Question about "obscene bonuses"

[Mynyel]

I think most people would in principle agree that bonuses awarded to an individual (or groups of individuals) who bring wealth and profit to an enterprise through their talents and innovations deserve compensation.

 

Getting a bonus while running a company into the ground? Not so much. Same with making very short-sighted moves that produce long-term harm.

 

Lastly I think people have a real problem with bonuses being paid to those whose only real contribution to a company's bottom-line is the fact that they laid-off workers, rather than by expanding and hiring a business and keeping people employed.

 

Bill

 

 

:iagree:

 

It isn't the bonus really that miffs people. It is the irresponsibility of the individual then they get one anyway.

 

In the (average) real world, if you do poorly you get nothing and in a lot of cases lose your job. Not get a bonus.

[NoPlaceLikeHome]

My father works for a company that gives millions in bonuses to the top elite, but has frozen raises for everyone else for years. Not even COL raises sometimes. In a GOOD year he can hand out a maximum of 2 percent or 3 percent in raise to his workers...so if someone does a GREAT job they still get no more than cost of living increase, while the CEOs get an extra million. Not fair, not how business used to be run in this country.

 

:iagree::iagree:These companies claim they have to give outrageous pay in order to retain top execs.:001_huh:

 

I say baloney. I say that there would be plenty of extremely qualified takers lined up to take these jobs even if they only offered a more reasonable compensation of say several hundred thousand.

 

These top execs are not superstars and sometimes fail their companies miserably. They should definitely be taxed appropriately. Shareholders should be given much more say as well in these matters.

[Bluegoat]

What is obscene is taking the just wage that should be given to employees lower down the chain, and redirecting it to give a larger bonus to those at the top. If a company is not in fact making more money, the "bonus" is often coming from taking away money from someone else - outsourcing what was a solid job to a contract worker, for example.

 

The difference between the remuneration for CEOs and workers has become much more sharply differentiated in the past 30 years or so. As a pp said, this speaks to the values being embraced by businesses and society.

 

Bonuses are not always taxed, as it happens. Here in Canada they are increasingly being awarded in ways that shelter them from taxation, and for salaries to be awarded that way as well. I would be surprised if similar things did not happen in other countries.

[My3Boys]

These are very interesting figures indeed. These figures however do not illustrate to me the fairness or unfairness of the taxation system. They only show the MASSIVE disparity in the income levels of the top 10% and the bottom 50%.

 

I would have to respectfully disagree. The statement was made that higher wage earners aren't paying their fair share of taxes. These figures show otherwise. I find the fact that 50% of taxpayers are only paying between 2-3% of all taxes to be where the unfairness exists.

 

The disparages in income are due to many factors, not the least of which are considerations such as education, ambition, work ethic, and the personal choices one has made in their life. The argument could also be made that the reason the rich are getting richer and the poor are getting poorer is because each is continuing the life practices that got them where they are in the first place. Not all, of course, but most. Some are poor due to circumstances beyond their control, and some are wealthy because of inheritances, although that is less than 1%. For most, it still boils down to personal responsibility. Your life, for the most part, is what you make of it.

[Stacy in NJ]

As a results of this poor performance, after he was fired, he was awarded a $2.4 million "performance bonus", $7.2 million worth of severance pay, and $3 million worth of stock, in addition to his salary.

 

When they hire someone at his level, they have separation contracts negotiated before he even begins work.

[Stacy in NJ]

What most people don't understand is that in the finance industry, a bonus is actually more like a sales commission. The base salary is relatively low and the end-of-year bonus makes up for that. It varies depending on performance and ever since the government bailout (which the Feds actually pressured certain Wall St. firms to take even though they did not need them) the bonuses are spread out over several years with a "claw-back" provision if the individual does something that pumps up profit in the short term but hurts the firm in the long term.

 

People think "bonus" as if it's something extra but really it's not. Without it, total compensation would not be competitive with industries paying a much higher base salary.

 

Are frequently quite low. That "bonus" is the larger part of their total compensation.

[Trilliums]

The disparages in income are due to many factors, not the least of which are considerations such as education, ambition, work ethic, and the personal choices one has made in their life. The argument could also be made that the reason the rich are getting richer and the poor are getting poorer is because each is continuing the life practices that got them where they are in the first place. Not all, of course, but most. Some are poor due to circumstances beyond their control, and some are wealthy because of inheritances, although that is less than 1%. For most, it still boils down to personal responsibility. Your life, for the most part, is what you make of it.

 

For example, health insurance company executives must be willing to increase premiums while simultaneously denying coverage to clients.

