Keep working hard. Remember. The Free Shit Army is depending upon you.
Authored by Mark Perry at AEI via Contra Corner blog,
The Congressional Budget Office (CBO) just released its annual report on “The Distribution of Household Income and Federal Taxes” analyzing data through 2011 on American household’s: a) average “market income” (a comprehensive measure that includes labor income, business income, and income from capital gains), b) average household transfer payments (payments and benefits from federal, state and local governments including Social Security, Medicare and unemployment insurance), and c) average federal taxes paid by households (including income, payroll, corporate, and excise taxes).
Some additional analysis and commentary will be provided here that reveal a yet-to-be discussed major implication of the CBO report – almost the entire burden: a) of all transfer payments made to American households and b) of all non-financed government spending, falls on just one group of Americans – the top one-fifth of US households by income.
That’s correct, the CBO study shows that the bottom three income quintiles representing 60% of US households are “net recipients” (they receive more in transfer payments than they pay in federal taxes), the second-highest income quintile pays just slightly more in federal taxes ($14,800) than it receives in government transfer payments ($14,100), while the top 20% of American “net payer” households finance 100% of the transfer payments to the bottom 60%, as well as almost 100% of the tax revenue collected to run the federal government. Here are the details of that analysis.
The figures in the graph above show the amount of federal taxes paid by the average household in each income quintile minus the average amount of government transfers received by those households in 2011. For each of the three lower income quintiles, their average government transfer payments exceeded their federal taxes paid by $8,600, $12,500, and $9,100 respectively, and therefore the entire bottom 60% of US households are “net recipients” of government transfer payments. Averaged across all three lower income quintiles, we could say that the lowest 60% of American households by income received an average transfer payment of about $10,000 in 2011. And because the government has no money of its own, where did those transfer payments come from to finance the “net recipient” households? Where else, but from the top two income quintiles, and realistically almost exclusively from Americans in the highest quintile.
Specifically, the average household in the fourth quintile paid slightly more in federal taxes ($14,800) than it received in transfer payments ($14,100) in 2011, making the average household in the second-highest income quintile a “net payer” household in the amount of $700 in 2011. Basically, households in the fourth income quintile paid enough in taxes to cover their transfer payments, and then made a minor contribution of $700 on average to help cover the transfer payments of the “net recipient” households in the bottom 60% and make a small contribution to the federal government’s other expenditures.
But the major finding of the CBO report is that the households in the top income quintile are the real “net payers” of the US economy. The average household in the top one-fifth of American households by income paid $57,500 in federal taxes in 2011, received $11,000 in government transfers, and therefore made a net positive contribution of $46,500. The second-highest income quintile basically just barely covers its transfer payments, so it’s really the top 20% of “net payer” households that are financing transfer payments to the entire bottom 60% AND financing the non-financed operations of the entire federal government.
Here’s another way to think about the burden of the “net payer” top income quintile. The average household in that income quintile made a contribution net of transfers in 2011 in the amount of $46,500. That would be equivalent to the average household in the top quintile writing four checks: 1) one check in the amount of $8,600 that would cover the average net transfer payments of a household in the bottom quintile, 2) another check for $12,500 to cover the average net transfers of a household in the second lowest quintile, 3) a third check in the amount of $9,100 to cover the average net transfer payments to a household in the middle income quintile, and 4) then finally writing a check for the balance of $16,300 that would go directly to the federal government, which for the households in the quintile as a whole would have covered almost 100% of the non-financed federal government spending in 2011.
So except for a small contribution net of transfers in the amount of $700 from the average household in the fourth quintile, the highest income quintile is basically financing the entire system of transfer payments to the bottom 60% AND the entire operation of the federal government. And yet don’t we hear all the time that “the rich” aren’t paying their fair share of taxes and that they need to shoulder a greater share of the federal tax burden?
Hey, they (the top 20%) are already shouldering almost the entire federal tax burden along with almost the entire system of entitlements and transfer payments! And that’s not “fair” enough already?
The chart above shows another way that the CBO data reveal an extremely unequal distribution of government transfer payments and federal taxes by displaying the ratio of “dollars received in government transfers per dollar paid in federal tax revenues” by income quintile in 2011 (these data are from row 8 in the table above). The average household in the lowest quintile received $9,100 in government transfer payments in 2011 and paid only $500 in federal taxes, for a ratio of $18.20 in transfer payments for every $1.00 paid in federal taxes that year.
