For first time ever, US billionaires pay lower tax rate than workers

For first time ever, US billionaires pay lower tax rate than workers

9/10/2019 3:51:00 AM

For first time ever, US billionaires pay lower tax rate than workers

The tipping point came in 2017 with the passage of Donald Trump's tax cuts. They were a windfall for the wealthy, lowering the top income tax bracket and slashing the corporate tax rate.

Very large text sizeA new book-length study on the tax burden of the ultrarich begins with a startling finding: In 2018, for the first time in history, America's richest billionaires paid a lower effective tax rate than the working class."The Triumph of Injustice," by economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley, presents a first-of-its kind analysis of Americans' effective tax rates since the 1960s. It finds that in 2018 the average effective tax rate paid by the richest 400 families in the country was 23 per cent, a full percentage point lower than the 24.2 per cent rate paid by the bottom half of American households.

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In 1980, by contrast, the 400 richest had an effective tax rate of 47 per cent. In 1960, their tax rate was as high as 56 per cent. The effective tax rate paid by the bottom 50 per cent, by contrast, has changed little over time.The tipping point came in 2017 with the passage of Donald Trump's tax cuts. They were a windfall for the wealthy.

Credit:APThe analysis differs from many other published estimates of tax burdens by encompassing the totality of taxes Americans pay: not just federal income taxes but also corporate taxes, as well as taxes paid at the state and local levels. It also includes the burden of about $US250 billion of what Saez and Zucman call "indirect taxes," such as licenses for motor vehicles and businesses.

Advertisementcolumn in The New York Times on Monday, is also notable for the detailed breakdown of the tax burden of not just the top 1 per cent but also the top 0.1 per cent, the top 0.01 per cent and the 400 richest households.The focus on the ultrarich is necessary, Saez and Zucman write, because those households control a disproportionate share of national wealth: The top 400 families have more wealth than the bottom 60 per cent of households, while the top 0.1 per cent own as much as the bottom 80 per cent. The top 400 families are a "natural reference point," Zucman says, because the IRS publishes information on the top 400 taxpayers as a group, and other sources, such as Forbes, track the fortunes of the 400 wealthiest Americans.

The relatively small tax burden of the super-rich is the product of decades of choices made by American politicians, some deliberate, others the result of indecisiveness or inertia, Saez and Zucman say. Congress has repeatedly slashed top income tax rates, for instance, and cut taxes on capital gains and estates. Politicians have also failed to provide adequate funding for IRS enforcement efforts and allowed multinational companies to shelter their profits in low-tax countries.

Trump's tipping pointBut the tipping point came in 2017, with the passage of the Tax Cuts and Jobs Act. That bill, championed by President Donald Trump and then-House Speaker Paul Ryan, was a windfall for the wealthy: It lowered the top income tax bracket and slashed the corporate tax rate.

By 2018, according to Saez and Zucman, the rich were already enjoying the fruits of that legislation: The average effective tax rate paid by the top 0.1 per cent of households dropped by 2.5 percentage points. The benefits the bill's supporters promised - higher rates of growth and business investment and a shrinking deficit - have largely failed to materialise.

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Not all economists accept Saez and Zucman's analysis. It is based in part on their previous work, along with French economist Thomas Piketty, on the distribution of wealth and income in American society. Other economists have generated estimates of that distribution that show smaller disparities between the country's haves and have-nots. Saez, Zucman and Piketty have defended their research and maintain that their methods are the most accurate.

LoadingOn the question of tax burdens, Jason Furman, an economics professor at Harvard who chaired the White House Council of Economic Advisers under President Barack Obama, noted that Saez and Zucman did not include refundable tax credits, such as the earned-income tax credit (EITC), in their analysis.