[Bootsie]

Are frequently quite low. That "bonus" is the larger part of their total compensation.

 

Yes, the base pay in many of the finance positions is often quite low. I was in NYC last week and visited with a former student who is now working on Wall Street. He graduated at the top of his college class three years ago. Interestingly, given recent threads regarding what type of lifestyle a minimum wage job should provide, he has three roommates in a small apartment to make ends meet.

 

He works until at least 10:00 every night. (He feels he is lucky because some of the divisions work until 2:00 or 3:00 in the morning.) He works Thanksgiving and other holidays (the financial markets are open in other parts of the world that don't take Thanksgiving as a holiday, so he must work to take care of the clients.) One hundred people started at the firm when he started; less than three years later over half have quit--it is a grueling lifestyle.

 

Bonuses are paid in February. Part of the reason for this is to keep people from quiting when the work load is heaviest--if you don't stay until February you get no bonus.

[SKL]

In my previous job, a bonus program was created to encourage relatively long-term commitment. It was available to all employees. It was based on each year's company profitability plus the individual's performance rating. It was paid out after three years. Now if year 3 was a sucky year and I still got a fat bonus that was publicized, I'm sure "the public" would be outraged, without having a clue how my bonus was determined or how long I'd waited for it.

 

As for tax-free bonus structure - yeah, that makes sense if no cash has actually changed hands. How are they supposed to pay the tax on a non-cash benefit (such as company stock options) that they can't sell? Take out a loan? Sure, that's what lots of executives have to do, but it makes more sense for the tax to be paid when the benefit is monetized.

 

You know what I think is an outrage? The fact that some people who don't even put forth the effort to report to work in the morning get more respect than people who work long hours, seven days per week. I can understand ignorant people feeling irrational hatred and envy against the "haves," but I can't accept intelligent people such as politicians encouraging this. As if terrorizing the rich is going to improve the lot of the poor. Yeah, that worked really well in the Soviet Union.

When they hire someone at his level, they have separation contracts negotiated before he even begins work.

 

That doesn't make it any less obscene, it some ways, the formalization makes it worse.

 

I'm disappointed to see so many pro-bonus people in this thread projecting their pre-held opinions of what other people think here, instead of reading what is actually written.

 

Perhaps an analogy will help. From the clips I've seen, I think the TV show "Jersey Shore" is obscene. As a result, I don't watch it, my family doesn't watch it, and if anyone asked for my recommendation, I would suggest that they not watch it. Nonetheless, I don't think it should be censored by the government, rather I try to spend my efforts supporting things I'd like to see more of. The fact that the TV station has a contractual obligation to produce and show it doesn't impact in any way how I feel about it.

[Spy Car]

When they hire someone at his level, they have separation contracts negotiated before he even begins work.

 

Which is part of the problem as it removes the ordinary logic of capitalism (having risk and reward tied to performance) from executive compensation.

 

Under these sort of arrangements those CEOs and other top executives whose firms do badly under their leadership often walk away with millions of dollars despite failing. Where is the economic logic in that?

 

Americans, perhaps more than an other people, like the idea that people who work hard and use their creative energies to build weath, build successful companies, and create jobs are well compensated for their efforts. We do not have a society of "class envy" when it comes to people who've earned fortunes being anything but admired.

 

But those who enrich themselves while ruining companies and destroying jobs is not something that plays well to the American peole. And why should it?

 

Bill

[Stacy in NJ]

Which is part of the problem as it removes the ordinary logic of capitalism (having risk and reward tied to performance) from executive compensation.

 

Under these sort of arrangements those CEOs and other top executives whose firms do badly under their leadership often walk away with millions of dollars despite failing. Where is the economic logic in that?

 

Americans, perhaps more than an other people, like the idea that people who work hard and use their creative energies to build weath, build successful companies, and create jobs are well compensated for their efforts. We do not have a society of "class envy" when it comes to people who've earned fortunes being anything but admired.

 

But those who enrich themselves while ruining companies and destroying jobs is not something that plays well to the American peole. And why should it?

 

Bill

 

as CEO of Fortune 500 companies. Leo Apothker was one of them. Prior to joining HP he was a successful CEO of SAP AG. HP's board hired him because of this experience. When hiring a high talent individual, whether that person is a corporate executive, a professional athlete, or an entertainer, contracts are an industry standard. An expensive athlete may or may not perform as expected, but his contract must be honored.

 

CEO's and famous entertainers and athletes live with the consequences of their very public successes and failures. They are subject to the market and market pressures based upon their performances. Leo Apotheker is currently unemployed.

