graphing the tax plans

Via Bitch PhD and Yglesias, this terrific graph showing the Obama and McCain tax plans and how much they’ll affect different income brackets’ taxes, with the bands scaled to reflect the number of people affected:

This is from a site called chartjunk, which attempts to use Edward Tufte‘s principles in designing charts.  Definitely lots to learn from.

The Freakonomics blog at the NY Times picked up on this too.

While we’re on the topic of taxes and distribution, I’ll point out that the big tax cut bill coming out of the Senate, which includes both the Alternative Minimum Tax patch and a bunch of business tax extensions, does include one provision that is really important for low-income families: allowing families to start to receive the child tax credit starting at an income of $8,500, down from the $12,050 under current law.  This would help 13 million low-income children.  It’s not at all guaranteed that the House bill will also include this provision, so it’s worth dropping a line or calling your representative.

I’m going to use the blogger’s prerogative to add this to the post, rather than risking having it get buried in the comments with all the back and forth about child support.

Maria commented on the stat that’s shown in the third chart on the Freakonomics post — that the top .1 percent of the country pays 20 percent of the income tax.  I haven’t seen that elsewhere, but it seems plausible.  There are great statistics on US income and wealth inequality here.

It’s worth noting that for all conservatives in the US mutter about European socialism, the tax system in almost all European countries is far less progressive than the US system, because they collect a large portion of their government funding through a Value Added Tax (VAT) which is if anything, somewhat regressive.

I

24 Responses to “graphing the tax plans”

  1. amy Says:

    Elizabeth, of those 13 million low-income children, I wonder how many are that poor because (in part) their absent fathers don’t or won’t make enough to support their kids adequately, and/or they’re violent enough that the mothers haven’t sought child support for fear of more contact. The average child support order here in Iowa is $300/mo, based primarily on father’s income. So for your average noncustodial dad here, paying your $300/mo support means you’re a fine upstanding fella. No, childcare costs are not routinely split by the courts, either.
    If that’s the main reason these kids are poor, I’d frankly rather spend the money hunting down the guys and either getting the money out of them or putting them to work on chain gangs until they’re paying adequate support, and by “adequate” I mean “paying half or more of the actual costs of raising the children, including housing, transportation, etc.” And while we’re at it? Let’s offer free vasectomies. Not sure you could handle supporting babies or the chain gang, too much of a man to bother with rubbers? Step up and get snipped, reversible if your circumstances change.

  2. amy Says:

    As someone who falls at the low end of the second quintile from the bottom, AGI-wise, federal income tax relief is not what I need. Really not. I pay no income tax and have more deductions than I can use, and the feds already send me a fat, unearned check each year, after covering my self-employment tax. It’ll be a bigger check this year, now that I’ve stopped handing my ex the child tax credit. The state also generally sends me money.
    As I’ve mentioned before, where I could use relief is in property and school taxes. Local stuff. We have here a very generous, very earnest, very school-of-social-work government here, and they’re killing me. Well over 10% of my gross goes to property taxes. No, I do not want to pay for a new giant jail, a new conservation district, a new school bond, a new set of human-services initiatives to attract more people who can’t support themselves or do some arithmetic before deciding to have more kids. And no, I don’t want to avail myself of the buffet of human services, for reasons I’ve been over. What I’d really like is adequate police protection and infrastructure maintenance, a decent public library and rec halls, and schools that teach the Rs competently. Beyond that I’d like local govt to leave me and my wallet alone.
    Also, like many single mothers, I’m a small-time landlady. I don’t want higher cap-gains taxes, because they’ll really knee me if I have to sell the property. If you sell income property, you not only pay cap gains on the appreciation of the property value, but you pay gains on whatever depreciation you’ve taken along the line. It’s worth remembering that fat cats with diamond pinky rings aren’t the only ones who worry about capital gains. Anyone who has to draw down funds in an emergency — and that’s going to mean a lot of middle-class types in the next couple of years — will have to pay them, too.

  3. bj Says:

    So Amy — you want pay for a federal program to track down father’s who don’t pay for 1/2 the costs of raising their children, and to develop a work-projects program to employ them so that they can contribute to the raising of their offspring? How would this program look? Would we put it into HHS, or would we develop a new agency of child support enforcement?
    I’m being partially snarky, but I’m also wondering whether there’s a policy/program behind the anger at “deadbeat dads?”

