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December 10, 2013

The Horror That Is Tax Inequality

Tax inequality: the government's answer to income inequality. We're all equal in the eyes of the law. It's just that some of us are more equal than others:

“A group can have a negative income tax rate if its refundable tax credits exceed the income tax otherwise owed,” said the CBO report.

The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO. The households in the fourth quintile paid another 13.3 percent of net income tax revenues. Together, the top 40 percent of households paid 106.2 percent of the federal government’s net income tax revenue.

The third quintile paid another 2.9 percent—bringing the total share of net federal income tax revenues paid by the top 60 percent to 109.1 percent.

That was evened out by the net negative income tax paid by the bottom 40 percent.

Those in the second quintile paid -2.9 percent of net federal income tax revenues, and those in the bottom quintile paid -6.2 percent of federal income tax revenues.

When the the negative 9.1 percent in federal income taxes paid by those in the bottom 40 percent is subtracted from the 109.1 percent paid by those in the top 60 percent, federal tax revenues net out to an even 100 percent.

So, while the top 20% earn about 52% of national income, they pay just under 70% of gross tax revenue and about 93% of net tax revenue (taxes minus transfer payments).

Since I understand numbers better when I can compare them visually, I added the net federal tax share for the top quintile to a chart from the CBO report referred to in the article. This was a quick-and-dirty exercise, so let me know if this doesn't look right:

Tax_incomeshare.png

Seems totally fair....guess they weren't kidding when they told us that even if we raised the tax rate on top earners to 100%, they just don't make enough money to pay for everything in redistributionist fantasies.

A few more tidbits about The Evillest Income Quintile:

1. Half of them have at least two earners per household:

2. About 90% are married:

One frequently overlooked dimension of the gap between the "rich" and the "poor" is how much it is affected by marital status.20 As Chart 10 shows, only about 30 percent of all persons in Census's bottom quintile live in married couple families; the rest either live in single-parent families or reside alone as single individuals. In the top quintile, the situation is reversed: Some 90 percent of persons live in married couple families. In this case, equalizing the numbers of persons within the quintiles makes little difference; even after each quintile is adjusted to contain the same number of persons, 85 percent of persons in the top quintile continue to live in married couple families compared with one-third in the bottom.

Wikipedia puts it more succinctly:

In the United States the increasing gap between the top 30% and the bottom 70% of society is attributed to the large increase of single parent households.

If the socially unjust and unsanctioned lifestyle choices of America's top wage earners concern you, don't worry. Government will be along to fix things momentarily.

Posted by Cassandra at December 10, 2013 08:54 AM

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