In contrast, the average household in the top income quintile received $11,000 in government transfers in 2011, but paid $57,500 in federal taxes, for a ratio of 19 cents in government transfer payments per dollar paid in federal taxes. This analysis is a further illustration that the bottom three quintiles are “net recipient” households that received more than $1 in government transfer payments for every $1 paid in federal taxes in 2011, while households in the fourth quintile were minor “net payers” in 2011 and received slightly less than a dollar in transfer payments on average ($0.95) for every $1 paid in federal taxes. “Net payers” in the top quintile received only $0.19 in government transfer payments per $1 paid in federal taxes in 2011.
This final chart shows average tax rates by quintile in 2011, both before and after government transfer payments. The blue bars in the chart show the average tax rates by income quintile from the CBO report (Table 4) and are also displayed in the top table above in row 5, calculated by dividing federal taxes paid (row 4) into “Before Tax Income” (row 3, Market Income + Government Transfers).
Adjusting for government transfers received, the brown bars in the chart are calculated by dividing “federal taxes paid minus government transfers received” (row 6 in the table) into Before-Tax Income (row 3), and show average tax rates by income quintile after government transfers. For example, the average “net recipient” household in the lowest income quintile received a “negative tax” payment of $8,600 in 2011, had an average before-tax income of $24,600, for a negative tax rate of 35%.
Reflecting their “net recipient” status, all three lower income quintiles had negative average tax rates in 2011, and only the “net payer” households in the top two income quintiles had positive after-transfer tax rates of 0.7% for the second-highest quintile and 18.9% for the top quintile. This further demonstrates that after transfer payments, households in the bottom 60% are “net recipients” with negative income tax rates, while only the top two “net payer” income quintiles had positive tax rates after transfers in 2011…….
That which you subsidize, you get more of.
While this guys numbers seem about right,,doan forget he is from also from AEI [neo-con central] and you can bet that somehow, someway, he will work to create more profit, err debt, for his Think Stank Sponsors.
We might not need so many “transfer payments” to the lower quartile, if we had not been transferring such a huge portion of our wealth to the top 1% of 1% for the past 130 years.
Not to defend our welfare programs, which I will be the first to state are blatantly unfair and anti-freedom, have wrecked our cities, punish work and thrift while rewarding laziness and carelessness, and which have made our poor that much poorer and less able to cope with life.
But if they have degraded and demoralized our lower classes while robbing our middle classes (which include the largest taxpayers, those upper-middle earners earning $150K to $300K a year), what has Corporate Welfare done to our once-mighty industrial complex. Could it be that it has rewarded uneconomical and unprofitable businesses practices, including gross overcompensation for incompetent executives; supported obsolete legacy corporations making shoddy, outdated products at the expense of talented upstarts; throttled new technologies; and turned our financial markets, once the most fair and orderly in the world, into a rigged tax-payer supported casino in which the oligarchs cannot lose
The amount of money transferred to our Oligarch Class has never been calculated. The money would include everything from direct subsidies, to public works projects built to benefit select landowners and corporations, but which confer little benefit to the public as a whole. It also includes the increasing transfer of wealth to our upper class via the inflationary policies of the Federal Reserve, which has inflated us out of our very lives since 1913
If we are to unravel the welfare state successfully, we must start with the greediest welfare recipients of all, our oligarch class.
Chicago – Even if you took all the money from all the very top percentages, and gave it to the poorest, it would make little difference. The poor would simply consume the wealth quickly, and there would be no capital left.
Inequality is not so much about who has how much – because even if it is all spread around it would make zero difference.
Inequality is only an issue insomuch as people do not have equal opportunity of moving around the various income levels, and certain groups are afforded protection and unequal opportunity.
Surprisingly enough, there is still a lot of upward and downward movement through various wealth percentiles. Just not as much as there was at one time. And as far as I am concerned, that is the real issue.
If you divided all the wealth up equally, within a year the present poor would be poor again, and the present wealthy with the drive, knowledge and connections would be rich once again.