  4. bj Says:

    Amy — How does the economics you’ve described actually work out comparing these taxes from the two candidates?
    Assuming that the calculations are accurate (and I think part of what you’re saying that you do not actually think you’ll get the 3.6% from the 2nd quintile under the Obama plan–I can see why that might be the case, since they have to assume a “average” taxpayer in these calculations), a person making 26K (female average) in the 2nd quintile would get back $936 under the O-plan and $130 under the M-plan.
    I believe the O-plan’s increase in capitol gains has an income threshold — that is, you pay a higher cap gain tax, only if your income is already greater than 250K a year. So, I don’t think the increase in the gains tax under the O-plan would affect someone in the lower 20%, unless of course, they will have a capitol gain of greater than 250K. So, if one were going to get a 250K capitol gain, the M-plan would be much better (savings of 37K). Is the expectation value of a 250K capitol gain * 37K greater than $800 a likely possibility?
    It’s certainly not for me.
    (and the question of local taxes is a read herring, since it shouldn’t drive a choice between the tax plans of the two candidates, since neither will have any particular affect on the local tax policy).

  5. bj Says:

    The chart analysis is interesting (via freakonomics). Each weights the information differently, but I think this version, and some of Tufte’s other designs underplay the importance of readability. There’s a tendency to make charts fit the font, rather than weighting the chart to make the point, but part of the reason for that is to make all the fonts readable. Comparing the weighted Tufte version to the un-weighted version, I find the income subdivisions harder to read in the population-weighted version.

  6. amy Says:

    bj, the question of local taxes is certainly not a red herring; people are concerned not with federal income taxes but with their entire tax burden. My point is that Obama’s priorities on a local level lead to significant problems for the working non-wealthy, because on the local level you must actually pay for your liberal a la carte selections instead of adding them the $10 trillion tab you’re leaving your kids. You’ll also find the working non-wealthy have no interest whatsoever in using many of these delightful services, despite the best intentions of their well-meaning and naive designers. In other words, you’re hearing once again the voice of Pennsylvania, which the Dems have been bound and determined to avoid comprehending since 1980.
    Policy and deadbeat dads (no scare quotes necessary, they’re real enough): Yes, of course this is about policy. You may recall, long ago, boys your age worrying about jailbait. Currently there’s little or no incentive, if you’re a man who’s interested in self and little else, to refrain from making babies and walking away from supporting them. The various forms of child support enforcement are weak at best, and when you look at the numbers it’s not surprising. The state has little interest in spending dollars to pick up nickels. Support is nickels because so frequently the deadbeats don’t work, work irregularly, or don’t report income.
    If you shift child support minimums from “what can the noncustodial parent afford to pay” to “what is half the actual cost of raising the child locally at some reasonable standard of living,” you no longer worry about nickels. If the father does not pay, the state can then put him to work, for the duration of his children’s minority if necessary, collect his pay, and distribute appropriate child support to the custodial parent.
    What’s the effect? The jailbait fear. If a guy knows he won’t be allowed to walk away from supporting his children, and that trying it will guarantee a bracelet on his ankle for 18 years, I guarantee you’ll see fewer single-mom families doubling up and trying to get by on state aid and $8K/yr.
    Who develops it? Shoot, I’d give it to the cops and IRS. No need to be nice to these guys. Give it to the Marines, for that matter.
    Don’t forget that the cost of those $8K babies is not limited to EITC. They cost a tremendous amount in social services and police, and that’s before you get to the personal misery endured by these children and their mothers and grandparents. So I would guess that investing — don’t you love the lingo of social services? — investing money in a back-to-work program for deadbeat dads would likely bring fine returns to all.
    As far as cap gains goes:
    “I believe the O-plan’s increase in capitol gains has an income threshold — that is, you pay a higher cap gain tax, only if your income is already greater than 250K a year. So, I don’t think the increase in the gains tax under the O-plan would affect someone in the lower 20%, unless of course, they will have a capitol gain of greater than 250K.”
    Well, you’re conflating earned income and capital gains, which are taxed separately. Let me have a look —
    OK, it looks like he’s talking about $250K in earned income, regardless of size of capital gains. So yes, you’re right, that’s fine for me too. The yelling will come from the coastal ENT daddy of four, who sells the house to help send the twins to college and sees $40K disappear. And I don’t want to hear complaints when you find these rich cats are hiding more money in shelters and unreported overseas accounts. 5% of a lot is a lot, and they won’t hand it over voluntarily.
    I’ll tell you, though, the two main problems I have with both candidates’ plans are that a) they’re fantasies (recall that this is the executive, not the legislative, branch); b) they cost money, which is not a terrific idea when we’re flat busted. To put it in perspective, the national debt is now equivalent to about a year’s GDP, not counting unfunded state and federal liabilities. American debt, including private and corporate debt, now amounts to over $50 trillion, or five years’ GDP.
    If you had personal, mostly unsecured debt amounting to 5x your annual income, with corresponding debt service payments due, and you were legally on the hook for your kid’s private college tuition in two years, you would be Freaking. Out. You’d be selling everything not nailed down on eBay and looking for a nice dry paper bag to move into. The very last thing you’d be doing, assuming you were sane, is asking whether you should get the bathroom remodel that costs $10K or the one that costs $18K, on the theory that a new bathroom might — might, according to the Realtor Fantasies Brochure — make you a few extra grand if you sell your house when it’s done.