[Free]

I would have to respectfully disagree. The statement was made that higher wage earners aren't paying their fair share of taxes. These figures show otherwise.

 

And my point was that these figures do not show otherwise. They only show that the earnings of the top 10% are so high that they end up contributing 70% of all the income taxes, whereas the entire earnings of the bottom 50% of the earning population is so low that their share of taxes only make up 2-3%. This does not indicate anything about the actual tax rates, only that there is a huge, massive disparity in income.

 

I find the fact that 50% of taxpayers are only paying between 2-3% of all taxes to be where the unfairness exists.

 

The disparages in income are due to many factors, not the least of which are considerations such as education, ambition, work ethic, and the personal choices one has made in their life. The argument could also be made that the reason the rich are getting richer and the poor are getting poorer is because each is continuing the life practices that got them where they are in the first place. Not all, of course, but most. Some are poor due to circumstances beyond their control, and some are wealthy because of inheritances, although that is less than 1%. For most, it still boils down to personal responsibility. Your life, for the most part, is what you make of it.

 

That 50% of the earning populace is lazy and is making poor life choices is quite an absurd and judgmental statement to make. To me the fact that 50% of the population is earning so low only indicates that the economic policies are failing the people.

[Spy Car]

as CEO of Fortune 500 companies. Leo Apothker was one of them. Prior to joining HP he was a successful CEO of SAP AG. HP's board hired him because of this experience. When hiring a high talent individual, whether that person is a corporate executive, a professional athlete, or an entertainer, contracts are an industry standard. An expensive athlete may or may not perform as expected, but his contract must be honored.

 

CEO's and famous entertainers and athletes live with the consequences of their very public successes and failures. They are subject to the market and market pressures based upon their performances. Leo Apotheker is currently unemployed.

 

Such contracts remove the logic of capitalism (reward for success, punishment for failure) from executive compensation. This is why people object to the way these Golden Parachutes have expanded to obscene levels in recent years. It is not because people have "anti-capitalist" impulses, but exactly the contrary. People believe there should be risk and reward. These prearranged deals violate that logic.

 

According to Wikipedia Leo Apotheker "served less than 11 months as CEO, he received over US$13 million in compensation: a severance payment of $7.2 million, shares worth $3.56 million and a performance bonus of $2.4 million, although the company lost more than $30 billion in market capitalization during his tenure."

 

I think most Americans—people who believe in free markets and the spirit of capitalism—would find this obscene.

 

Bill

Edited April 24, 2012 by Spy Car

[ChocolateReignRemix]

And my point was that these figures do not show otherwise. They only show that the earnings of the top 10% are so high that they end up contributing 70% of all the income taxes, whereas the entire earnings of the bottom 50% of the earning population is so low that their share of taxes only make up 2-3%. This does not indicate anything about the actual tax rates, only that there is a huge, massive disparity in income.

 

 

 

That 50% of the earning populace is lazy and is making poor life choices is quite an absurd and judgmental statement to make. To me the fact that 50% of the population is earning so low only indicates that the economic policies are failing the people.

 

Correct.

The top 1% earn 20% of the income in the United States. When 1% of the population earns 1/5 of the income, a large disparity in taxation should be expected. Factor in the compounding effects of that income over time and how it effects wealth distribution, and some of the current economic issues of the U.S. should become a bit clearer to anyone.

[SKL]

Correct.

The top 1% earn 20% of the income in the United States. When 1% of the population earns 1/5 of the income, a large disparity in taxation should be expected. Factor in the compounding effects of that income over time and how it effects wealth distribution, and some of the current economic issues of the U.S. should become a bit clearer to anyone.

 

Funny thing, though - when my income was below average decades ago, my effective tax rate was as high as 45% (including fed, state, local, ss & medicare). Today, people at that relative income level pay only local, ss & medicare; the cost of federal services, transfer payments, etc. is being shouldered almost 100% by people like me who have always paid a significant share of our income in taxes. And there's always someone complaining that we don't pay MORE.

 

Fairness is a very subjective term.

 

I get more and more enamored with the idea of a flat tax of x%. And besides that, I think people who don't have income should have to spend x% of a normal work week doing community service.

[Free]

.

[MrsBear]

And my point was that these figures do not show otherwise. They only show that the earnings of the top 10% are so high that they end up contributing 70% of all the income taxes, whereas the entire earnings of the bottom 50% of the earning population is so low that their share of taxes only make up 2-3%. This does not indicate anything about the actual tax rates, only that there is a huge, massive disparity in income.

