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Taxing Our Way to Equality - Reprise


A recent blog addressing the consequences of using federal income taxes to pay for the current accounts deficit and long term deficit at the federal level drew several meaningful comments. This blog will address those.

We drew the inevitable comment that equates payroll taxes to federal income taxes. That comparison is at best disingenuous and may well be considered absolute propaganda. Payroll tax is essentially an annuity that buys the payee a retirement program that includes health care. Federal income tax is the only tax we pay that funds the operation of the federal government – our largest government entity. If we remove the payroll tax from the comparison the $50K earner pays only $2500 in taxes exclusively to state and local governments. The $100K earner still pays over $21000 in taxes – mostly to the federal government to operate that government – the one with the big deficit.

There were comments about lifestyle driving the comparison. The only significant lifestyle issue is that of home ownership. The paragraph below addresses the cost implications. Changes in personal property taxes and sales taxes are small. It should be noted however, that both of those taxes are driven by consumption. Really significant differences in consumption might show a larger difference although a difference overwhelmed by the much larger payments for federal and state income tax.

Concern was expressed that a comparison of a family that did not own a home with one that did was manipulative. I went back and removed the house. The federal and state taxes increase for the non-home owning couple but the increase is offset by the elimination of the property tax. It should be noted that the end point is a reduction of about 5% attributable to the home. The real consequence is reflected when we consider increasing the tax where the total tax take of the couple without a home is significant more than the tax for someone with a home. The table below compares the differences

Since the real subject of both blogs was the significant tax increase that would be required unless we make major cuts to programs the real focus is on federal income tax – the singular tax that addresses those costs. For a couple making $100K with no kids and ho home the tax take to address the long term deficit approaches half of their income.

So, how much is enough? Who should pay? Why does almost half our population pay nothing toward the operation of the federal government. Why is the percentage of tax taken from tax payers at the upper reaches of the middle class essentially equal to that paid by our wealthiest citizens when the tax take on the middle of the middle class is about 22% of that take- what happened to the progressivity we claim our system has?


imastinker 3 years, 10 months ago

Don't worry. I heard that only the top 1% will have to help pay for any of those things.

Alceste 3 years, 10 months ago

"Why does almost half our population pay nothing toward the operation of the federal government."

This from a guy living in house valued at almost $500k and living phat and large on two gubment pensions.

In hard times, Kansans like to blame the poor. shrug

imastinker 3 years, 10 months ago

A 5000/year property tax bill is a smaller house than 500k.

imastinker 3 years, 10 months ago

Also, I don't see him as strictly blaming the poor. His point (I believe) was to illustrate that government spending is out of control and must be reigned in.

George Lippencott 3 years, 10 months ago

You are not poor.

When people in their twenties making $50K are considered poor the system has lost it's collective mind.

Alceste 3 years, 10 months ago

We agree 100% on this fact, Moderate. 100%. Tax 'em. Tax that income. Seriously.

Fossick 3 years, 10 months ago

George: "Payroll tax is essentially an annuity that buys the payee a retirement program that includes health care. "

I agree with this wholeheartedly, which begs a question: What is the difference between owning an annuity (financial capital) that pays $20k/yr and owning political capital in the form of SocSec/Medicare that pays the same? If you own political capital, that is wealth, just like financial capital.

Were that political capital counted as wealth like financial capital is, that would make the nation's wealth distribution a little different, no?

imastinker 3 years, 10 months ago

George, I agree with your analysis of the situation. I think that we do need to close the budget deficit, and that taxes in the order of what you propose will kill our economy. The only way to do this is to cut spending. I think at most I could agree to cutting $10 for every $1 of tax increases.

Oh, and let's stop this class warfare stuff. I intend to be rich someday, and I don't want y'all hatin' on me when I get there! Here's a freebie for anybody that wants to hop on board:


Alceste 3 years, 10 months ago

Remember, "George's" "earned" "pension" from Uncle Sam due to his military "service" is NOT on the table for cutting. No military benefit AFTER "service" is on the table per "Loyal Opposition". Military benefits are entitlement grants, but are sacred cows and different than other entitlement grants per "Loyal Oppostion". Twin edged sword or double standard?

How much of the USA's budget is spent on military spending AFTER one includes the pensions, VA benefits, etc., etc., etc., etc.??? Are these entitlements open for cutting?

George Lippencott 3 years, 10 months ago

Fossick, you bring up a fascinating and very important point. Not only do most citizens have a present value of a future stream of income as represented by Medicare and social security, they also have a stream of government services and benefits that they enjoy and will continue to enjoy throughout their life.

For those who fall legitimately into the social safety net we conveniently overlook the trillion plus annual investment by the taxpayers in those programs. Simple math suggests that that we could give each person legitimately considered poor enough money to lift them out of poverty. That funding is only counted in part and is not fully taxable.