  7. bj Says:

    So tell me more about this plan to employ the me who can’t pay 1/2 of what it costs to raise a child. What exactly would we have them do, and who would run the program?
    See, I get that you’re trying to get a disincentives in place for those who father children that they’re not going to take the economic cost of raising. But, I really don’t get how we’re going to make them earn the money to pay (especially if they’re the prolific sort, who just can’t afford to pay for as many children as they father).

  8. Maria Says:

    The third chart at Freakonomics is fascinating — I had no idea that the top .1% paid 20% of the nation’s income tax. That’s astonishing.

  9. amy Says:

    Er…not that most anyone’s going to have capital gains to worry about for a while. So who do you think the Ron Paul write-in vote’s going to pull from? Oh boy.
    Anybody want to bet on which day the Dow returns to four-digit territory?

  10. amy Says:

    Maria, if you want more eye-openers, try David Cay Johnston’s book _Perfectly Legal_. Johnston is the main tax reporter for the NYT.
    bj, around here, the dorms are furnished with beds, dressers, etc. made by prisoners and bid competitively to the university. You may recall that TANF recipients are required to work, too (or be in school or actively jobhunting). Locally, we have just tons of unpleasant slaughterhouse work available. Seasonally there’s farmwork, too, which I hear really sucks. I’d say give those daddies three choices: Find a job and do your share in supporting the kids you helped make; go where we send you and work; or run off, get caught, and get locked up and put to work until someone gives you a job on the outside. And no, don’t pay them to pretend to go to school. Uneducated, unskilled, and can’t get a good job? Fix that before you unzip, or spend a whole lot of your life working for minimum.
    I’d say give them a free-pass period for non-support — everybody has a run of bad luck now and then — but if it’s a chronic thing or they’re just screwing around, put ’em to work. Forcibly if necessary. Don’t just shell out to the women in their place. This isn’t small change; there’s child-support arrears out there to the tune of around $100 billion, and HHS estimates around 85% of support cases were in arrears nationally in 2004. That’s at support levels pegged to the fathers’ income, not the costs of raising the children, which are usually more than twice the support order. Who picks up the balance? You got it — the custodial parents, and if they can’t do it, it falls to you and me. These guys, while stupid, are not idiots; they know someone will pick it up for them.
    The biggest nonpayors, according to HHS, are those parents with little or no income. Solution: yep, you got it.

  11. bj Says:

    “The third chart at Freakonomics is fascinating — I had no idea that the top .1% paid 20% of the nation’s income tax. That’s astonishing.”
    Yes, at it’s one of the few arguments I’ve heard against “taxing the rich” that actually makes sense to me. There is a problem in taxing *someone else* in order to fund your programs — it’s kind of like buying something when your grandmother is paying. In it’s extreme form, it could become “taxation without representation.” We could jigger numbers so that the 40% of the people paid 100% of the taxes, and 60% could keep voting to keep it that way. I don’t think we’re going there, but I do see the moral hazard in that outcome.
    Frankly, Alaska has a pretty good deal in that form — they tax oil companies to feed the majority of their revenue. And the people who buy the oil pay the taxes (but don’t vote in Alaska).
    (of course, the reason that the top .1% pay 20% of the taxes is that they earn more a huge percent of the income. I can’t google the numbers for the top .1%, but for the top 1%, in 2006, they earned 22% of the income, and paid 40% of federal income taxes).

  12. Bob Says:

    That’s Cure the Median Individual doesn’t add up to the Median house hold… Sure this is legit

  13. jeff Says:

    “Anybody want to bet on which day the Dow returns to four-digit territory? ”
    uh……you’re kidding right?

  14. amy Says:

    Not a bit.
    $700 billion is a stent. A balloon angioplasty. If it works, terrific. If not, this patient gonna lose an arm and a leg.
    Keep in mind the scale of the money we’re talking about, please. We’ve got on the order of $10 trillion — not billion, trillion — tied up in mortgage loans. That’s much of (but certainly not all of) the bad debt that’s been ground up into sausage with good debt and resold.
    This whole business started when the Dow was somewhere in the neighborhood of 4000, which was already a dizzying ascent from where it had been just a few years before. But that’s when it took off; those were the days of “irrational exuberance”. Irrational they surely were. There’s no special force maintaining the Dow above 10K; the only mystery is that we really don’t know what our gigantic businesses are worth anymore, because so much of their value recently has had to do with air-puft portfolios. We don’t have a compelling sense of how competitive the businesses (remember actual business? Selling things, collecting the money?) are globally. Someone does, but it’s not us. I can tell you, though, that we’re not three times as crackerjack a global salesman as we were in 1995. And that’s what the Dow says we are, ignoring inflation.
    I heard a guy say something today that was true: when the feds nationalize the investment banks (a bad, bad idea, imo — you really want Congress voting all those proxies?) they’re going to buy a lot of good debt mixed in with the bad. That is true. The problem is that the debt’s not going to earn out for a long time, and in banking, as in anything else, time is a crucial element. If confidence is lost, if the game collapses before the mortgagees and degree-holders and car-buyers can pay off those loans, we get bupkes past that point.
    Buy beans. Can’t hurt and they don’t go bad.