But at least the nigs would have themselves some dope ass rims.
John t.b. – you have said the same thing I have, but more colorfully. But the rich would not be rich again that quickly, or at least not so rich, as the capital investment would have been consumed, and would no longer be available for production.
My friend who lives south of Atlanta advised me just yesterday that her retired black maid’s neighbors in the government projects , have a maid that comes in two days a week. Granted she related only a couple of neighbors had maids but WTF… I Don’t have a maid and I operate a small business. My taxes are too f@#king high for such a luxury but THE FSA HAVE MAIDS ! That’s complete bullshit.
Bea lever – I share your pain. I own a business, and I surely understand what is happening to businesses such as yours. The pressure is unbelievable, the red-tape is never ending, and the myriad laws are almost impossible for most folks to navigate.
If you ever have anything that you think I might be able to help with, please let me know. I have been running a medium sized business for a very long time, and if nothing else I am a sympathetic ear.
Good luck.
BTW – I hate taxes with a purple passion.
Ilpoh, where did I suggest giving the wealth of the top 1% to the poorest?
As I stated, welfare for the poor is unfair, degrading, and demoralizing, incentivizing bad behavior while punishing work, intelligence, and thrift. But I also pointed out that massive corporate welfare does the same thing on a mega-scale, resulting in a deformed economy driven by perverse incentives, that punishes upstarts and stifles productivity while supporting outdated, senescent legacy businesses and uneconomical industries that would have disappeared long ago were it not for these subsidies…. and making life vastly more expensive and difficult for both businesses and individuals who don’t have a place at the feeding trough.
I only suggested that if we had not given the 1% of 1% so much, we might not quite so many poor, AND we would have a much healthier economy with much more truly productive business activity and more innovation.
Best of all, we would not have so much invested in systems and businesses that, without massive subsidies, are unsustainable. Crony capitalism on a massive scale has, for the past 130 years, greatly skewed not only our economy, but the way we inhabit the land and consume resources, resulting in lifestyles and patterns of settlement that are grossly uneconomical and set to fail as the country grows poorer, and the public money necessary to keep the party going, is no longer there.
When that happens, we will see that the FSA includes a much, much larger group of people and entities than we ever had any idea of.
Chicago – you said: “if we had not been transferring such a huge portion of our wealth to the top 1% of 1% for the past 130 years.” My point is if you take that back, it will not do any good. I was not so much disagreeing with you as pointing out that an even distribution of wealth would see the destruction of massive amounts of capital. The one thing that concentrations of wealth currently does that is beneficial is that is conserves capital – the FSA would consume said capital if they ever get a chance.
There is a story about a charity that went to Africa. They brought equipment, and seeds. They spent a long time teaching the Africans how important it was to preserve the seeds, and maintain and use the equipment. They left knowing that the Africans would be better off now that they had a means of producing their own food. The charity returned 6 months later to see the evolution of these benefits. The Africans had, immediately upon the charity leaving, eaten all they seeds and busted up all the nice equipment for parts and metal, and were again starving.
And that is what would happen in the US if capital were dispersed into the control of the poor. They would consume or destroy all the capital, and there would be nothing left.
I agree with you almost 100%. I especially think that the way it is now, big corps, with or without preferential treatment, have become so large as to effectively be beyond competitive forces. Upstarts simply cannot grow sufficiently to challenge them, by and large.
Last year, I had a full-time job that paid around $84K and my taxes (federal income, state income, and payroll taxes) were around $25K – enough for me to live comfortably for a year.
Now I am self-employed and only work six months of the year. I make $34 an hour in my current contract assignment and will be there through the end of March 2015. The “staffing agency” makes a cut but also covers my liability insurance and my share of the payroll taxes.
The trick is to not have kids and not have debts – that is the only way to “Go Galt” now. I live in Iowa, so my condo cost $117K, it is paid off, and I already had the furniture. It’s perfectly nice, and I even put beautiful hardwood floors in the place, since I borrowed the tools from a friend and paid him back for the use of his tools in Amber Bock. My car is 15 years old but has less than 112K miles – amazing how few miles you put on a vehicle when you only work half the year.
