Here’s a chart showing who pays federal taxes by income level. When people say that the rich “do not pay their fair share” you can pull this out. Apparently no other major western country has such a huge portion of their tax revenue come from such a small minority of tax payers. If the top 1% of tax payers in this country actually goes “John Galt” on us, it will destroy this country.
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Follow-up comment rss or Leave a TrackbackTo be really meaningful the chart needs a third component to show the % of total workforce income for each group. In other words, I wouldn’t cry myself to sleep at night over 1% of the workforce paying 40% of Federal income taxes if I was told the same 1% account for 50% of total earnings.
I don’t know what the actual numbers are, and it could be that 1% account for significantly less than 40% of workforce income, in which case there would certainly be some inequity evident. However, without that data point this doesn’t tell the whole story.
A liberal would look at this graph and say that it only tells us that 50% of the country are living around the poverty line while a very small minority hold most of the nations wealth…
Pace, I would agree with you in a purely theoretical case where these numbers are abstract things that can be expected to remain constant regardless of public policy. But the reality is that this shows that 1% of the tax paying public is footing the bill for the entire economy. It would be irresponsible for policy makers to not consider what that 1% might do, after all, they are actually human beings, not economic units.
Back in the 60s Britain had a 95% tax rate for top income earners. This is what led to the Beatles song “Taxman” (“One for you, 19 for me, I’m the Taxman!”). This is also why the Beatles and a whole lot of other rich Brits fled the country and brought their wealth making endeavors to less onerous tax venues. The result of that was a major economic crisis in England which led to the conservatives taking power and eventually to Margaret Thatcher running the country.
There is a real danger in this country that the “rich” are starting to do the same here. And it’s not just the evil conservative Republican rich. There’s a reason John Kerry kept his yacht anchored in another state. That reason is that he was trying to escape onerous taxes.
Ok. I am in agreement that there is a danger in having such a large portion of the economy dependent upon such a (arguably disenfranchised) few.
However, lowering their taxes does not address the root cause of the problem. Why do we have such a tiny percentage of our workforce holding the majority of the nations wealth (a logical inference from their tax contribution)? Progressive taxes are an artificial way of trying to achieve some parity. So what’s the real solution?
Another pertinent question is “What percentage of that income represents the taxes paid by the different groups?”
If, for example, the top 1% are paying 15% of their income while the 26-50% group is paying 25% of theirs, a whole different picture is presented.
But, the main thrust of the chart, i.e., that an inordinately small percentage of people are paying a hugely disproportionate share of the tax burden, reveals an insanely unstable tax base and furthers the argument that we should go to some sort of “use” or “sales” tax and get rid of the income tax structure entirely.
Regardless of what the top income brackets pay, I find it unconscionable that almost half of the population pays no taxes at all. Voting without paying taxes is a recipe for disaster. Which more or less explains where our country is now…
Jefferson was a proponent of a progressive taxation system as am I.
I have no problem with the poor not paying federal income taxes. Are you under the impression that they pay “no taxes?” Of course they “pay taxes.” They pay social security tax, fees, sales taxes, state and federal permit fees, licensing fees, inspection fees and all kinds of other taxes which go into local, super-local, state and federal coffers.
The reason most of those who aren’t “poor” AND “don’t pay federal income taxes” is because of directed income tax DEDUCTIONS – whether it’s because of child deduction, IRA, mortgage deduction, or whatever – deductions which are carved out to encourage that conduct (which means that the money that the federal government would have seized is, instead, spent on those activities – but the money is spent – generally flowing to those who DO pay “federal income taxes.”)
See, e.g., federal tax rates. Note that, prior to such ITEMIZED deductions, that everyone pays income tax, after they have reached the threshold amount for their filing status. http://www.taxfoundation.org/publications/show/151.html and http://www.paywizard.org/main/incometax/income-tax-2009
What that table doesn’t tell us is what the bottom 50% earn, in toto, so that the 3% that they pay represents what portion of THEIR INCOME – not the TOTAL FEDERAL REVENUES.
First, let’s recognize that the above chart represents EARNERS, not percentage of population.
Second, what is the representative percentage of the overall INCOME that the other 80% represent?
The second quintile has, on the average, a single earner and earns less than $20,000 per year. Their total income represents a bit less than 10% of all the income of all earners.
The third quintile has, on the average, a single earner, and earns less than $35,000 per year per household. Their total income represents around 18% of all the income of all earners.
The fourth quintile has, on the average, two earners, and earns around $55,000 per year per household. Their total income represents around 28% of the income of all earners.
The fifth quintile has, on the average, two earners, and earns around $88,000 per year per household. Their total income represents around 45% of the income of all earners.
The top 5% of all earners has, on the average, two earners, and earns around $157,000 per household per year. Their total income represents around 20% of the total income of all earners.
So, when we’re talking about disparities, the bottom 1/2 of all earners earns about 25% of the total income whereas the upper 1/2 earns around 75%. (And, as the income increases, the percentage of the total national earnings increases even more, so that the upper 5% earns around 20% of all the earnings for the nation).
See, e.g., http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Quintiles
So, I don’t find it “unconscionable” that those who earn such a disproportionate amount pay a likewise disproportionate amount in taxes. I would find it “unconscionable” if the poor and the working poor paid MORE so that the more affluent could pay LESS.
I could go into all sorts of philosophical discussions about “progressive” tax rates, but for the most part I’m OK with them so long as they are reasonably implemented. I also don’t like the idea of taxes being used to overtly “balance” the economic pie. I don’t think it’s the Federal Government’s responsibility or purpose to take goods from the affluent with the express purpose of redistributing it to the poor as a means of promoting some sort of fictional “economic equity.” Such efforts are, in my opinion, almost certain to fail due to unintended consequences of the tax policies, intentional waivers granted to the politically connected, and outright fraud by people who game the system in a variety of ways, from exploiting barter to simply not reporting their income.
The result of such policies is a federal tax document that is thousands of pages long and that even the IRS admits is incomprehensible. It creates an entire segment of the economy just to prepare taxes, an endeavor that provides no value whatsoever to the government or the people, and yet sucks in tens of billions of dollars, and billions of hours of time every year.
Whatever the “perfect” tax system might be, what we have right now is a pathetic joke, tailored for special interests, exploited by the rich who can hire teams of tax specialists who find ways to avoid taxes while half of the population ends up paying no federal income taxes and people like me, who refuse to pay someone to do our taxes, end up spending hours and days preparing the damn forms and then get nasty IRS letters where I have to prove I did it right to the people who are supposed to know better.
I agree that, if the purpose of the tax system is to “balance the economic pie,” then that is not only wrong, but is unconstitutional and arguably evil.
I also agree that the tax code is incomprehensible. It needs to be scrapped and a flat tax implemented (or a use/sales tax). Failing that, the Chair of the House Ways and Means committee should be locked in a room – no phone – no outside access – from April 1-15 and be forced to prepare his own taxes – and have that return audited – and be forced to pay whatever fines and spend any jail time which would accrue if he fails to fill them out correctly (or attempts to Barney Frank his income).
Ah, to dream…
Just a side note; but until recently I did not know that it was possible for an individual to receive an Federal income tax refund significantly greater than the amount of taxes paid.
Last year my wife had offered to file a friend’s taxes for her. This lady had earned in the region of $15k-$20k as I recall, and her total Federal taxes paid during the year were in the $500-$1,000 range. After all the credits and deductions were applied, she ended up receiving a $5,000 tax refund. I was absolutely flabbergasted.
So I do take issue with our government using the federal income tax system as a component of the welfare state in this way. It goes far beyond being just a progressive taxation system.
Pace, my point exactly…
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