I further note that as a society we have chosen to tax income at a significant rate. We do not tax wealth except in the form of real property. People like Alceste (and many of the 1%) have significant wealth that goes untouched. Just think for a moment that one of the wealthier contributors to either parity’s candidate who takes a retirement in stock options pays half of what a salaried person would pay and after investing the largess in tax free investments almost never pays income taxes again.

Why does the left on here never ask for a “wealth tax”

George Lippencott 3 years, 10 months ago

How about it Alceste?? We tax all wealth annually. We tax holdings in excess of a million at 1% We increase gradually so for example someone holding $20M gets taxed at 5% for wealth in excess of $10M and so on. Now thta would raise some revenue and get the really wealthy screaming.

Alceste 3 years, 10 months ago

Alceste reminds Moderate:

The top income-tax rate was 91 percent in 1960, 70 percent in 1980, 50 percent in 1986, and 39.6 percent in 2000, and is now 35 percent. Income from investments is taxed at a rate of 15 percent. The estate tax has been gutted.

The current "tax rate" is a joke compared to what it was. Tax income. Do NOT tax work. I'd be a fool to NOT use the tax code. Too, I'm on the record with both U.S. Senators and one House member to "fix it" and tax the top 10% of income in the USA. until the cows come home; I'm on the record to revamp the estate tax which has been gutted; blah, blah, blah, blah. Them boys in Washington D.C. couldn't care less what old Alceste writes to them. shrug

But these are hard times. In hard times, Kansans blame the poor. shrug

Alceste 3 years, 10 months ago

woops. speed reading error: I SUPPORT this taxing of wealth annually, Moderate. Further, I'd like to see the % rates INCREASED compared to the % numbers you've supplied. Let the wealthy move to some other "tax friendly" country if they don't like it.....they'll be back in the U.S. of A. soon enough once they discover these "tax havens" are really sh** holes.

Uncle Sugar don't really care or worry about the handful of us out here who stuff mattresses; use safe deposit boxes; bury the stuff, etc. because "it" really doesn't amount to much MONEY in the final analysis.

So, excellent idea Moderate. Excellent. Carry on

(and remember: http://www.taxkimk.com )

Jonathan Fox 3 years, 10 months ago

I'm not against this idea, I believe that we should have a more progressive system for the ultra wealthy. Currently the top income tax rate is 35% for everyone making around 250k+. I believe that we need an additional 10% from 500k earners, and another 10% at 1mil earners, or a similar system.

But I do have to qualify the idea that a weath tax of any kind will generate a very small amount of income. There just isn't very many high earners in America. 1% of America is not very many people when looking at the massive federal budget.

It's like asking to stop foreign aid to other countries. Doing that would save the USA about .01% of its budget.

However, all this aside, I agree that the best possible action is an all around cut in spending.

George Lippencott 3 years, 10 months ago

I wish I knew about wealth. The 1% number comes from tax returns. Does anybody really know how much wealth there is out there. Neighbor of an inlaw lived quietly, in a home worth less than 100K. At death had a fortune of over 2 M

Alceste 3 years, 10 months ago

Income already taxed must not be taxed again if it's sitting in a safe deposit box and earning not dime one in interest. My taxes have been paid on my "wealth" and my choice to stick the currency in a box which sits in a bank vault is my business. It's already been taxed. Should it be taxed year in and year out while people "in" "the market" pay next to nothing with capital gains tax rates where they are? I think not. Tax that income from capital gains. Tax income. Do NOT tax work.

George Lippencott 3 years, 10 months ago

Absolutely. Particularly when you make issue about other people's inome and wealth.

Alceste 3 years, 10 months ago

Good one! hahahahahahahah......and here we have a solid reason for currency in that lock box: NOBODY knows how much is inside the the thing! Never will, either!

Kontum1972 3 years, 10 months ago

i am 60 with one kid who i have raised alone since he was 4 years old his mom slipped town with her boss she wanted the house i gave it too her...end result she lost it. I own a home and i pay a lot of taxes....i retired in september after 30 years. I took a buyout but by the time uncle gets done with me i take it in the shorts, and for me to get my retirement from my past employer is like pulling eye teeth and its a government job..it has not been fun, it is almost like i never existed. I really don't know whats next......i just keep pulling the belt tighter...my former co-workers are feeling the same effect....i just keep praying.

George Lippencott 3 years, 10 months ago

Was the last thrity years worth it? At current tax rates if you doubled your income from $50K to $100K the government would take 40% of your increase.

George Lippencott 3 years, 10 months ago

Alceste (anonymous) replies…

Remember, "George's" "earned" "pension" from Uncle Sam due to his military "service" is NOT on the table for cutting. No military benefit AFTER "service" is Moderate Corrects:

Military pensions are on the table - major changes a foot – more like a 401K – gee could Mr. Sam be doing that too?? Military health care saw an increase in costs to the recipient in the last budget. It reflects further increases in the future to retirees. VA care for those with service connected issues remains essentially free. Should it not be? VA care for non-service injured veterans has seen increases.

