Income tax

Comments on Cecil's Columns/Staff Reports
#1

I just obtained my copy of Triumph of the Straight Dope, and while perusing it, I came upon the following claim:

The richest Americans “paid 10 percent of the taxes. That’s a mere 67,000 households, who on average paid income tax of $707,000.” (page 141)

Doing the math gives us about $47.4 billion dollars paid by these households. If that’s really 10%, it means that we’re only collecting $474 billion in income taxes. Given that the budget is around $2 trillion, how are we making up the difference?

On a side note, I was unable to find Triumph in Border’s humor section, so I had to ask. In turns out, they shelf it in reference. Good for them!

#2

I believe the “taxes” being discussed were only “individual Federal income taxes”. $474 billion per year is a believable total for this form of Federal revenue.

The Federal government also collects around $30-50 billion per year in “corporate income taxes”, which includes income taxes paid by non-corporate entities that are taxes like corporations (Limited Liability Companies, Massachusetts Business Trusts, etc.).

A huge chunk of Federal revenue, though, comes from Social Security and Medicare taxes. Although the Social Security Act of 1935 referred to it as “an income tax on employees”, neither it nor Medicare payments are considered part of “individual Federal income tax” revenue.

The remainder is made up of various little Federal taxes invisible to most citizens, such as the excise taxes on gasoline and alcohol, import tarriffs, etc…

#3

tracer has some good examples of non-personal income tax revenue sources. However, even by high-end estimates, they’re not making up the other $1.5 trillion of the budget. In other words, I don’t believe that $474 billion is a believable total for total collected personal income taxes. Is there somewhere to check up on this?

#4

Well, according to the budget guides at http://www.access.gpo.gov/omb/omb004.html , individual income taxes for FY1999 were $791 billion, and for FY1997 they were $737 billion.
Based on that rate of change, my SWAG for the last time that about $474 billion in individual income taxes were collected was the mid-1980’s. I don’t know what year is referenced, but I’d suspect a typo, at a minimum.
OTOH, the general attribution (the top 0.1% of households pay 10% of the income tax) may be true. I’ll have to dig deeper on that one.

“Kings die, and leave their crowns to their sons. Shmuel HaKatan took all the treasures in the world, and went away.”

#5

According to data downloadable from the IRS, for 1996, there were 110,762 returns reporting income (AGI) of a million dollars or more. (That is about 0.11% of returns)

They paid a total of $98 billion dollars in taxes, about 14.7% of all individual income tax.
(file 96in02tr.xls in archive
http://ftp.fedworld.gov/pub/irs-soi/96inrate.exe

See http://www.irs.ustreas.gov/prod/tax_stats/soi/ind_agi.html for more files)

For 1996, individual income tax was about 44% of Fed revenue, social insurance 36%, corporate income tax 12%, the rest from excise taxes, custom duties, inheritance taxes, etc.

Individual income taxes were $476 billion in 1992.

http://www.census.gov/prod/2/gen/96statab/fedgov.pdf (Adobe Acrobat format- large file!!)