The Big Myth - Lower Income Families Pay More taxes - A winning argument?

I guess it depends just what you think social Security really is. It certainly wasn't sold to the American people as a tax when it was passed.

Next time someone gives you a % of tax paid, ask if their calculation includes SS/Medicare, it always does because it bolsters the numbers

What came first, the chicken or the egg? If you confiscated the wealth of every American you would not be able to pay off the current debt and the debt our government has obligated itself to pay in the future. Since Franklin Roosevelt defied the Constitution and got his Court to agree with him we have been going down hill at a much faster rate and by the 1950s we were giving away more than we produce, first to foreigners and then to our own non-producers. Sooner, rather than later the U.S. dollar will have lost any buying power it has, similar to what happened to the German Mark after WWI.

The policies proposed by both the Republicans and Democrats, like Roosevelt's, are mere stop gap measures because anyone who would propose what really needs to be done would neither get nominated nor certainly not elected.

From what I've read, Seth Berry needs a new calculator. Maybe he can borrow one from the next group of petitioners that he stands in front of, while trying to deflect people from signing.

As polemic, Berry's op-ed is successful in the sense that it's hard for a casual reader to spot its errors.

The effective tax rate is the proportion of taxes paid to income received. Berry writes that the effective tax rate for a minimum-wage single parent is greater than the effective rate for a well-to-do taxpayer, if only state and local taxes are considered.

Let's assume Berry is correct. It makes sense (to me, anyway) that those with higher incomes enjoy a greater latitude in reducing their effective tax rate. A minimum-wage worker must pay for necessities - a certain minimum for food, shelter, and transportation. A high-income worker could choose to pay the same minimum costs, but obviously can afford to pay much more. Because of this range of choice, the high-income worker gets to choose - at least in part - his own effective tax rate. This is especially true of property and sales taxes.

But so what?

The reductio of Berry's "fairness" argument is that the effective tax rate should be equal across income groups. The problem is whether tax policies could achieve it. What would those policies look like?

Years of Maine Democratic tax policies provide ample evidence that it is not within the power of government to raise effective tax rates on higher-income taxpayers. Maine's attempt to collect 8.5% income tax served to drive taxpayers either out-of-state or out-of-sight. If LePage's reforms are the dramatically wrong direction, one wonders what makes higher tax rates the right direction?

If Berry were economically literate, he'd understand that the implication of his own argument about tax fairness is that the LePage reforms - including a reduction in marginal income tax rates for lower-income taxpayers - are a dramatic step in the right direction. The only hope for a convergence of effective tax rates across income groups is the implementation of tax reductions.

The effective tax rate is the proportion of taxes paid to income received. Berry writes that the effective tax rate for a minimum-wage single parent is greater than the effective rate for a well-to-do taxpayer, if only state and local taxes are considered.

What's the old saying? "The rich are different than you and I - they have more money."

Seth is playing MECEP's standard broken record crap sandwich. The reason you try to improve your circumstances in life is so that you pay a smaller portion of your income for your needs. No doubt the minimum wage parent pays a higher percentage of their income for food than just about anyone else, not allowing for food stamps.

If cell phones cost $100 a month and cable TV costs $100 a month, and cigarettes cost $200 a month, clearly, the less you make, the greater percentage of what you make you pay for these 'necessities.'

On the other hand, why not compare % of 'earned income tax credits' for the various income levels, along with % of income going to federal income taxes.

Stay tuned, the paper has accepted my rebuttal...that particular single parent household would get back $3600 from the fed even if you include SS taxes...and owe NO state income tax, thus theya re upside down on taxes to their advantage..its not possible for them to spend enough to meet the 17% quoted.

http://www.sunjournal.com/news/letters/2012/08/29/rebuttal-rep-s-morisse...

Nothing funnier than a state Rep signing on the blog to defend himself..oh wait even funnier is saying "here is the proof I am right" and then proiding a link to....his own blog....repeating his own comments....

Robert Reed -- thanks for sending in the rebuttal. Let us know when it runs, please.

Economike - Berry cannot be correct - simply put, a single parent (even just one child) making $12K a year means no state or federal income tax owed, PLUS they can still get the $1,000 child credit AND an Earned Income credit of over $3,000, thus to have an effective tax rate of 17% they would have to spend over $2,000 in OTHER taxes PLUS the tax credits.