 

 

 

 

Quintile Average Income Before Taxes

 

Lowest $18,400

Second $42,500

Middle $64,500

Fourth $94,100

Highest $264,700

 

Okay, so let's meet in the middle of the 40-60%, between $42,500 and $64,500 to say the 50% mark is somewhere around $53,500.....that's too poor to pay income taxes?

[ChocolateReignRemix]

Quintile Average Income Before Taxes

 

Lowest $18,400

Second $42,500

Middle $64,500

Fourth $94,100

Highest $264,700

Okay, so let's meet in the middle of the 40-60%, between $42,500 and $64,500 to say the 50% mark is somewhere around $53,500.....that's too poor to pay income taxes?

 

If someone is earning $53,500 and not paying income tax, then it is simply because they have a large number of dependents and deductions (all of which benefit those at *most* income levels).

A married couple earning $53,500 will pay income tax. A family of 5 may not. In certain areas of the country, a family of 5 earning $50,000/year would not have much extra to pay federal income tax in addition to state and local taxes.

[Crimson Wife]

Bonuses are paid in February. Part of the reason for this is to keep people from quiting when the work load is heaviest--if you don't stay until February you get no bonus.

 

Delaying the bonus until February is actually a fairly recent thing. Up until a couple years ago, the bonuses were announced to employees at the beginning of December (so that employees could plan Christmas/Hanukkah) and paid in full the first week of January. The decision to push it back was so that the 4th quarter final numbers could be taken into consideration.

 

But you're right about forfeiting the bonus if you leave the firm. Now with the payments staggered out over multiple years, the company has even a greater hold over their workers.

[ChocolateReignRemix]

Funny thing, though - when my income was below average decades ago, my effective tax rate was as high as 45% (including fed, state, local, ss & medicare). Today, people at that relative income level pay only local, ss & medicare; the cost of federal services, transfer payments, etc. is being shouldered almost 100% by people like me who have always paid a significant share of our income in taxes. And there's always someone complaining that we don't pay MORE.

 

Fairness is a very subjective term.

 

I get more and more enamored with the idea of a flat tax of x%. And besides that, I think people who don't have income should have to spend x% of a normal work week doing community service.

 

And FTR, people like dh and myself.

You are also being a bit misleading. Federal tax rates and deductions have not changed significantly for anyone in the middle tax brackets. Other than the EITC, there has not been any significant changes which would shift the tax burden. Also, lower to middle income workers still pay SS and medicare on all of their income, while high wage earners are exempt starting somewhere around $106,000. In addition, local sales taxes take a higher % of income from the lower and middle income groups as well.

 

When 1 out of every 100 people earn 1 out of 5 dollars in income, exactly who do you expect to pay the tax burden? When 42% of the nation's wealth is controlled by 1% of the population, who exactly has the money to pay the bills.

 

A flat tax would be a train wreck.

[Momof3littles]

A married couple earning $53,500 will pay income tax. A family of 5 may not. In certain areas of the country, a family of 5 earning $50,000/year would not have much extra to pay federal income tax in addition to state and local taxes.

 

Particularly these days, when things like health care costs may eat in *substantially* to a salary like that. High deductible plans, high copays, lack of any plan from an employer, or a plan that charges a significant premium to add a family on will eat into that amount. In some areas of the country a family can live on 50K per year, and in other areas that would be extraordinarily difficult.

[Momof3littles]

And FTR, people like dh and myself.

You are also being a bit misleading. Federal tax rates and deductions have not changed significantly for anyone in the middle tax brackets. Other than the EITC, there has not been any significant changes which would shift the tax burden. Also, lower to middle income workers still pay SS and medicare on all of their income, while high wage earners are exempt starting somewhere around $106,000. In addition, local sales taxes take a higher % of income from the lower and middle income groups as well.

 

When 1 out of every 100 people earn 1 out of 5 dollars in income, exactly who do you expect to pay the tax burden? When 42% of the nation's wealth is controlled by 1% of the population, who exactly has the money to pay the bills.

 

A flat tax would be a train wreck.

 

Agree on the flat tax rate and your other points.

 

Families with less income still need to buy healthcare, food, gas, etc. and a flat tax hits those families hard.

[Crimson Wife]

That 50% of the earning populace is lazy and is making poor life choices is quite an absurd and judgmental statement to make. To me the fact that 50% of the population is earning so low only indicates that the economic policies are failing the people.

 

1/3 of the U.S. population lacks a high school diploma, and it isn't just the senior citizens. 1/5 of those aged 25-34 are H.S. dropouts. You don't call that a poor life choice that is hurting their earning potential?

 

Other poor life choices that hurt earning potential: committing a felony, substance abuse, having a baby out-of-wedlock (especially as a teenager)- I could go on, but you get the point.

