TAXES Cut and Dried - Who Pays Them Today

Paul: as Mark Twain is supposed to have said, I am sorry this is so long. I did not have time to make it shorter than 269 words.

Current discussions about whether to raise taxes on the “rich” lack context and are being held in a vacuum. More than what? Up from where? Filing income taxes is complicated, but figuring out who pays them is not. Here are some basic facts, all of which are easily available on the internet from government reports.

In 2007, the federal government collected about $2.6 trillion (that’s 26 followed by 11 zeros). About $1.16 trillion of this came from income taxes. The remainder came from social security ($869 B) [not saved for your retirement but immediately “loaned” to the government], corporate ($370 B), excise and other taxes ($165 B).[1]

In 2006, the top 1% of tax return filers[2] (about 1 million filers) paid about 40% of these taxes – an average of $340,000.

The next 11%[3] (15 million filers) paid about 34% - an average of $26,000.

The next 38% (50 million) paid 23% - an average of $5000.

The next 50% (70 million) paid 3% - an average of $500.[4]

1/3 of all filers paid no income tax at all.

12% now pay 74% of all income taxes; 10 years ago, the same 12% paid about 64%. 50% now pay $500 or less; 10 years ago, it was 45%. 33% now pay nothing; 10 years ago, it was 25%.

Can the rich afford it? Sure. They won’t starve. A better question is: Should 1 million people pay $340,000 while 70 million people pay less than $500? If we are trying to accomplish wealth redistribution, let’s just do it and forget the income tax. There are much simpler ways to do it.

[1] http://www.gpoaccess.gov/usbudget/fy09/sheets/hist01z1.xls
[2] Income above $500,000+/-
[3] Income above $100,000+/-
[4] http://www.irs.gov/pub/irs-soi/06in11si.xls