So lets move on to his next biggest argument - property tax for this poor mythical woman..it stands to reason that at $12K a year she is NOT likely to own property on her own and is more likely to be a renter...and okay so in the greater scheme renters in fact pay proeprty tax through their rent, just indirectly...except that at her income level she would be Section 8 eligible for assistance and only pay $300 a month max in rent, plus she would be eligible for rental rebates each year - again reducing her actual costs out of HER pocket...Now lets take out rent and food (non-taxable), plus the FICXA deductions she cannot avoid leaving her with no more than $5K in income that could potentially be spent on taxable items - just look at what her tax might be on utilities - less than $25 a month, her tax on taxable items purchased...her excise tax and fuel if she has a vehicle...its just not possible to be taxed at 17% before you even consider the tax credits from income....but what bothers me most is Rep Berry tries to be an expert as the lead Dem on taxation, and he simply mimmicks bad math...

A resident such as you describe would also be eligible for the Circuit Breaker from the state, which would rebate some money based on either rent or mortgage.

Economike - Berry cannot be correct...

Mr. Reed -

Understood and agreed. My sole point was to show that the implication that government should somehow set "fair" effective tax rates is a fantasy.

I read your response in this morning's Sun Journal. I thought it was excellent.

Great job, Robert.

***********

In rebuttal, R. Reed: What are the real tax figures?

Robert Reed

Letters |
Thursday, August 30, 2012

... I am deeply concerned that...(Berry) ...does not have a firm grasp of taxation while sitting on the Taxation Committee...

Berry indicates... single parent earning ...($12,000 annually) will pay 17 cents on the dollar in taxes, to which I respond — poppycock.

...snip
...at that level of income, she would pay no federal income tax and could receive... earned income credit of $3,094, plus... child tax credit of $1,000.

... no (state)... income tax due...

... she would pay ... slightly less than $600 in Social Security/Medicare taxes. ... net tax would... be $3,500 paid to her, not taken from her ...

....snip
I call for Rep. Berry to provide a complete accounting...

LSJ

**********

As I stated above, this person would also be eligible for the State Circuit Breaker, which gives up to $1,600 for property tax paid above 4% of income. It also gives a rebate for rent paid that exceeds 20% of income, again, up to $1,600.

So, in reality, our fictional single parent making $12K per year is receiving more tax money than she's paying out - even with the need to pay sales taxes.

Nobody's saying that our fictional working mother is living a luxury lifestyle, by any means. However, she's also not paying more taxes than a "rich person." Facts do matter.

Berry needs a remedial math and tax class. Maybe one of his pals at the MECEP can oblige.

Naran, Thank you for your support. Word counts prohibited me from going further on the LTTE.
Let's face it, Rep. Berry cherry picked every tax in Maine and decided which were the worst offenders and used ONLY those to come up with a ludicrous argument that cannot hold water.

He agrees there are no income taxes for this person, but says property taxes are at fault due to recent legislation...and he even admits he included circuit breaker money...and yet someone earning $12K a year pays $2,040 in taxes? If you earn $1,000 a month you qualify for Section 8 housing subsidy which caps your rent cost at 30% or $300 a month. Pretending this mythical person.llives in Lewiston she might have total rent of anywhere from $600 to $1000 for a 2 bedroom place, Meaning at least half the rent is paid by OPM (Other peoples money). So assume a multi unit building, property taxes divided by total units, square footage per unit or something else and then remove the rent paid by OPM, you have at best her share being extremely small of the entire tax bill. 3 units, her share 33%, less at least half paid OPM, her share is no more than 16% of the total tax bill for the building. ON a $150K building in Lewiston you would pay $2800 in property taxes, thus she is looking at roughly $440 in her true out of pocket share of the property taxes.

Now on to other taxes, go back to the $12,000 a year, reduce by $600 FICA tax. Then reduce by the $3000 we already assumed she MUST pay in her share of rent. She likely qualifies for food stamps which requires she spend a specific amount no food (non-taxable) of roughly $2,400. So we're left with $6,000, and of the original $2040 in tax (17%) she only used $450 leaving $1600 taxed on the remaining $6K, or roughly 26.7% tax to meet his number....now can anyone tell me which taxes in Maine are at 26.7%...yeah thats what I thought...

Feel free to poke holes in my logic, I'm always willing to learn! Now excuse me while I'm out campaigning for the evening, its clear we need smarter representation in Augusta!

