Income, Taxes, and Spending by Income Quintiles

This Huffpost story the other day pointed to some Labor Department data on American income and spending by income groups and, while much was made of the bottom 20 percent spending more than double their income (the shortfall presumably made up by tapping savings, new borrowing, food stamps, and the like), other data in this set seemed worthy of a graphic and that graphic is shown below.

Draw your own conclusions about what this data means (Mitt Romney did), remembering that payroll taxes and Medicare contributions are not included in the taxes above. I thought one of the key takeaways was that spending exceeds income not just for the bottom 20 percent, but for nearly 50 percent of all households and that almost the same amount have a higher after tax income than before tax income.


3 Responses to Income, Taxes, and Spending by Income Quintiles

  1. DCX2 September 28, 2012 at 1:44 PM #

    “remembering that payroll taxes and Medicare contributions are _not_ included”

    This is why I like you so much, Tim. You aren’t a partisan hack. The only time I hear payroll tax come up in a discussion of federal taxes is in the comments section of some article that utterly fails to be as truthful as you were right there. It would be interesting to see what a graph including payroll taxes would look like.

    I’m absolutely astounded that 1 in 5 Americans actually manage to “live” on an average of 10k/year household income ($833/month), though I’m less surprised when factoring in government assistance. Also interesting to see how income vs. expenditures gets flipped from 1:2 to 2:1 between the bottom and top percentiles.

  2. Sefton September 29, 2012 at 12:00 PM #

    Here are my takeaways.

    1) People at the lower end of the income spectrum must spend more of their income on necessities. People on the upper end do not and have more money to invest. Learned this reading Samuelson in the ‘70s. Whether you agree or not, these investments are taxed at a lower rate. But you can’t disagree that investments, unlike gold and silver, produce jobs and government revenues. Econ 101.

    2) In spite of that general fact, I think the income/expenditures gap in the lowest 20 per cent is awful. Everyone does, but I think after giving themselves a pat on the back and an admiring look in the mirror they stop thinking from there. Can we drill down deeper?

    I do not know what those additional expenditures consist of. If you tell me this is solely to pay for food for children I will believe you. But it could also be for private schools to avoid awful public schools or a combination of both. But whatever, that doesn’t tell me why that is so. According to the government, food can not be affected by inflation. And PRESUMABLY doesn’t cut it. Where exactly is the difference coming from?

    3) I do know the core of our current economic philosophy is SPENDING will make us RICH and INFLATION will create JOBS. As we once thought, the sun revolves around the earth. Everyone visiting this site knows this is madness and they are here to avoid it. They are here to invest in metals that, to suggest again, except for miners, do not create jobs. They preserve your wealth. They do not create wealth for others.

    So under that guiding philosophy isn’t a substantial amount of the over expenditure for food for children or whatever really a wealth transfer to Verizon, Apple shareholders and farmers? Who are food stamps really for? Who are college loans really for? If you don’t know the answers to those questions, why come here? Go to Huff Po. You are economically illiterate. It is even worse if you don’t even wonder why college tuitions are rising at twice the inflation rate or gas is going up.

    4) Please do not accuse me of not caring. Can’t say, but I just might care more for others than how I am perceived. A payroll tax for a fiduciary unsound retirement system and an increase in the Medicare tax are supposed to help who exactly? Yeah, subsidizing health care will make it cheaper.

    People who care about people do not make them dependent.

    Our New Class rich and powerful transfer money to themselves under the guise of helping people. How else would they get away with it? This graphic will help them. You get piles of worthless paper; they own the wheel barrow factory. Romney knows this. Not one in a billion Huff Po readers could come close. Romney also knows you shouldn’t raise tax rates if it results in lower tax revenues.

    4) Finally, people in the upper income quintiles have access to inefficient tax breaks those in the lower do not. Their health care benefits are not taxed. They have a mortgage deduction (to make inflation killing us all seem a positive rather than a negative). These too contribute to income/expenditures flip from bottom. to top your other commenter notices.. Last time I looked you don’t get a 401K from welfare.

    I have an idea: let’s help the poor by giving them a mortgage! Wait, that didn’t work out did it, except in the way I just described? Those issuing the mortgages made out like bandits.

    No, you are not a partisan hack, but I think you have done your readers a (very rare) disservice by laying out a graphic without pointing out the fallacies, possible and real, within it and where those fallacies can mislead us.

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