P(A|B) != P(B|A)

Posted on by

Timothy Taylor writes,

those in the top 1% are almost surely paying the top marginal tax rate of about 40% on the top dollar earned. But when all the income taxed at a lower marginal rate is included, together with exemptions, deductions, and credits, this group pays an average of 20.1% of their income in individual income tax.

…The top 1% pays 39% of all income taxes and 24.2% of all federal taxes.

Assume you are in the top 1 percent. For any particular dollar of your income, there is 20.1 percent chance that it winds up with the government. However, for any particular dollar (not necessarily yours) that winds up with the government, there is a 39 percent chance that it came from your income.

6 thoughts on “P(A|B) != P(B|A)”

  1. And, even so , each of those dollars (along with all other dollars collected) has been covering only about 63 cents of each dollar of federal expenditures.

    So, as each 10 of those dollars from the 1% is collected, the federal debt increases by a bit more than 4 dollars.

  2. “there is a 39 percent chance that it came from your income.”
    Shouldn’t that be “…from the incomes of the one percent.”

  3. Tax stats that don’t include state, local, property, sales taxes, etc seem rather meaningless to me. Not sure why we’re always analyzing a partial equation.

  4. “For any particular dollar of your income, there is 20.1 percent chance that it winds up with the government.”

    With the federal government, of course. The part to state and local governments, and the part to charity, are in those “deductions” listed.

  5. Tax incidence is very complex. If you include matching FICA do you also include corporate taxes? Etc., etc.

    Also if FICA is a tax then SS is a welfare program (and if so why does it give more to the wealthy).

    I think a little transparency in taxation would help. A simple progressive consumption tax would help. You could do that by allowing people to put all their income into a tax sheltered account, like the the IRA, and tax them progressively on all the withdrawals plus pay not put into the account. Keep the gas tax and maybe even add a carbon tax. Lower the corporate tax to 1% or 2% as an insurance premium to pay for limited liability insurance. Get rid of FICA, matching FICA, the medicare tax the income tax.

Comments are closed.