Get your facts straight. Maybe your envy blinds you. Did they throw you out for drugs?? Otherwise you could have served and earned the lavish pension you so envy.

Do you advocate cutting current benefits to union pensioners?? Always great to advocate for abrogating a past contract.

Rich people who attack the middle class to pay for "the Poor" are the focus of the occupy movement! Guess you are the 1%.

Alceste 3 years, 10 months ago

Stop guessing.

An "entitlement" is an entilement. VA benefits are an entitlement. Since Moderate is the poster of statistics (generally rather skewed, but numbers at any rate)....let Moderate post the cost of "service" related entitlements following military "service".

"Envy" is a word Moderate really embraces. Trust me, I don't envy a bitter, old soldier who grew accustomed to the "good life"; expected it to continue on into "....fade away...." time; and now feels the pain of a reduction in life style. If anyone is filled with envy, it is the "Moderate" who is ever so envious of an infinite stream of cash for doing exactly what?


Tax income......not WORK.

Alceste 3 years, 10 months ago

My INCOME is a ton lower than your's George. I have a negative cash flow each and every month, relying on saved dollars to live a modest life. I paid ALL my taxes on my INCOME already. You continue to have an income that is high enough that it mandates taxation.

You chose your route, I chose mine. Both have netted us a decent lifestyle, although I shall opine that I learned how to live on less a long time back and I believe this concept is fairly new to you as you've caught on to just what a racket the "tax code" is and how shamelessly disgusting it is. shrug

Just remember that little story you told above. Yes, looks can be deceiving. Were the estate tax what it should be, that "....Neighbor of an inlaw lived quietly, in a home worth less than 100K. At death had a fortune of over 2 M......" would have been properly taxed. As well said neighbor should have been.

George Lippencott 3 years, 10 months ago


On the possibility that your issue is real I suggest you see the following


If this is just personal and you envy what the wife and I have done over a lifetime - well - too bad! You could have done it too. Complaining about your failed choices is - well - pretty sad!

Alceste 3 years, 10 months ago


Can you read? Sakes alive you love to throw that "envy" stuff around. Here's the deal:

Essentially, you and I agree about the problems, concepts, and yes, even the solutions you blather on about. The deviations are in the numbers: Six figure incomes are BIG money.....especially here in the Mid-West. Period.

Son, I have TWO gubment pensions; one which has kicked in...and one which awaits me once I obtain a couple more years. Too, Social Security awaits as does money in a 457. Once I begin to draw down on that, it will, correctly, be taxed as income. Big deal: I'm not afraid of any increases in the personal income tax rates because it's such a small amout. Bluntly, I can draw $400 per month on it, now, and it won't affect the prinicipal. Son, $400 a month extra income is a lot of money to this student of Silas Marner. BOTH my gubment pensions are under attack and, just as you do, I bitterly resent any discussion to cut either one: A DEAL is a DEAL: I provided a gubment service at reduced wages to collect on the back side. However, I wasn't as smart as Kansas Legislators, and I admit that!! And, had I proposed I worked a 372 day year, I would have been demoted. shrug

Too, where we differ is your constant attack upon the poor and disenfranchised of this Nation. Ok, so make this "50%" you keep going on about pay a token income tax. What is that going to accomplish? NOTHING. Focus my good fellow.....Focus.....Focus on where the money is; who has it; and how they keep. Our job is to take it back: They ain't going to give it.

Tax income. Do NOT tax work.


George Lippencott 3 years, 10 months ago

The real Alceste surfaces.

Where does the six figure in come arise in your mind? I use that number as an example because it is twice the average Kansas income. It is also a not uncommon income for a two wage earner professional family at the end of their run in many parts of this country. Go pursue the commerce department web pages.

You currently take about 30% of the income of those at $100K and 12 % of those at $50K. That equates to a tax rate tripling over a $50K increase in income. That would suggest a 66% tax on those making $150K - that is not marginal but actual tax.

When you can get to that point we can talk. Arguing that a two income professional family with each member having the same (or similar) pensions as you is rich is just ridiculous.

Go after the real money - the wealth that has accumulated in selective bank accounts as the result of preferential tax treatment of income for generations.

As far as the poor. I believe our trillion dollar social safety net is adequate for the poor. I deplore a system where half the people are on it long term - The system should get them off it. People with an average income are not poor.

I believe that all should pay for the largess of our governments. That way everyone feels the cost of government and has an interest in containing it least they have to pay more. It is a corrupt system that draws almost all of its resources from half the population. In a democracy that means there is no longer incentive to cap anything because the majority of the people receiving the largess are the ones not paying for it.

And yes. I believe that we owe the people who work for us that which we promise. If we want to change it - by all means do so for the new hires. I am repulsed by the notion that our government makes false promises and then walks away from them. Sickening.

I am even more repulsed by so called liberals who continue to support people in elective office who have created this mess. (don’t like Republicans either).

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