When I went rogue, I estimated a generous $2K a month in living expenses, which has actually turned out to be a little less than that, and I assumed I needed the next six months’ worth of living expenses in my checking account, plus $10K. (So $22K.) I keep a savings account of $10K in case my old vehicle dies, which it shows no signs of doing, because I take care of it. (But yes, eventually it will happen.) And now I have a high-deductible insurance policy which costs $197 a month in premiums and has (I think) a $5K or $6K deductible and still costs $197 a month. So I keep a balance in the HSA account of nearly $8K. Mostly I spend it on teeth cleanings – I have no dental insurance, but have healthy teeth.
Not to bog anyone down in the details, but I am loving life right now. It doesn’t matter if my job is dumb or boring – most jobs are boring, and mine is only half the year, so there is light at the end of the tunnel – for the other six months I get to enjoy my life doing things I like doing. Mainly these are art projects and reading, but they aren’t anything I can get paid to do.
It’s not always going to be so cut-and-dried – my next work assignment might last 9 months, or even 12. I probably won’t take off more than six months between projects, however it works out.
But there is a way to relieve yourself of this burden, and believe me I will never pay $25K a year in taxes again, because I have no need to. It’s just stupid, when it gets to that point.
Just saying, if you want to pay lower taxes, reduce your cost of living and work less.
Actually, to clarify, by “last year” – my full-time job ended on May 2nd. I gave them two months’ notice and left them in good shape. They are an option for future contract work. No sense burning bridges. I took May 2nd through October 8th off, biked the Katy Trail in Missouri, and next year am set to follow a similar pattern.
Amazingly, when you look at my hourly wage and view it through an all-year lens, my taxes would be nearly 30%. But if you sliced it by half and applied a full year of working to it, it drops to 22%.
Go Galt, motherfuckers. And don’t have kids.
The key is be debt-free, don’t think you need all the latest New Hotness in terms of cars and gadgets, and just think about what you enjoy doing. That has been interesting to me. At first, I was just so glad to be away from dull corporate life, all I could think about was getting away from that. I wasn’t really thinking about what I was escaping TO, just what I was getting away FROM.
Could I have an even nicer home? Yes. Nicer car? Yes. More expensive wardrobe? Yes. But those would all necessitate working more than half the year, and there is nothing – NOTHING – that could be a better investment than buying months of my life back. The returns are immediate, and not subject to inflation.
Pirate Jo, I love my kids, but I’ll admit to envying your lifestyle. This having kids thing starts at their conception and lasts until the day you die. You should regale us with some stories of your life so we can live vicariously. Bonus points for lesbo action. Or you could show up at the local parent-teacher conferences all drunk and mocking everyone.
My heart bleeds for the wealthy. GE paid how much after billions in profits? War’s cost how much per day? How many military bases do we have in the world.
Yeah, things are strange and often unfair. My dad often bring’s up the insane amount sports figures make.
Iska, I’m not sure what you’re getting at here, but I am no hairy-legged lesbian – nor a smooth, hard-bodied total hotness lesbian for that matter. In fact, I’m no lesbian at all. I’m just an average woman, with a sweety who loves me, and I’ve been with him for nearly eight years now. I give no thought whatsoever to parent-teacher conferences. That’s between the parties involved, and it sounds horrible.
I’m not trying to be snotty – or drunk! – although now that you mention drunkenness, it’s not a bad idea – I’m just serious. If you want to squeeze the best you can out of life, it’s on you to first figure out what you want from it. Give your kids my e-mail address, and I’ll happily teach them how to balance their books and budget for the things they enjoy. But if I advise them not to have children, and they follow that advise, I’m absolving myself of any future liability for the production of your future grandchildren. Sorry!
And another thing, Iska, you can’t possibly envy my 15-year-old car. You have no idea what its vents and wheezers sound like. This ain’t the posh life! I just found a way to pay lower taxes and enjoy life more. But that’s because I don’t spend much time in my car!
There’s lots of peace and quiet, though. Not everyone (or you) values peace and quiet the way I do. But if you want your kids to learn The Way of the Spreadsheet, send ’em here. I provide my tuition for free.
Well, unfortunately, I’m in that six-month window where I have to work tomorrow. Off to bed!
