Only the rich pay tax: Zombie talking points on the rampage

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I can attest to the truth of Krugman’s claim that a zombie talking point is alive and well in the US, which hasn’t really taken root here.  It is that only the rich pay tax.  That’s roughly true here if you’re looking at families (because of family payments), but it’s based on a bit of a trick which is that not only is it not true if you don’t have kids, but it’s also not true if you include indirect taxes – here mainly GST, payroll tax and stamp duty (although the latter is a little progressive at least nominally by house price).

Anyway, I recall overhearing some American woman explaining to an Australian that no-one paid tax in America except the wealthy.   Krugman offers this graph in contradiction.

And in news just to hand Bill O’Reilly and Glenn Beck explain why George Soros and Paul Krugman are trying to destroy the US economy (so they can install socialism obviously enough). Glenn Beck also explains why oil prices have gone up against the dollar – the reason paradoxically is that they’re pegged to the dollar.  Watch, listen and learn, direct from the echo-chamber.

There is no category in Troppo’s catalogue for ‘Conspiracies to destroy the world’ but there should be.

 

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conrad
conrad
10 years ago

I think what your graph shows, apart from dispelling the myth, is that collecting taxes from the bottom 40% of people probably not only has negative consequences (it’s basically Robin Hood in reverse) but appears to be a waste of time (especially the lowest 20%) — I wonder how much it actually costs to police and get the tax from the bottom 40%?

Dave Bath
10 years ago

Krugman and others should be in the running for a “Kassandra Award”, spot-on seers never heeded.

KS
KS
10 years ago

It depends where you drink. If I was to walk into the public bar at an average pub I think I would be just as lilely, or more, to find a consensus that it’s the rich who don’t pay any taxes because they have ways to avoid it.

Tel
Tel
10 years ago

I presume that when Krugman says, “zombie lie” he is calling Veronique de Rugy a liar since she wrote the article he disagrees with, however de Rugy does clearly spell out that she is talking about “Federal Personal Income Taxes” so looking at what she actually wrote, it’s not actually a lie. She also references the Tax Policy Center, and they in turn make it clear that federal personal income tax is not the only tax that people pay:

http://www.taxpolicycenter.org/publications/url.cfm?ID=901335

But even citizens who pay no income tax still pay other kinds of taxes. They pay Social Security and Medicare taxes when they work, sales taxes when they buy things and property taxes on their homes. Drivers pay gasoline taxes, and smokers and drinkers pay excise taxes on tobacco and alcohol. According to our research, more than 75 percent of us will pay at least some form of federal tax in 2010.

I still can’t find the lie in this, although I can see that it doesn’t frame things quite the way Krugman would prefer, perhaps we can say there is some deception by omission.

Hmmm, when it comes to deception by omission, there’s few key points that Krugman skips right on over. Most importantly, the way “Payroll Tax” in the USA works is that the money is pooled in a social security account and paid to retirees. This is (in theory at least) an encapsulated, self-funding system where current taxpayers support retired citizens and in turn are owed some support as they themselves eventually retire. In effect, they get their own money back at the end of their working career. However, when you consider that the rich Americans spend their lives paying into social security but most likely will never get paid anything out of it, while the poorest probably will get back significantly more than they put in… it is outrageous to pretend that the social security system does not represent at least some degree of wealth transfer in favour of the poor. DISCLAIMER: I don’t understand what the criteria for SS payouts is in the USA, and I can’t find any website that explains it in understandable terms. I’m presuming that Bill Gates doesn’t collect SS in his retirement.

If I was to pay someone $1000 and they give me back $900 in change, the normal accepted summary of what happened is that I paid $100, but what Krugman is trying to say is that the other guy paid $900. That certainly fits my criteria for dishonesty.

Now, I’m well aware that deep in the US federal system there are also kickbacks that throw tax money at the super rich, and I’m also aware that puzzling out the nett effect of wealth transfer in this direction is difficult because of the way such things have been deliberately obscured through indirect benefits. However, just because the correct answer is a bit hard to find, does not justify latching onto a blatant oversimplification and delivering it as ultimate truth. To do so would be, well deceptive really.

A less important issue is the bundling of state taxes in with federal taxes, given that all states are different. Does a wealthy New Yorker deserve to be held accountable for harsh treatment of poor people in Texas? If there are so called “regressive” taxes in some states, that’s an issue to be campaigned at the state level, surely not an issue to be somehow redressed at the federal level. It seems perfectly reasonable for conservatives who are unhappy with federal policy to target their complaints at one particular level of government. To call them liars because they refrain from muddying the waters introducing irrelevant material into their analysis seems rather unsporting to say the least (providing they are quite clear about which material they have introduced and why).

By the way, George Soros did in fact pay (at least in part) for that graph up above… just sayin’.

Peter Whiteford
Peter Whiteford
10 years ago

Nicholas

As I read the chart, it shows that the bottom 60% of the US income distribution pay a lower share of taxes than their share of income, while the top 40% pay a higher share of taxes than their share of income – i.e. their overall system is progressive (but not as progressive as if you just looked at income taxes).

The same is true everywhere in the rich world, but in fact in most other countries the overall system is less progressive than in the USA – mainly because the the payroll taxes and consumption taxes are much higher in Europe and the consumption taxes have a broader base (i.e. include food) and are therefore less progressive.

Now I totally agree that the idea that in the US only the rich pay taxes is simply wrong, because this is based on analysis which doesn’t take into account payroll taxes including from employers, and sales taxes. Simply wrong doesn’t begin to describe the problem – it is propoganda.

However, in my view the problem for the US left is that they don’t appear to appreciate that progressivity is only part of the solution to reducing inequality. Nearly all other OECD countries reduce inequality more than the USA, but in my view (and analysis) they have less progressive tax systems. Most importantly they have tax systems that are less progressive, but collect more money, which they then spend on more generous social benefits.

I can send references if wanted, but the USA actually has the most redistributive tax system in the OECD, but it has close to the least redistributive social spending in the OECD. And social spending is more important than taxes.

Now I totally agree that the income tax cuts under Bush – on the whole – cut taxes most for the very rich, and are largely unjustifiable. Going back to the Clinton tax scales would obviously be a good idea – but this would not change anything fundamental.

If people in the USA did want to change the effectiveness of their system – a very strong assumption! – then in my view they need to increase the level of taxes rather a lot – probably through a broad-based sales tax of between 10 and 15%. They then need to spend the extra money collected on properly universal health care and a much more effective social safety net than they currently have.

KS
KS
10 years ago

http://gregmankiw.blogspot.com/2011/03/what-nation-has-most-progressive-tax.html

I was going to note the reference by Greg Mankiw to the previous contribution of Peter Whiteford at a similar debate, with a different table, but see he has already done so here at Troppo himself.

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