[ChocolateReignRemix]

I should probably also add DH and I are registered Republican. However, our current corporate culture along with the money and influence it holds within our political system is slowly destroying the American dream. The belief that simply working hard was all that was needed to succeed was always over stated, but we are now facing the reality that future generations are going to find it harder and harder to achieve anything close to what their parents and grandparents accomplished. Blaming a lack of work ethic or "kids today" is always an easy out, but the reality is that we are facing a higher concentration of wealth into the hands of a few than we have seen in the United States for a long, long time.

[Crimson Wife]

Federal tax rates and deductions have not changed significantly for anyone in the middle tax brackets.

 

That is untrue. DH and I were in that middle range of income when President Bush's tax cuts passed. It was ridiculous how much we wound up saving from them. We went from paying thousands of dollars to only a few hundred. Today a family with the same income in constant dollars probably wouldn't pay anything at but might even receive back money in a refundable credit.

[ChocolateReignRemix]

That is untrue. DH and I were in that middle range of income when President Bush's tax cuts passed. It was ridiculous how much we wound up saving from them. We went from paying thousands of dollars to only a few hundred. Today a family with the same income in constant dollars probably wouldn't pay anything at but might even receive back money in a refundable credit.

 

Top rates were also dropped with the Bush tax cuts, so it is true when we are discussing relative tax burdens.

The one fifth of households in the middle income tax bracket received an average saving of $647 under the Bush tax cuts (a % increase of 2.3 of after tax income).

The top 1 % received an average of $34,992 (5.3% increase in after tax income).

Those over $1 million received $123,592, or 6.4%.

Source: http://www.cbpp.org/cms/index.cfm?fa=view&id=1811

 

You and your husband may have had the correct combination of factors to benefit more than average, but anecdotal data isn't really useful in these discussion.

[Free]

Quintile Average Income Before Taxes

 

Lowest $18,400

Second $42,500

Middle $64,500

Fourth $94,100

Highest $264,700

 

Okay, so let's meet in the middle of the 40-60%, between $42,500 and $64,500 to say the 50% mark is somewhere around $53,500.....that's too poor to pay income taxes?

 

And they did. A household with $53,500 income would fall in the third quintile. The third and fourth quintile together paid about 25% of all federal taxes.

 

http://en.wikipedia.org/wiki/Progressivity_in_United_States_income_tax

[MrsBear]

And they did. A household with $53,500 income would fall in the third quintile. The third and fourth quintile together paid about 25% of all federal taxes.

 

http://en.wikipedia.org/wiki/Progressivity_in_United_States_income_tax

 

Did you read the stats in your link?

 

 

• The highest quintile in total earned 55.9% of all income. It paid 86.0% of federal income taxes and 68.9% of all federal taxes
  
  • The top 1% earned 19.4% of all income. It paid 39.5% of income taxes and 28.1% of all federal taxes
    
  • The next 4% earned 12.9% of income. It paid 21.5%. of income taxes and 16.2% of all federal taxes
    
  • The next 5% earned 9.7% of income. It and paid 11.7% of income taxes and 10.7% of all federal taxes
    
  • The next 10% earned 13.9% of income. It paid 13.3% of income taxes and 13.9% of all federal taxes.
    

   

  [*]The fourth quintile earned 19.3% of income. It paid 12.7% of income taxes and 16.5 of all federal taxes.

  [*]The third quintile earned 13.1% of income. It paid 4.6% of income taxes and 9.2% of all federal taxes.

  [*]The second quintile earned 8.4%. It paid a net -0.3% of income taxes, meaning in aggregate this quintile received slightly more back in income tax credits than it paid in income taxes. It paid 4.4% of all federal taxes.

  [*]The lowest quintile earned 4.0% of all income and received a net -3.0% income tax credits. It paid 1.0% of all federal taxes.

I thought we were talking federal income taxes, not FICA + federal income taxes. The bolded above includes figures for both and those in the bottom 60% pay just 1.3% of federal income tax (4.6 - 0.3 - 3); if you include FICA, then they paid 14.6% of all federal taxes.

[MrsBear]

If someone is earning $53,500 and not paying income tax, then it is simply because they have a large number of dependents and deductions (all of which benefit those at *most* income levels).

 

Deductions, maybe, but it's more likely the tax credits that are often based on income. *Most* making $50,000 or less will qualify for some tax credits available, those making more do not and some have nothing to do with level of income. Tax credits offset income more than deductions do and unlike deductions, which lower your income tax due, tax credits can and often are paid to you - they don't just zero out your income taxes due, the government sends you a check, so you have a net gain at the end of the year!

