Now, it seems grossly immoral to me to tax households making less than $50,000 at all, so let's drop them. Without them, we still have $661 billion in revenue, $31 billion less than our revenue from the convoluted mess above. Awesome, right? Much more fair, right? A few cuts here and there, and we have a fairer system and a balanced budget! Well, yes, except that the effective tax rate on the 30 million tax payers who make between $50,000 and $100,000 a year just DOUBLED.