Only the little people pay taxes

Discussion in 'Economics' started by misterno, Feb 24, 2011.


    Leona Helmsley’s legacy lives on in the building that bears her name.

    Over at, Martin A. Sullivan, an economist and contributing editor to Tax Analysts, has a fascinating post on the tax rates paid by the residents of the Helmsley Building. The building’s tax-evading billionaire namesake, as you may recall, supposedly once said, “Only the little people pay taxes.”

    Mr. Sullivan shows that she was mostly right.

    The building has its own ZIP code, and so Mr. Sullivan was able to use Internal Revenue Service ZIP code records to find data on the 130 individual tax returns filed by residents of the building in 2007. He then compared their tax liabilities to the estimated tax liabilities of the blue-collar workers employed by the building.

    He found that the average adjusted gross income in the tax returns of people filing from the building was $1.17 million. Which is of course impressive. More impressive, though, is the tax rates this group pays.

    The table below shows the total income and payroll tax liability of a typical resident of the Helmsley building, alongside the same tax liabilities of janitors and security guards earning the average wages for the jobs in the New York area.

    Martin A. Sullivan
    As you can see, the average effective income and payroll tax rate for individuals filing from the Helmsley Building was 14.7 percent of their adjusted gross income. By contrast, the income tax rates for the typical New York janitor and security guard were 24.9 percent and 23.8 percent, respectively.

    But we have a progressive tax system, you say. What can possibly account for millionaires paying a much lower tax rate than blue-collar workers?
    A lot of it has to do with payroll taxes, which, as our Daily Economist Casey B. Mulligan has written in the past, are highly regressive.

    In 2007, only the first $97,500 of wage and self-employment income was subject to the Social Security portion of payroll taxes, at a 12.4 percent rate. (The ceiling today is slightly higher.) Everything above that ceiling wasn’t subject to Social Security taxes. As a result, high earners pay a smaller share of their income in payroll taxes than low-earners do.

    Additionally, most workers — the bottom two thirds of tax-filers — pay more in payroll taxes than they do in income taxes.

    A typical New York janitor earns $33,080. In 2007, his tax liability was about $3,168, whereas his payroll taxes were about $5,062. (Mr. Sullivan appears to assume, as many economists do, that the payroll taxes paid by employers effectively come out of employees’ potential wages.) Altogether, that’s $8,229 in taxes, or about a quarter of his adjusted gross income.

    The employee-side component of payroll taxes has been temporarily cut this year, a measure intended to stimulate the economy. But in all of the discussions about more permanently overhauling the country’s messy tax code — to make it simpler, fairer and more efficient — little attention has been paid to the country’s increasing reliance on these regressive taxes and the resulting effects on low-income workers.

    Perhaps this is because payroll taxes, collected in small amounts from every paycheck, are less salient than income taxes, which are presented to taxpayers as a big total every April. And perhaps it’s also because those most burdened by payroll taxes are Leona Helmsley’s “little people.”
  2. I don't mind paying taxes that much really although I understand people strugling might think otherwise.

    Every weekend I go swiming with my nephews in my towns swiming facility which has just been renovated.

    We pay 1$.

    We go there with the bus. this costs 2$.

    Other examples are plentyfull where I myself take some of my taxmoney back by the services provided.

    Sure, some of the money is badly put to work, and sure some of the government employees get by doing nothing but a society where taxes are non existent has it's imbalances as well.

    I guess it all depends on your own personal situation, or on the quality of service being provided where you live.

  3. :) You are part of the solution :)
  4. I hear this type of argument all the time. People seem to forget that most services you actually use: schools, police, roads - are supposed to come from property and gas taxes. I don't mind paying those either. And if someone does mind then they have the freedom to move to another municipality/state with a different local tax scheme or modify their behavior as with equitable gas taxes.
    What I do mind, and I think what anyone paying attention should be outraged by is Federal Taxes. They basically go to neocolonialism (defense), forced wealth redistribution (social services), and trillion dollars bailouts of oligarchs. What's more, you can't simply move and escape them. It isn't too surprising that power tends to concentrate at higher levels and rob the middle and lower class. Until people wake up and limit the Federal Government we are going to get exactly what we deserve.
    So please, stop confusing local with national taxes in some misguided attempt to excuse an unfair system.
  5. I'm not American nor do I live there, but I see your point.
  6. I believe Ben Franklin once said that people are taxed 3 times more by their own idleness than what the government taxes them. Franklin taught that we should always be employed in something useful & productive.
  7. Mayhem


    I'd gladly go back to the Federal income tax rates charged in Ben Franklin's day.
  8. Its true. This iss all the fault of republicans. They lie to americans. Listen to glenn beck, he doesnt even make sense anymore. (crazy!)

    Repubicans lie and distort, oh USA has progressive, wait LOL why does Warren Buffett disagree? LOL

    Óh guns gays and god more important then a 1.7 trillion public dificit LOL.
    Thats republicans for ya.

    OMG the demcorats are big spenders LOL then why are republicans bigger spenders? SAY WHAT? yup, republicans are bigger spenders than democrats. what the hell, my world is upside down, republicans are more irresponsible with public money even though they claim to be more responsible?? Basically they're lying????

    yup, they're lying to you.:p all people who vote republican have themselves to blame for the deficit and for being fooled.

    You can fool some people some of the time, but you can fool people who vote republican ALL of the time LOL.
  9. Ben Franklin lived in a time before there was any Federal Tax. No IRS during his time.
  10. schools, buses, gasoline, parks, highways are all subsidized by us govt

    once the reality settles all the prices on these services should be raised to at least COST

    Reality will settle once the us govt no longer be able to print money
    #10     Feb 25, 2011