  15. amy Says:

    Whoops, sorry — did not mean to imply that there’s $10 trillion in bad debt (at this point) out there. $10T is the approximate value of current US mortgages. Some percentage of that is bad; a few months ago there were estimates up to 20%, which could be true but I wouldn’t accept without seeing evidence of much more reckless lending, on a much bigger scale, than I heard about.

  16. amy Says:

    Y’know….
    I just had another look at the top of that tax-plan graph. Granted, both sides are all fantasy. But think about what the Obama plan is saying. It says, you make $3 mill a year, the taxman’s going to show up _every year_ and say, “Hand over $330,000 more, please.”
    I don’t care how much you’re making. Nobody says, “Oh, sorry, I got $330,000 right here, here you go, see you next April,” to IRS if they can help it. For that much you can spend $100K a year dodging and still come out $230K ahead.
    I think it’s slightly screwy, then, that we’re talking about these candidate tax plans as if they mean anything.

  17. Amy P Says:

    “I just had another look at the top of that tax-plan graph. Granted, both sides are all fantasy.”
    Amen to that–none of these tax plans are any good without knowing how much revenue the economy is going to be throwing off over the next few years.
    “I don’t care how much you’re making. Nobody says, “Oh, sorry, I got $330,000 right here, here you go, see you next April,” to IRS if they can help it. For that much you can spend $100K a year dodging and still come out $230K ahead.”
    Amen to that, too–it’s a very dynamic system. At a much lower level, we have a relatively heavy property tax here in Texas of around 2-3% depending on locale and sales tax, but no income tax. Unwary transplants (from places like California) ooh and ah over the cheapness of the real estate, and then buy expensive houses, only to discover that their monthly tax bill is about the same as renting a much more modest home. I’m a transplant, but somewhat more wily, and I would like us to buy a house for no more than $100k in about two years. That may not be feasible (in a secure neighborhood), but I’ll do my best to spend no more than $150k. My knowledge of the tax structure affects my buying behavior, which affects how much property tax the state will be able to get from me. It’s like Elmer Fudd and Bugs Bunny–Elmer Fudd is always hunting Bugs Bunny, but Bugs is a moving target.

  18. bj Says:

    Nobody says, “Oh, sorry, I got $330,000 right here, here you go, see you next April,”
    Buffett says he would.
    And I never complain about paying my taxes (and I’d be even less likely to if I made 3 million a year).

  19. amy Says:

    Which is why you don’t make $3 million a year.
    Buffett’s a public servant without portfolio. He’s also old. Makes a difference. Fewer of him than the other kind.

  20. amy Says:

    400 points to go…

  21. dj41326 Says:

    Who cares our traitorous government just sold us up the river for some nice bug hunks of pork. In case you weren’t paying attention the 700 billion bailout was passed but the difference is 150 billion in pork was added to the bill. Yes that is right 150 billion these ravenous blood suckers in Congress are stealing from our collective wallets. Baton down the hatches we have a rough hyperinflated ride in front of us.
    http://popblogculture.blogspot.com/

  22. amy Says:

    Hey, and here we are in 4-digit land. If this joint had been full of Republicans, I bet someone would’ve been cleaning up today. As it was, no takers on the bet.
    Everybody dance now.

  23. alex Says:

    on what planet would a politician propose adding a health insurance sales tax on a nation facing a recession?!

  24. Ed Says:

    Amy, more than 90% of the $10 trillion tab has been left by Republicans. Borrow and spend is more expensive to the populace than tax and spend, because it kills income increases and widens the wealth gap.
    Also, speaking of the 20% thing, Warren Buffet says he paid 17.7% in fed payroll taxes on his $46M income in 2006. This year I’ll pull in around $120K HHI, and I’ll pay closer to 25-28%. I bet you can cut a section of the Middle class around my level and say they pay a large disproportion of income taxes. Also take not that the 20% figure does not include SSI taxes. I include those in my taxes because they are federal income taxes.
    Including property taxes, state income taxes, local sales taxes, state sales taxes, and other built in taxes, I’m paying well over 50% of my income to taxes. I have decent health insurance, but there are many that don’t who pay the same percentage of their income into taxes.
    Don’t get me wrong, I think taxes need to be lower. But first spending has to go down. If taxes go down and spending goes up, like apparently both candidates intend to do, it only hurts the country worse, in my opinion.

Leave a Reply


seven × 2 =