Section 8 with maid? If you throw in renting new house in the suburbs, Twin hummers parked in the driveway, I’d say your talking Palmdale – erstwhile home of the Octomom.
PJ – yours is one option. Eventual ill-health will put a major damper on that – not trying to be a killjoy but we all get older (if we don’t die young, of course). And with age comes eventual ill-health.
There are other ways, but those require hard work over at least three decades, generally, combined with appropriate skills and education, an above average intelligence, the same dedication to thrift and debt avoidance you mention, etc. That equation will still tend to pay off. But not always. But on average it will pay off well. Problem is folks tend to take short-cuts – too little work, too much play, or too little education or too much debt. The system works – but you have to follow it for thirty years. Gotta have it now is not part of the system. And after thirty years, when you are around late forties, you find you live in a fully paid for nice house, you have no debts, you drive nice cars, your kids if any are educated or nearly so, and your bank balance is swelling. And then the next thirty or forty years of life are smooth sailing. I have never seen anyone who says this does not work to have actually done it as described – they always tried shortcuts. There ain’t no shortcuts. Shortcuts are penalized with debt and destitution and bad luck throughout one’s entire life.
And yes children are expensive. But they are an incredible blessing to those that actually rear them rather than just have them.
Again, Ilpoh, i am not looking for anything like “an even distribution of wealth”.
I am only asking what every Libertarian asks- that it not be taken from those who produce it to be given to those who don’t.
But thanks to the statism of the past 150 years, and the power of the state to make sweeping policies and sweep the resources of tax payers into implementing them, we have taken many trillions of dollars from people and things that are economical and productive, and allocated them to things that are uneconomical and often destructive.
I have, over the years, met three men who ran small manufacturing concerns in MO and IL, who were literally put out of business by our taxes and regulation. Well, some would say, these guys were not major employers, the biggest of the trio only employed 500 people… 500 relatively high wage jobs in a city, Chicago, that has bled jobs and manufacturing over the past 40 years. The demise of that man’s business, which had been extant for 40 years before he purchased it and ran it for another 27, not only left 500 people unemployed, but had a “ripple” effect on their families, his old suppliers and vendors, their employees, the neighborhood the business was located in, and, of course, the city itself.
Multiply this guy’s case by thousands, and multiply the people taxed out of their houses, or who decided just to hang onto their hard earned money rather than chance it in an entrepreneurial venture whose chances of success were steeply reduced by the oppressive taxation and regulation that crushes smaller, upstart concerns. You of all people should realize how crushing is the load for a smaller (fewer than 1,000 employees) concern, especially one just starting and trying to accumulate capital to get to the next stage.
I don’t ask for the wealth to be “distributed”- just not stolen to subsidize Chase Bank, GM, the next redundant big box store, or the next high rise development by one of the mayor’s cronies, or $5B water reclamation projects in states with 300,000 people in them, or payments of hundreds of thousands of dollars per years to farmers to NOT GROW anything. Stop this crap, and there might be quite a few more jobs available.
Stop this, and it will be a lot easier to say no to the people now collecting food stamps and Section 8 vouchers and school grants and other welfare.
Ilpoh, I don’t take back that statement, because we HAVE transferred a massive portion of our wealth to the oligarch class by taxation, and corporate welfare.
Most of this corporate welfare remains unknown to most of the public, and most of the people posting here, even to this day. I am only beginning to dig, and what I am finding staggers me. I mean, I really had no idea.
Just this much more will I say- EVERY single program, from the Homestead Acts with its grants of 160 acres of land to any willing homesteader, clear up to the Section 8 vouchers and FHA loans and GSE-backed home loans of today, with every major public works project for mega-structures in places where almost no one lives,… all these programs and works that were ostensibly designed to benefit “the people” actually created the wealthiest, most entrenched, and most privileged oligarchy ever to exist, and most people do not even know the names of these people. Most residents of Irvine, CA do not know the history of the Irvine Ranch, or the Tejon Ranch, whose owners grew obscenely rich by manipulating the homestead acts, for example.
You could say that our top-heavy society with its entrenched privilege is a product of socialism- of the specious late 19th century progressivism that purported to aid “the people” , but instead enabled well-positioned people with pull to steal almost untold wealth by manipulating these programs.