The credit, which is intended to encourage low-income families to work, "is part of the tax code," Furman said. A person who paid $US1,000 in federal income taxes and then received a $US1,500 credit would have a total federal tax burden of minus $US500, but Furman said that under Saez and Zucman's analysis, that person would instead show a burden of $US0. That result would make total tax burdens at the lower end of the income spectrum appear higher than they actually are.

"The best estimates indicate that the tax system is progressive - with the rich paying a higher tax rate than everyone else," Furman said.Zucman countered that his and Saez's analysis considers the EITC and other credits like it as transfers of income, akin to food stamps or jobless benefits, rather than tax provisions.

"If you start counting some transfers as negative taxes, it is not clear where to stop," he said via email. "Do you treat the EITC as a negative tax? Veterans' benefits? Medicaid? defense spending? . . . There's no clear line, and the results become arbitrary."

There is general agreement among economists, however, that the tax burden of the rich has fallen considerably in recent decades."The rich definitely pay less in taxes than they did in the past and less than they should," Furman said. Read more: The Sydney Morning Herald »

That’s what LNP want here and are on their way doing it Trump Mission Accomplished What was the provable benefit of doing this? Not the fantastical trickledown nonsense... We are getting back to the time of being ruled by Kings and Queens, and we only have ourselves to blame. Vote with greed, you get greed.

Pieces of shit...the lot of them This is what the Trump clone here is trying to achieve Does anyone remember the French Revolution? History can repeat itself. In Georgian England the poor would throw dead cats and dogs at the rich. That’s ridiculous. They should be paying 90c in a dollar over 10 million Make the rich greater again

Good Bless America That’s what happens when you elect a crook... And yet without them how much would the workers be paying? When was the last time billionaire big tech...Apple, Google, Uber, Amazon....paid tax? Just how can that happen? Let's do some maths with made up numbers: someone earns $50K and pays 10% tax - they've paid $5K. If someone earns $500M and pays 9% tax, they've paid $45M.

Not the first or the last In the USA or Australia Wow Am I supposed to be surprised by this Look who's in charge Wait till 2020 SMH forgot to mention how happy the workers are with much more $$$ in their pockets with tax cuts ➕businesses paying more to their workers in pay rises🤔 Anti-Trump clickbait. Objective economists refute their calculations. Billionaires have controlled the US economic policies for generations. They enriched themselves like pigs. Trump cuts corporate tax and all of a sudden the world was fair before ‘he’ came along? Just stop.

Lock him up So they should they take risks .. if we didn’t have employers I would be living in a tent on the River .. Thank you Risk taking employers 👍... One sick country .. the American dream .. corrupted. To all Republicans who are not billionaires, is this what you really want? Working class people paying more taxes & the national debt being the biggest ever

Clearly in the USA there’s been a long term focus on incentivising ambition and wealth creation. Over there, it’s only the mendicants that want it any other way. For this very reason the wealthy will ensure 45 retains the presidency. Money is a powerful tool. Greed MSMWatchdog2013 '1st time ever' I don't believe that part it's been getting more and more the standard multinational corps owned by billionaires get away with paying bugger all and some cases zero tax...

What's the effective tax rate ? The tax cuts worked as intended. To provide lower taxes for the wealthy. And the country is falling apart. But...But.. What about those tax reliefs? and...what about that Trickle down? Stop voting for people who don't give a duck about the middle and poor classes. Bernie2020 Warren2020 getmoneyoutofpolitics

US billionaires pay lower tax rate than workers The biggest Trumpcon He wanted to drain d swamp n Wall St people believe d con man So they get what they deserve Shameful... Three data points mentioned: 1960, 1980 and 2018. What were the figures like during Obama and Dubya? Get real they always paid less than workers!! Why do you think the Cayman islands exist?

Rep’n all those workin MAGATs. Theyre so brainwashed they’d not know but its not like they weren’t warned... What a surprise... Not surprised & there’s Aussies apparently wanting the same thing tying to get a trump like figure into our politics 🤢heavenstobetsy Making America Greedier Again... Making America Great Again 🙄

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