 

Adoption credit - you have to adopt a kid

EIC - up to $5,891 (3 kid+), make less than $50,270 (married)

Child Tax Credit - make less than $55, $75 or $110K, depending on filing status

Childcare Credit - 20-35% of what you paid for childcare, depending on income

Retirement Savings Credit - 10-50% credit if you make less than $53,000

Tuition Credit - up to $2,500 (full time undergrad)

Tuition Credit - up to $2,000 (part-time, any level); has income limits

[SKL]

Personally I do not think it is a virtue that an individual taxpayer can pay millions of dollars in taxes and still be told he isn't pulling his weight. Hello! How come nobody is concerned about the people who go through their entire life and never pay a net dollar in income tax, despite making use of all the tax-funded benefits?

 

If the USA were a corporation and the guy in the next cubicle was given a salary for doing nothing all day but using the facilities and the free stuff in the break room, while you were fined heavily because you put out so much work, would you think that was just awesome? Would you say you weren't being fined enough?

[MrsBear]

Personally I do not think it is a virtue that an individual taxpayer can pay millions of dollars in taxes and still be told he isn't pulling his weight. Hello! How come nobody is concerned about the people who go through their entire life and never pay a net dollar in income tax, despite making use of all the tax-funded benefits?

 

If the USA were a corporation and the guy in the next cubicle was given a salary for doing nothing all day but using the facilities and the free stuff in the break room, while you were fined heavily because you put out so much work, would you think that was just awesome? Would you say you weren't being fined enough?

 

It's just going to get worse, especially for people who live in really high COL areas. For example, next year, the personal deduction is being phased out for married couples with income greater than $250,200 a year - doesn't matter if that's flow-through income from a small business, doesn't matter if they have 10 kids, they just make too much to have their dependents reduce their tax burden each year.

 

In NYC, Chicago or LA, a two income family can be making that, even in less than stellar careers due to the COL. Let's pretend they have three kids - so now they lose the $19,000 personal deduction for their family and pay an additional $6,650 in federal taxes without there ever being legislation passed increasing taxes on anyone. I don't know who here can easily take a $554 loss a month from their budget - that's basically what the loss of the personal deduction means - they're both still working, making same as ever, but taking home less. But hey, they're rich, right?

[Free]

Did you read the stats in your link?

 

 

• The highest quintile in total earned 55.9% of all income. It paid 86.0% of federal income taxes and 68.9% of all federal taxes
  
  • The top 1% earned 19.4% of all income. It paid 39.5% of income taxes and 28.1% of all federal taxes
    
  • The next 4% earned 12.9% of income. It paid 21.5%. of income taxes and 16.2% of all federal taxes
    
  • The next 5% earned 9.7% of income. It and paid 11.7% of income taxes and 10.7% of all federal taxes
    
  • The next 10% earned 13.9% of income. It paid 13.3% of income taxes and 13.9% of all federal taxes.
    

   

  [*]The fourth quintile earned 19.3% of income. It paid 12.7% of income taxes and 16.5 of all federal taxes.

  [*]The third quintile earned 13.1% of income. It paid 4.6% of income taxes and 9.2% of all federal taxes.

  [*]The second quintile earned 8.4%. It paid a net -0.3% of income taxes, meaning in aggregate this quintile received slightly more back in income tax credits than it paid in income taxes. It paid 4.4% of all federal taxes.

  [*]The lowest quintile earned 4.0% of all income and received a net -3.0% income tax credits. It paid 1.0% of all federal taxes.

I thought we were talking federal income taxes, not FICA + federal income taxes. The bolded above includes figures for both and those in the bottom 60% pay just 1.3% of federal income tax (4.6 - 0.3 - 3); if you include FICA, then they paid 14.6% of all federal taxes.

 

The top 1% pay about 40%, while the top 10% pay 70%. That seems like more than fair to me. :confused:

 

The link does not say anything other than what was already pointed out by My3Boys - that the top 10% paid 70% of the taxes. And Your point that bottom 60% pay just 1.3% federal income tax just brings us back to my original point:

 

These are very interesting figures indeed. These figures however do not illustrate to me the fairness or unfairness of the taxation system. They only show the MASSIVE disparity in the income levels of the top 10% and the bottom 50%.

 

To my mind the conclusion is simply that if a massive 50-60% of the earning population of the United States is earning so low that their contribution to the federal taxes accounts for a mere 2-3%, then this indicates that you need economic policies that will generate more income and wealth at the bottom to get more people into tax bracket (instead of shifting the tax bracket downwards as many seem to be suggesting here).

