Here's a spiffy chart that tells us how much each state gets in federal spending for every dollar its citizens pay in federal taxes.
The federal tax burden falls much more heavily on some states than others, according to a new analysis of federal fiscal operations. Comparing the federal tax burden by state with an adjusted set of the Census Bureau’s most recent data (2000) on federal expenditures by state, Tax Foundation senior economist Scott Moody has ranked states in order of which got the best deal in 2000 from Uncle Sam’s tax and spending policies. ..."Federal employees" also includes military personel, which probably explains why New Mexico has the best ratio of any state, receiving $2.03 from the feds for every $1 its citizens pay in federal taxes. Connecticut -- the richest state in the Union, if I remember correctly -- has the worst ratio, receiving only $0.62 for every $1 sent to Washington, DC. The capital itself gets a whopping $6.49 in spending for every $1 paid, but that's not surprising considering that it's the center of government.Factors influencing the shifting of federal dollars include the location of people who receive Social Security, Medicare and other substantial federal entitlements, the location of federal employees, federal procurement decisions, and grants to state and local governments.
My own state of California was ranked 38th in 1990 and 40th in 2000, receiving only $0.89 and $0.86 per $1 in those years respectively. In 2000, Vermont was the median state, receiving $1.08 per $1 taxed; that the median is over $1:$1 indicates that more than half the states are getting more out of the system than they put in... a phenomenon strangely similar to how the income tax hits individuals. (HT: The House of David.)
Here's a table showing what percentage of income tax comes from various groups of earners, along with what percentage of total income is earned by that group (data gathered from the IRS via Rush's website, 2001).
| Income Group | % of Total Income Earned | % of Total Income Tax Paid | Earned:Paid Ratio |
| Top 1% | 17.53% | 33.89% | 1.93:1 |
| Top 5% | 31.99% | 53.25% | 1.66:1 |
| Top 10% | 43.11% | 64.89% | 1.51:1 |
| Top 25% | 65.23% | 82.90% | 1.27:1 |
| Top 50% | 86.19% | 96.03% | 1.12:1 | Bottom 50% | 13.81% | 3.97% | 0.29:1 |
Of course, these numbers only reflect taxpayers; there are probably millions of low-earners who don't file taxes at all. How much do you have to earn to be in the top 50%? If you're filing jointly, you and your spouse need to earn a combined $26,000 or more to be in the upper half -- and have the privilege of subsidizing the lower half of the spectrum to the tune of approximately 4:1.
Does this mean that 50% of the income earners in America make less than 26K a year? That sounds awfully low, so I'm wondering how the percentages were calculated.
Do the income groups represent the number of individuals, or the amount made? Consider this scenario, if 100 people lived in Lamerica, and 99 of them make $100 a year, and the one poorest made 1$. It would be true to say that the bottom 50% made less than $50 a year. But it is not true that half the people in Lamerica make less than $50 a year. It is also true in this example to say that the top 1% of the income earners pay 99% of the taxes. But it is not true that 99% of the people in Lamerica don't pay much in taxes.
I believe that the top income earners pay more than their fair share of taxes, but tables like these are too vague for me. It depends on which way the bell curve of income is shifted. If it is to the right, there are more middle/upper earners and if it is to the left there are more lower/middle earners. Having it shifted one way or the other means you have to specify what you mean by "top 50%".
LT: That's why these figures always use median incomes, not mean incomes. The median household income for joint filers is $26,000, which means that 50% of people make more, and 50% of people make less. The mean income is actually higher than that.
This of course explains why the Bush tax cuts went only to "the rich," because if you are genuinely going to cut taxes, rather than merely transfer wealth from one econ. class to another (the Dem. plan), you have to cut the taxes of the people who pay them.
Hence the bottom 50 percent of earners' slice of tax-cut pie was very small.
Whenever you hear a politician talk about "tax cuts for working families" he means taking money from "the rich" and giving the money to the bottom 50 percent. Why? Because you can't actually cut the taxes of people who don't pay any; all you can do in the tax code is give them tax credits, which means refunds, which means they get "refunded" to them money they didn't pay. Someone else paid it.
But "the rich" consists of anyone making more than $26,000 per year.
Mike's figures are yet another argument in favor of a true flat tax.
Donald: Yep, a flat tax sounds good to me.
I think that everyone, no matter how poor, should pay some tax. Otherwise, the system devolves into the majority voting to tax the minority, without have to bear any burden themselves. Uh, maybe we're already to that point.
This chart refers to income taxes only and 70% of American households pay more in federal payroll taxes than they pay in federal income tax. I wonder what the pay/collect ratios for states and different income levels would look like if payroll taxes were included. Given the fact that Social Security tax ends at the taxable wage base (Medicare tax does not) yet Social Security pensions and Medicare benefits are not directly means-tested, I suspect that the comparisons would look a lot more even. That's especially true since older workers tend to earn more than younger ones.
John: As every politician from both major parties would agree (at least after consulting with their advisors), Social Security and Medicare payments are not taxes.
Of course, in reality they are taxes. Until they're dealt with that way politically, however, there's no point in really debating the issue.