Leatherneck Teuffel · @LeftFighter
4th Mar 2011 from Twitlonger
The Progressive tax is a fraud.
Here's a Heritage chart I saw that elicited more research from me:
http://www.heritage.org/BudgetChartbook/Images/income-tax-receipts-850.jpg
As you can see, at 91% top tax rate in 1961, total tax receipts were 7.8% of GDP, the estimate used for 2010 was 35% and 6.4% of GDP. The point of this is to show the dramatically reducing top marginal rate versus the relatively flat percentage of GDP.
The meme is, "tax the rich more and the government gets more money." That appears to be patently false, according to Heritage.
Because I wanted to be fair, I used the following search to get the top US Federal tax rates from elsewhere.
http://www.bing.com/images/search?q=us+top+marginal+tax+rate&form=QBIR&qs=n&sk;=
Being that this is a matter of public record, I didn't expect to find significant differences and I was correct, as I found the following charts that corroborrate the Heritage charts, among which are this one (http://bit.ly/fFBfhU) and this one (http://bit.ly/gY6X4u).
So we know the tax rate on the Heritage chart is correct. How about Individual Tax Receipts as a percentage of GDP line?
I did this search:
http://www.bing.com/images/search?q=Individual+Tax+Receipts+as+a+percentage+of+GDP&form=QBIR&qs=n&sk;=
And found this from the CBO: (http://bit.ly/gGVfHJ) Note the upper left corner. The line is pretty much at the same percentage as the Heritage chart *and* it's flat for the most part, just like the Heritage chart. I also found this one (http://bit.ly/i6elSK) that says near exactly the same thing.
It's pretty clear to me that the Heritage chart is correct and is a pretty damning, considering the "eat the rich" mentality. The fact is, the same money comes in to the government if the top marginal tax rate is 90% or 40%.
Now compare the tax rate chart to this:
http://www.midasletter.com/images/0901202.gif
The black line is US National GDP.
Notice it started to bend up in the 1960's, but took a sharp spike starting in the early 1980's? Right about the same time that Reagan reduced the top tax rate from 70% to 50%, 1981, right?
So, (follow me here) if, in 1981, the reduction of the top marginal tax rate from 70% to 50% only reduced tax reseipts only .2% of the GDP, then the GDP began to climb, even at the ensuing lower percentages from 1982 through 2010, the government was making more money, year over year.
I'll explain it this way:
Let's say 1980 total tax revenue was $1,000 (using $1k b/c that's where the black line falls on that last chart). The revenue off that $1000 would have been $92 (the $1,000 x .092). Flash forward to the 2008 (or so) figure, where the line just crosses $4,000. According to the Heritage chart, the income off that would be about 6.5% or so, for a total of $260.
These numbers show, you reduce the tax rate, GDP grows and you make more money, even if you're collecting a lower percentage of GDP in tax revenue.
Now take this into account: First, on economic "fairness" and "the rich paying their fair share:" The top 1% of earners are now paying more in taxes than the total bottom 95% (http://www.fundmasteryblog.com/wp-content/uploads/2009/07/tax-foundation-1-20090729-chart2.jpg). The top 1% is paying more, dollar-for-dollar, than at any time in the past 30 years, (http://scotthodge1.files.wordpress.com/2010/06/top-1-cbo-chart.jpg) more people are paying nothing than at any time in the past.
And compare that to this chart: (http://incometaxfacts.org/chart-payzero.png)
My question then becomes, who *really* isn't paying their fair share?
...amd just so we're clear, tax reduction isn't the reason why we're so screwed. This is: (http://www.rothcpa.com/misc/20091001-2.jpg)
When the increase of federal spending outpaces the increase in median household income by 189% since 1970, you're going to have major, major problems. All this goes back to entitlement spending with LBJ's Great Society and the New Deal.
Take all the above info into account, and it's no surprise we're here: http://www.usdebtclock.org/
The Keynesian spending philosophy has been in effect since the 1930's, and this is what it's gotten us. You'll notice we didn't have these issues when we were the a truly free market economy. Yeah, we had ups and downs, but the nation was never this close to bankruptcy before.
Now, given all the above cited facts and figures and that (no matter the rich's tax rate) taxes only net the government 8-9% of GDP, would it not make more sense to tax *everyone* 8.5%, and cut spending so that not a penny more is spent than is taken in? This would definitely kill the rent-a-car mentality of the poor in this nation and give the poor an ownership mentality over it (meaning, if you rent a car rather than own it, you drive it differently than if you have ownsership of it. If the poor payed taxes, they'd care how the money was spent and if it were wasted). I guarantee there's be a lot more thrift and common sense in government spending.
Of course a transition period between the law taking effect and ramping down to the 8.5% would take a while (to be able to pay off the national debt, rather than just make payments on it) maybe 15-20 years, but I'd feel safe in assuming guaranteed national prosperity on the back side of that.