[Murphy101]

I think a company that pays an employee with a terrible lack of merit a huge bonus is stupid.

 

If a company wants to be stupid and run their business into the ground, that's their right.

 

Such companies shouldn't receive a dime of bailout.

 

As for what income tax is fair...

 

I'll be honest and say that I think ALL income tax and grocery tax should be abolished.

 

Sales tax sucks, but at least if one doesn't want to fund it, they can save their money or spend it on something else.

[MrsBear]

 

 

 

To my mind the conclusion is simply that if a massive 50-60% of the earning population of the United States is earning so low that their contribution to the federal taxes accounts for a mere 2-3%, then this indicates that you need economic policies that will generate more income and wealth at the bottom to get more people into tax bracket (instead of shifting the tax bracket downwards as many seem to be suggesting here).

 

Then there are those who receive massive tax credits that reduce their income to levels where they don't pay or they get more money from the government. It isn't simply people earning low income, many who are earning decent wages are getting some significant tax breaks too.

[Quiver0f10]

Personally I believe that a private sector business should be free to make all compensation decisions of that nature. If they are privately held, it affects nobody who doesn't have some level of say in the matter. If they are publicly held, they are required to report large compensation payments publicly, and if you (generic "you") don't like it, you need not own stock in those companies (or work for them). It is the responsibility of the investors / prospective employees to investigate these things, and if they choose not to, that is their problem.

 

I am very opposed to people trying to tell other people (including private sector corporations) what they can or should do with their money.

 

Now if it's an entity with government support or under government control, my answer will be different, because now we're talking about tax money.

 

:iagree:

[Quiver0f10]

I agree we should not tell private companies what they should pay beyond minimum wage standards. However, I think excessive salaries and compensation should be taxed appropriately IMO which currently they are not:D

 

I also think stockholders should be given more rights in regards to compensation. I think this sort of excessive pay and compensation hurts stockholders:glare:

 

Bonuses are taxed at a higher rate.

 

Aren't bonuses taxed at a higher rate? We could use a bonus around now. :001_smile:

 

Yep, they are.

 

Don't worry, the people receiving these bonuses are paying plenty of tax dollars.

 

I would note that the main purpose of bringing these "obscene bonuses" to light to the general public is to incite envy and hate against those who carry the majority of the tax burden, create a large % of the jobs, and make the majority of charitable donations in this country. Seems irrational to me, but what do I know?

 

 

:iagree:

[Lisbeth]

I would have to respectfully disagree. The statement was made that higher wage earners aren't paying their fair share of taxes. These figures show otherwise. I find the fact that 50% of taxpayers are only paying between 2-3% of all taxes to be where the unfairness exists.

 

The disparages in income are due to many factors, not the least of which are considerations such as education, ambition, work ethic, and the personal choices one has made in their life. The argument could also be made that the reason the rich are getting richer and the poor are getting poorer is because each is continuing the life practices that got them where they are in the first place. Not all, of course, but most. Some are poor due to circumstances beyond their control, and some are wealthy because of inheritances, although that is less than 1%. For most, it still boils down to personal responsibility. Your life, for the most part, is what you make of it.

 

This is what I believe in a nutshell. I thank God I live in a society with a choice to work my tail off, and get somewhere. My parents were dirt poor. My mom's parents actively discouraged education and work. My parents had to do it all w no help. They are now well off and owe their money to no one. Work and make your own, make tough choices to delay gratification, and have the correct priorities...this works for MOST people.

[Rosie_0801]

According to Wikipedia Leo Apotheker "served less than 11 months as CEO, he received over US$13 million in compensation: a severance payment of $7.2 million, shares worth $3.56 million and a performance bonus of $2.4 million, although the company lost more than $30 billion in market capitalization during his tenure."

 

Sounds like a badly written contract to me.

 

My dear hubby is certainly not one of the "haves" and the company he works for isn't one either. They sent him on a training course with the proviso that if he quits within a year, he has to repay anything up to the entire course fee. Perhaps Leo Apotheker's boss should have been more creative when writing his contract.

 

And besides that, I think people who don't have income should have to spend x% of a normal work week doing community service.

 

We call that "Work for the Dole." It has its pros and cons.

 

Rosie

[cdrumm4448]

Personally I believe that a private sector business should be free to make all compensation decisions of that nature. If they are privately held, it affects nobody who doesn't have some level of say in the matter. If they are publicly held, they are required to report large compensation payments publicly, and if you (generic "you") don't like it, you need not own stock in those companies (or work for them). It is the responsibility of the investors / prospective employees to investigate these things, and if they choose not to, that is their problem.