It gets better....Rep Berry specifically indicated a single parent earning $12,000 annually at minimum wage...seemed unusual until you do the research...thats 30.25 hours per week....anyone want to guess what the requirement maximum hours worked for a TANF recipient is.....ahh yes, wait for it.....130 hours per month max....so not only does our person get the benefits outlined above, they just qualified for 5 years of TANF....so additional income supplement (tax free) of $463, month, free child care, dental care above the Mainecare base they already receive, , 30 cents a mile reimbursment for work or school, , $500a year in car repairs, $300 a year towards car insurance, $200 a year towards glasses or contacts, $750 a year towards school books and $300 a year towards clothing...That alone more than doubles the base income, all tax free and then we add on the Earned Income Tax Credits (for taxes paid by others).....

LTTE

In rebuttal, Rep. S. Morissette, Sen. T. Martin: Truth becomes a casualty

Rep. Susan Morissette and Sen. Tom Martin

Wednesday, August 29, 2012

......column by Rep. Seth Berry... “Largest tax shift in Maine history hurts working families.” ...contains wild distortions and blatant fabrications.

... tax cuts ... Rep. Berry criticized... supported overwhelmingly by...Democrats, including himself. ...part of...state budget that passed... House 123-19. ...disingenuous for a legislator to blast ... something he voted for.... His attack ...designed to deceive readers.

... working families benefit from... new tax system. According to (MRS)...460,000 Maine families will see...average reduction of $337 in ... 2013 income tax. Another 70,000... exempt from state income taxes....

LSJ Letters - this one well worth the read.

Maine Republican Party

For Immediate Release, August 31, 2012

Contact: David Sorensen, Communications Director
Phone: (207) 622-6247

Rep. Berry Launches Pathetic Attack on Tax Plan He Voted For

Short memory and omitted facts mark personal war in the editorial pages

"Rep. Seth Berry is being dishonest and hypocritical," said Maine Republican Party spokesman David Sorensen. "He has lied by omission and conveniently ignored his own policies of just a few years ago."

In a series of guest editorials to newspapers all over Maine this summer, Rep. Berry has been relentlessly attacking the biennial budget that he voted for. "It is understandable that there may be some things in the budget he doesn't like - no legislator is completely happy with every budget they vote for," continued Sorensen. "But the level of vitriol Berry has spewed about the tax cuts in the budget makes me wonder why he voted for them."

Berry has asserted repeatedly in his columns that the recent tax cuts passed under Republican leadership benefit the rich while everyone else loses, in one calling the tax reform "the largest tax shift in Maine history."

Berry knows that this is not true. He serves on the taxation committee. He knows that the share of income taxes paid by the top 10 percent will actually increase from 55 to 57 percent of total income taxes collected. He knows that the 80 percent of income tax payers in the low- and middle-income brackets pay only 24 percent of income taxes, but will receive 33 percent of the tax cuts, almost half again more than their "fair share."

But the truth doesn't matter to Berry. What matters is winning the election and gaining back the majority. He was the House Majority Whip two years ago, and now he is just a rank and file member of the minority party.

---> He has also been taking this fight to his fellow legislators, with whom he should be working across the aisle. He recently called the author of a column that rebuts one of his own to express surprise and anger that his Republican colleague would dare to respond. These intimidation tactics are unacceptable.

It also doesn't matter to Berry that the 2009 Democratic tax "reform" that he championed fits the mold of his own criticism. Berry specifically writes in one of his columns that those making over $350,000 per year will receive a $3,000 tax cut as a result of the GOP plan.

----> LD 1495, the bill that Berry fanatically defended and that was repealed by a people's veto in 2010, reduced income taxes by twice as much - $6,238 - for the very same group. He "paid for" this by jacking up sales taxes on everything from car repairs to dog grooming to nursing home meals. Republicans paid for theirs by cutting spending. Republicans passed real tax relief.

Berry says he wants to "put partisanship aside" in 2013. That's funny. Republicans built a bipartisan consensus for their plan, while Berry crafted his failed 2009 tax plan without Republican input and rammed it through without bipartisan support.

"The people of Maine rejected Rep. Berry's tax plan decisively at the polls in 2010," continued Sorensen. "It is pathetic for him to run around the state attacking the Republican plan that he voted for, and that Maine people kept in place."

###

Paid for and authorized by the Maine Republican Party. Not authorized by any Candidate or Candidate's Committee.

Maine Republican Party | Ben Lombard, Treasurer | 9 Higgins St. | Augusta | ME | 04330

IN my mail as I arrived home.....the actual spreadsheet used by Maine Revenue Service that is being touted by the dems including Mr. Berry....This just got so much better!

