Can you come up with a rebuttal to the following statements? I am
especially interested in where the figure of 49% of the population pay
no federal income taxes. Which part of the population could be
included in this number? I have no dispute with the argument that
there was no actual 'trickle down theory' per se.

 
"The recession ended 18 months ago. the growth rate of the last 6
quarters has averaged about 2.5% but the third quarter numbers for
this year are looking to be around 6%(very high). this indicates Q4
will be quite good. Unemployment is always a lagging indicator. It
will follow GDP(not GNP as someone posted before) by 6-12 months. This
seems to indicate that by the end of Q2 next year unemployment will be
below 5%. As recessions go (historically) this one was VERY mild.
Unemployment never rose above 6.4%.

Also, I know many of you have heard people in the media and in
politics refer to "the trickle-down theory". This theory is supposed
to be that you give benefits to the rich, in hopes that the money will
trickle down to the poor. The only problem is that there is simply no
such theory and never has been.As someone who spent the last 7 years
studying economics, I can assure you that no recognized economist in
any part of the spectrum has ever had any such theory.
This non-existent "trickle-down" theory is trotted out every time
someone wants to cut taxes in general or capital-gains taxes in
particular. But tax cuts to encourage investment are not intended to
let anything trickle down.

In order to have capital gains, you first must invest --- which is to
say, create jobs, products and industry. Nothing trickles down to the
working class. It is the workers who first get the money and only
later do the investors find out whether they have made money or lost
money. Benefits trickle up -- not down -- if and when the investment
pays off. There are no capital gains to tax until afterwards.

I would also encourage anyone who thinks that "the rich do not pay
enough in taxes" to pick up any introductory economics text. In the US
49% of the population pay no federal income tax, and guess what?? its
the poor who avoid the taxes. We have written so many deductions into
the tax code that nearly 1/2 of the population get all of the federal
governments services paid for by the other half.(ever wonder why polls
say that all most 50% of americans do not favor tax cuts? If i paid no
taxes i wouldn't favor them either!)
The top 5% of americans (the rich everone hates) pay an average 0f 35%
in federal taxes(earn a dollar, keep $.65 not including state taxes!)
the average american that actually pays taxes pays 13.8% in federal
taxes.
When it comes to fairness, the rich are gettn' hosed!"

The following tax publication from the IRS

http://www.irs.gov/pub/irs-soi/00inrate.pdf

can be found on the following site along with many other statistical
reports:

http://www.irs.gov/taxstats/article/0,,id=96981,00.html



Many interesting observations can be made from this 41 page report
-filled with charts and tables.

Table A -   25% who filed an income tax return in 2000, owed no
federal income tax, up from 18.5% in 1986.


Another example from many that can be taken from this report. 

page 11 and 12.

"The total income tax shares for the top 1% have risen from a low of
24.1 percent for 1991 to a high of 36.3 percent for 2000. Shares of
total income tax for the bottom 50 percent of taxpayers have decreased
from 6.7 percent for 1986 to just under 4.0 percent for 2000"

Now you asked for a rebuttal  --- but on the surface, it certainly
appears that the rich are "getting hosed".

So change the grounds of the debate.

1.  What is fair?  

The very definition of the "progressive income tax" is that the
wealthy pay a greater share.  Presumably the wealthy benefit by paying
high taxes because it means they can live in a country in which they
can make and keep most of the money they make without hiring private
armies to defend themselves from widespread social unrest.


2.  Change the data (what is being compared).


The actual statistical argument is skewed by the fact that you are
looking at the income of the top 1% and it definitely seems unfair
that they pay 36%.

But if you look at the WEALTH of the top 1%, then the fact that they
pay ONLY 36% seems quite reasonable.  The counter argument is that
that is a false comparison, we are talking about income tax.

The counter-counter argument is the rebuttal "Would you prefer a
wealth tax instead of an income tax?"  Usually that gives the opponent
an immediate heart attack and ends the debate.


Hope this comment was helpful.

-amalik

-----------------------------------------

Search strategy

Go to the IRS web site 

http://www.irs.gov

Type statistics into the "Search IRS Site for"  window to the left.

I think we're on the right track. How do you 'create' more taxpayers
at the lower rungs? I always felt it had to do with better pay
resulting in more people adding to the coffers?

(As a side note, one could also argue that the wealthy have already
begun hiring their own armies. Either through their need for
body/security guards and high fences or contributing to the election
of officials willing to send troops to foreign territories.)

Thank you so much for your help. You helped more than I can publically
disclose. I have since found that the above quote was 'lifted' from an
article written by a prominent conservative economist and the argument
is now moot. One should always give credit where credit is due. Great
job.