An Illustration of Why I Don’t Like Progressive Taxation

August 22, 2008

Check this out.

Using 2008’s Federal Income Tax Brackets for Married Filing Jointly, I ran some numbers comparing the tax burdens for two incomes. First, here’s a look at the 2008 Federal Income Tax Brackets for Married Filing Jointly:

2008 Federal Income Tax Brackets (Married Filing Jointly)

Using those numbers, I ran the numbers for two different taxpayers. One taxpayer (Joe) has a taxable income of $50,000 and the other (Pete) $500,000. Here’s what their tax burden looks like:

Income Tax Comparison

So, Pete makes 10 times more than Joe but pays nearly 22 times more in taxes.

I have a hard time understanding what Obama means when he says it’s time for people with higher incomes to start paying their fair share in taxes.

Oh, and I didn’t even mention the AMT, which I think would most likely would affect someone with a taxable income of $500,000, making their tax burden even higher. I could be wrong about that as I’m not exactly sure how the AMT works.

60 responses to An Illustration of Why I Don’t Like Progressive Taxation

  1. JLP says:

    Under the fairtax, people would receive prebates on the amount that would have been spent on taxes up to the federal poverty level. According to the book, this would have amounted to about $6,000 in 2006.

    True; my objection is that at all income levels, renters pay more tax than homeowners on equal spending.

  2. The basic misconception here is the point of a progressive tax is to make the rich pay more; actually it is to make the non-rich pay something because they can not afford to pay much since most of their money is absorbed by the cost of living. With a reasonable estimate of the cost of living, the bottom half would no longer be paying any tax. They work to survive, not to profit. One of the biggest flaws of the fair tax is its presumption of the poverty level which is a standard that hasn’t been updated in decades.

  3. Lord, the progressive tax is to make the rich pay more. There is no way around that.

    You are wrong if you honestly believe that the bottom half works to survive. If you’re paying for cable TV, which is not something exclusive to the top half, then you’re working to profit. Just because your idea of the bottom half has poor money management skills does not mean that they are working to survive.

    That the poverty level hasn’t been updated in decades is not a flaw of the FairTax; that is a flaw in whichever portion of the government is responsible for such figures.

  4. Don’t worry, rich people don’t pay as much tax as the charts indicate. It’s nowhere near the %age because they have access to a whole different set of tax rules.

  5. One of the important purposes of taxes is to pay for basic services and infrastructure that are used by all or most of the population. This includes paying teachers, police, firefighters, maintaining structures such as bridges (witness the Minneapolis collapse). This money has to raised somewhere and when huge sums are wasted paying for foreign wars then even more money needs to be raised. You are not going to get this money from people who are barely affording their minimum living expensies, so it is only logical this money has to come from higher taxes on wealthier people. Isn’t this logical?
    This is money well spent – it is an investment in the future of the country and all our children. There may be a few people that take advantage and the government should try to prevent this, but most of the money is needed for services we all use. And you never know when you may be hurt or disabled by illness and need help yourself sometime in the future. No one think this will happen to them or their loved ones, but you never know what lies around the next corner.

  6. Those local taxes which pay for basic services tend to be regressive, and not at all progressive.

  7. I wish for all the people who complain about increasing taxes would spend half as much time demanding the government display some fiscal responsibility and balance the budget.
    For sheer financial reasons alone, I am surprised that more people did not protest the war in Iraq. Undoubtably some citizens have become very rich off this conflict, but the vast majority of us will be paying the bill (and the interest on the bills) for many many years to come.

  8. No, really, I wanna know – how does giving away 10% of your income improve your financial situation? It doesn’t make sense. 🙁

  9. G.L.,

    Logically, it doesn’t make sense (read Malachi 3:8-12). But, for us, it worked.

  10. You may want to have a look at Debatepedia’s pro/coin article on progressive taxation. I think it will illustrate the broader arguments in the progressive vs. flat tax debate.

    http://wiki.idebate.org/index.php/Debate:_Progressive_tax_rate