From the spreadsheet..a family earning $14,427 or less annually reflects a sales tax of 3.03% of their income. But is that even possible?

3.03% of income translates to $437.00 which when creating a reverse calculation means you've spent $8,742 on taxable goods for the year. If you remove the non-taxed groceries, base cost of utilities, rent or property tax, and excise taxes....is it even possible to have $8,742 remaining and that you would spend it all on taxable goods? Is this a serious flaw in the assumptions created?

Anyone here see the logic or can help me understand this one? I'm waiting for answers from the state, but that is not likely until Tuesday at best given the holiday weekend.

I'd like to know how they supposedly have $8,700 in disposable money for taxable goods from an annual income of $14K. To spend that much, it seems to me they'd need an annual income more like $34K, at a minimum.

Please keep us posted with any updates, Robert, and thank you.

You're forgetting about the cash they get for selling their EBT cards and the money they get for working under the table. I can easily see $8K from those two sources alone, not to mention the money the live in boyfriend brings in that isn't counted in her income.

The numbers do not add up, hoping I'll have answers by Tuesday..as to the live in boyfriend....read the TANF rules, thats actually not only allowede but their income is not considered in the equation...

MOving on to the next flaw....those arning $14427 or less as a "family" would be paying 2.79% of ther income in excise taxes, which equals $403.00 - nice car for low income folks right..but...a family earning $62K - $82K would pay 0.47% excise tax or $385 a year...how can this be, most people earning that much means a minimum of 2 vehicles and potentially toys such as snowmobiles, tvs, boats etc...

How can anyone at MRS create such a flawed analysis in my humble opinion?

It appears there are some good questions, Robert. Please keep us posted, as time allows. Best of luck on the campaign trail!

So many flaws...it would appear each assumption was made independent of all other expenditures one might make over a year...added together the family of 1.85 people would pay 16.9% tax burden on $14427.00 but to do so they would have to spend roughly $21650 each year...and thats not including ANY utilities, gas for the car, insurance for the car, or other items...second biggest flaw is the 1.85 in the lowest bracket might actually include students claimed on their parents tax return - its pretty much the only way there could be any state income tax due by this bracket as students do not claim a dependent thus are taxed sooner. I have forwarded my review for MRS comment and we will see where it goes.

Thank you for doing this work, Robert, and for sending your findings to the MRS. Please let us know when you receive a response, and some answers.

Meanwhile, in today's SunJournal, Douglas Rooks repeats the same ridiculous tax information as accomplished fact.

This lie has legs.

More dems have started letter writing with this fictional piece....yet even if you added in an Earned Income Credit of $4,000 to what they earned, they still would not have enough money each year to spend as the model indicates. Of course if you added in the Earned Income Credit than the percentage of tax would be much closer to 12.3%, but we can't do that, its just not fair to the children right?

I have to confess, Rep. Seth Berry was right....now let me explain WAS....the 17.06% overall tax figure Rep. Berry and others are quoting was from a 2009 analysis as printed in the MECEP website as provided by the MRS. But lets compare that to the 2013 anaysis completed by Dr. Allen of the Maine Revenue Service (even though it still has the same minor flaws).

Lowest 3 income groupings in number of family affected (1/3 of the state):

2009
10th - 17.06% Burden
9th 10.86% burden
8th 10.82% Burden

Average Maine family 2009 tax burden - all income levels 11.37%

Now for 2013 as indicated by MRS:

10th - 10.51%
9th - 10.76%
8th - 10.89%

Overall 11.02% tax burden.....

So higher burden under dem leadership, lower under current leadership....

Despite my reasearch and conversations with Dr. Allen the author of the report at MRS, the Lewiston Sun Jounral has declined my request for a guest column on the subject at this time...

But here's is a quote from Dr. Allen which further solidifies my argument agianst the democratic lies:

There is no doubt that income is understated and spending is overstated for tax families in that bottom decile, but that is not unusual in these types of studies. Having said that, our circuit breaker data shows that very low income households in Maine (less than $5,000 of income) that own a home can have an effective property tax rate of over 70%. There are a number of explanations for this, the most likely is that the homeowner has savings or an ability to borrow to pay their property tax. Even if the circuit breaker is taken into account, the effective rate can be over 30%. While they don’t make up a huge portion of this group, there are a number of tax families that fall into the bottom 20% that are there temporarily or who appear to be in worse shape financially than they really are