I recently read a survey from the IRS which showed the percentage of federal income taxes paid, and adjusted gross income earned, by the top 1%, 5% and 25% of American taxpayers. If correct, the finding were pretty surprising to me.
The top 1% paid 38% of Federal Income Taxes ( "FIT"), but only earned 20% of Adjusted Gross Income("AGI") .
Likewise the top 5% paid 59% of FIT, but earned 35% of AGI .
The top 25% paid 86% of FIT .
Finally almost 50% of tax filers pay no FIT.
While the top 1% do make 20% of all income, they pay 38% of federal income taxes.
So much I guess for the 1% - 99% Occupy Wall St. mantra.
It is now widely recognized (although not well known) that almost half of American taxpayers pay no federal income taxes. While this doesn't cover social security and medicare taxes, those taxes are narrowly focused and people essentially get them paid back when they retire or get sick. They are not the same as federal income taxes which are used for most of our government expenditures.
The retort is that they do pay other taxes and that if they pay no federal income taxes, it is because they are not rich enough, too old or have big families.
By the way, I suspect a good portion of Tea Party folks are among those who pay very little or no federal income taxes.
Nonetheless there has to be concern from a societal point of view, when half of our citizens do not share in the burden of the cost of running our government. For that reason some conservatives are in favor of some kind of consumption tax at the federal level to insure that everyone pays some federal taxes. See Cain's 9-9-9 plan.
However what really surprised me is that while I always knew the "rich" paid most of the federal income taxes, I thought they made an even higher percentage of the income. Apparently they don't.
I'm not against raising taxes if needed to solve our fiscal problems, I just think it's important that people be aware that taxes are more fairly distributed than we are told. The rich, and the kind of rich, do pay their fair share and the less well off pay very little or none.
Perhaps if that were more widely known it would take some of the steam out of the class warfare frenzy and we can get down to solving our problems in a rational productive way.
Eric
In general, I think our differences are that you tend to value self-reliance and I tend toward being a bleeding liberal. Our views are not all that different – it’s a matter of emphasis.
ReplyDeleteThe government needs to do the things only it can do to make the US a happy and secure place for most of us. How it pays for it is a mere detail. At the moment, the richest 25% can best afford to provide meaningful amounts of additional revenue. The bottom 50% cannot. Like the pizza-man, I think the answer is simple; maybe we can get him to push 0-0-0 for the bottom 50, 9-9-9 for the next 25, and 15-15-15 for the top 25. When the poor and middle class can afford it, tax ‘em.
First, I don't get the reason to exclude payroll taxes. A 30 year old trying to raise 3 kids on a median income isn't thinking that if he or she manages to live a few more decades, he or she will get a return on that "investment." What matters is the tax burden today. Second, the reasons for the numbers are that we have a progressive tax system, which is good, and that the disparity in income has grown tremendously, which is bad. About half the people who don't pay taxes live below the poverty line, which is pretty low. On the other hand, the people in the upper brackets have had tremendous growth in income. About 65% of the growth in national income n the Bush years went to the top 1%, at the same time that their tax rates went down. They paid more taxes because their incomes went up much more than their tax rates went down. So the numbers are just another manifestation of the overriding problem we face. I also suspect there is a bias in the numbers because the difference between gross income and AGI is greater for higher bracket people. In fact, as you well know, real estate developers, at least in the good old days, managed to live very well with very little reportable income.
ReplyDeleteAs to the Occupy Wall Street folks, Shaw said movements attract the best and the worst in society, and this one is no different. We can all argue with what at least some of them are saying, but they are right in spirit and in their general sense that something is terribly wring, and that something has a lot to do with money and the way it is distributed in this country. Wall Street is a very appropriate symbol for the issues they are raising, however inarticulately. Maybe it is up to the rest of us to do the articulating. .(BTW, did you read a week or so ago that the receiver for Fannie Mae is opposed to mortgage principal reductions because he is worried about the moral hazard. If you think about that for 30 seconds you might agree with me that his position is a lot crazier than anything coming our of Zuccotti Park.)
Ron
As you know, I have for some time been very concerned with the growing income gap and as such I am very sympathetic to Occupy Wall St movement's concerns. You responded to my aside about the 1%-99% thing as if I was a detractor.
ReplyDeleteAs to the 1% thing it hit me this morning watching the morning and Sunday talk shows that everyone on the set, every guest , all of the athletes and movies stars they showed clips of , are all in the 1%, but the critics on those shows never acknowledge that fact.
Just once I'd like to hear them say that the accursed 1% includes themselves.
My principal reason for doing this post is articulated at the end. Most people don't know the facts. I guess I still think facts are important.
I suspect most people not only think the rich make most of the money, but they also believe that the rich don't pay very much of the taxes. Maybe not enough, but they do pay most of what ever taxes are collected.
It is the sainted Middle Class that the public believes pays most of the taxes. Not true. That's why I made my aside about many in the Tea Party not paying much in federal income taxes, whether they know it or not.
If everyone knows the facts perhaps they can stop calling each other names and try to solve the problem
I excluded so called payroll taxes because they are not really taxes as such, but are really forced savings accounts for social security and medicare purposes only.
ReplyDeleteBy the way it's never mentioned that employers also pay additional "taxes" by matching those forced saving contributions. As to the employers those really are taxes.
When the employee retires, he or she and his or her spouse will certainly be happy to receive social security and medicare benefits.
That's why they are called entitlements; because the person has already contributed for the benefit. The only real fight is whether they will have contributed enough and when they should start receiving their entitlement benefits; not to mention how much they should receive.
They are not "taxes" for general revenue purposes; which is everything else other than social security and medicare.
http://money.cnn.com/2013/03/12/news/economy/rich-taxes/index.html?iid=Lead&hpt=hp_t2
ReplyDeleteFor 2010 , top 10% paid 70% of federal income taxes.