 

I am very opposed to people trying to tell other people (including private sector corporations) what they can or should do with their money.

 

Now if it's an entity with government support or under government control, my answer will be different, because now we're talking about tax money.

 

 

:iagree:

[cdrumm4448]

the interests of stockholders are often (usually) not well-represented.

 

The Boards largely fail to act in the "shareholders" interestBill

 

If you feel, as a shareholder, that your interests are not represented then you are free to dump that stock. We put our money into companies that are successful and are a good buy. We reward success.

[cdrumm4448]

The top 1% pay about 40%, while the top 10% pay 70%. That seems like more than fair to me. :confused:

 

 

:iagree:

 

You don't see too may people applying for jobs with bums.

[cdrumm4448]

After thinking longer on this issue, I think in many cases the way bonuses are distributed sends a message about the priorities and attitude of those running the company.

 

HUGE bonuses for those at the top and minimum wage for those at the bottom, sends a very clear message that those at the top don't value the contribution of those at the bottom.

 

Another example, those at the top get huge bonuses, but those at the bottom are made to pay higher and higher portions of their health insurance costs. Again, a message devaluing those at the bottom.

 

Yes, private industry has the "right" to do whatever with its own money. But those choices not only reflect the values of that industry, but also the general values of the society as a whole that allows those systems to flourish.

 

Work gets paid for what it's worth. A store checker does not do the same work, nor generally have the same skill set or education, as a CEO. They are paid and rewarded accordingly. Everyone is free to work to attain the skill set of a CEO and get paid accordingly.

[cdrumm4448]

Voicing concern over excessive compensation of CEOs has nothing to do with envy and hate. It has to do with fairness. Currently, the excessive compensation of many CEOs is unfair to stockholders let alone employees.

 

Again look at how much CEOs made in the 1960s in comparison to average workers to today. Then look at the tax rates back then to today. There is a problem IMO. Then look up "robber barons."

 

We are a country based on equality of opportunity, not equality of outcome and reward.

[cdrumm4448]

I think the idea that a CEO can make hundreds of millions of dollars while someone else in the same company can't afford to feed his or her kids without food stamps is ridiculous. If the company has enough laying around to pay millions and millions in bonuses, they should pay their lower level employess a living wage, not make the already weathy that much wealthier. I don't care if the CEO sh*ts gold nuggets. No way is he worth THAT much more.

 

And when you own and run your own company, putting your own capital and sweat on the line every single day, you can run it as you wish.

[cdrumm4448]

These are very interesting figures indeed. These figures however do not illustrate to me the fairness or unfairness of the taxation system. They only show the MASSIVE disparity in the income levels of the top 10% and the bottom 50%.

 

That disparity is the product of the American Dream, which I assume you would consider the American Nightmare. We are ALL free to work toward becoming rich, if that's your goal. If not, then don't complain about people who have succeeded financially.

[cdrumm4448]

Then there are those who receive massive tax credits that reduce their income to levels where they don't pay or they get more money from the government. It isn't simply people earning low income, many who are earning decent wages are getting some significant tax breaks too.

 

Where are all these people receiving massive tax credits that reduce their income to almost nothing? I don't know anyone remotely like that. BUT, we do hang around with quite a few business owners who are getting hit HARD.

[2squared]

Bonuses are taxed at a higher rate.

 

This isn't correct. Federal income taxes are withheld at a higher rate on bonuses. However, when income taxes are filed at the end of the year, bonus income is treated as all other earned income and taxed at the wage earner's tax rate. If you fall in the 15% tax bracket, then your bonus will be taxed at 15%. Since taxes would have been withheld at a higher rate, you would be refunded the overage as an income tax refund.

 

A bonus may push you into a higher tax bracket when you file your taxes, but that isn't the same as being taxed at a higher rate. It just means that the bonus increased your earned income enough to put you in a higher tax bracket.

[MrsBear]

Where are all these people receiving massive tax credits that reduce their income to almost nothing? I don't know anyone remotely like that. BUT, we do hang around with quite a few business owners who are getting hit HARD.

 

Yes, we're one of them.

 

My comment was based on how few are paying federal income tax these days, at incomes where they can; that tax credits often will take a respectable income down to next to nothing and that higher earners, including business owners, often do not qualify for the same tax credits.

[SKL]

Again look at how much CEOs made in the 1960s in comparison to average workers to today. Then look at the tax rates back then to today. There is a problem IMO.

 

Shall we compare how much (a) welfare recipients and (b) the working poor have today compared to the 1960s? Is that also a problem?