Wednesday, October 23, 2013

The Rich Feeds the Poor, just not Enough

$80.35 billion was spent on food stamps last year to feed 47 million people. $80.35 billion = $142.46 per person, per month for food. According to the Center for Economic and Policy Research, $80.35 billion = 2.3% of all annual federal spending.

The U.S. population is 313.9 million, so 47 million people would be 14.9% of the population. There are 151 million wage earners. If $80.35 billion were equally divided by each of the wage earners, each would contribute $44.34 a month in taxes to feed America's poor.

But these tax expenditures are not evenly divided --- the most wealthy pays the greater share --- even though, as a percentage of their earnings, many times they pay a lesser tax rate than those in the middle-class. But like many wealthy foundations, one would have you believe something else.

The Peter G. Peterson Foundation claims they are a nonpartisan organization --- but casts Social Security, Medicare, Medicaid and various other safety net programs that aid the poor as "in a state of crisis" --- and in need of dramatic cuts. Peter Peterson spent nearly half a billion dollars in Washington targeting Social Security and Medicare. From his website about taxes:

"The first misconception is that nearly half of taxpayers pay no federal tax. Although it is true that many people pay no individual income tax, they face significant payroll taxes if they are working. In fact, the bottom 80 percent of taxpayers pay, on average, more in payroll tax than income tax.

(* True. Most people pay Social Security taxes on 100% of their regular wages up to $113,700 --- after that, they are capped, and any earnings above this amount is exempt from further Social Security taxes --- whereas, capital gains are not taxed at all for Social Security.)

The second misconception is that high-income people face low overall tax rates because they receive most of their income from tax-favored capital gains and dividends instead of wages and salaries. That conclusion, however, does not account for the fact that high-income people bear a disproportionate share of the corporate income tax, which significantly raises their overall effective tax rates.

(* The Peter G. Peterson Foundation uses the old "double taxation" argument, rather than just un-incorporating their multinational conglomerates and paying the individual rates that the self-employed, entrepreneurs, small businesses and independent contractors might pay. Here's how they benefit from government by incorporating.)

  • The Joint Committee on Taxation released a report and lays out their decision to assume that in the short run the incidence of corporate tax is fully on capital owners, but in the long run (assumed to be reached by the end of a ten year analysis period), owners can shift 25% of the tax to domestic labor.

The Peter G. Peterson Foundation created a chart (pictured at the bottom of this post) to show us how "fair" and progressive" the tax rates currently are. But take a closer look at those effective tax rates in relationship to the top 0.01% when put against the amount of their earnings, shown in gray in the smaller chart that I created (Actually, even that is not to scale, or the highest peak would be 12 inches higher than this web page!)

But the Peter G. Peterson Foundation does go on to say:

"The top 1 percent faced an average tax rate of 20.3 percent. However, some taxpayers with very high incomes faced lower effective rates than people with lower incomes because much of their income came from tax-favored capital gains and dividends. Warren Buffet, for example, paid an 11 percent tax rate in 2010."

(* Note: If Warren Buffett had been paid in regular wages instead of capital gains, his tax rate would be the top marginal rate of 36.9% before his write-offs --- but even then, he would still have his Social Security taxes capped on earnings up to $113,700 --- even if he earned $1 billion in any given year.)

Quote of the Day: "Most news sources are funded by corporations and investors. Their goal is to drive people to advertisers while pushing their own corporate agenda."

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