From an old Cecil column:
Is it true that people pay an equal percentage of their income to taxes? Does anybody have cite with statistics that can back this claim up?
This source is almost a year old, but I doubt things have changed that much.
Houston Chronicle, January 13, 2003
% Share of Income Average
Group Total Taxes Split Point Tax Rate
Top 1% 37.4 >$313,469 27.4%
Top 5% 56.5 >$128,336 24.4%
Top 10% 67.3 >$92,114 22.3%
Top 25% 84.0 >$55,225 19.1%
Top 50% 96.1 >$27,682 16.9%
Bottom 50% 3.9 <$27,682 4.6%
Having occupied almost every strata on the socioeconomic spectrum, I can attest that the tax burden is much greater when you start making more money. It’s difficult to cut taxes for the lower 50%, because thay hardly pay any at all to begin with. I understand that the little they do pay seems like a lot at that level. But the top half pays almost all of it.
Don’t forget the Stupidity Tax - aka the Lottery =P
Of course I love it, it paid my way through college via the Lottery Scholarship!
What is missing from that table is the percentage of the income those groups make. I can’t find my cite now, but this is data from the IRS that I dug up for a tax debate on another forum…
Percentage of income
Top 10% - 46.01%
Top 25% - 67.15%
Top 50% - 87.01%
Also, according to this, the share of taxes in that table is federal income tax only.
http://www.house.gov/jec/press/2002/10-24-02.htm
Hopefully someone else will have some more information as I’d like a diffinitive answer as well.
Of course, when you start getting wealthy, you can amass wealth without it being counted as income. In fact, some wealthy people don’t pay ANY income taxes. I refer you to the book “Perfectly Legal” for some of the veeeery interrrresting dodges the wealthy have come up with to avoid paying taxes. Or rather, the dodges their subordinates/employees have come up with on thier behalf. The rest of us of course have no such resource.
Ringo got it right for Fed Income tax, but when you add in the other taxes, it starts to level out a bit.
FICA is a big culprit, since you’re taxed at a flat rate starting with the first dollar of income you have, and then max out at a certain income level. But it starts getting tricky when you include FICA. You will get a certain amount of that money back, so without computing the estimated cash payback (even discounted for future value), it’s a bit misleading to just look at it only from the front-loaded tax perspective.
While most state income taxes are progressive, sales taxes tend to be more regressive. Of course some states have no income tax and others have no sales tax.
So if the data supplied here is correct,…
The top 10% make 46% of the income, yet they pay 67% of the total taxes.
The top 25% make 67% of the income, yet they pay 84% of the total taxes.
The top 50% make 87% of the income, yet they pay 96% of the total taxes.
This is fairness? Progressiveness?
Perhaps it’s time to follow the lead of some courageous members of Congress and push for the abolishment of the incomprehensible and bloated tax code, income tax and IRS, substituting instead a national retail sales tax. (It has a provision for those under the poverty line to pay no tax, and other exemptions like food.) Fair across the board: The more you earn, the more stuff you’ll buy, so the more taxes you’ll pay. No billions of man-hours and billions of dollars wasted yearly on filling out tax forms, tax court, etc. No federal agents peering over your shoulder into your personal, private affairs, taking your hard-earned money away from you. No loopholes/tax shelters for the wealthy or free rides for black marketeers and all those being paid “under the table” to exploit the rest of us and force us to bear an excessive portion of the tax burden. No special interest groups getting tax breaks from Congress and stiffing the rest of us. No incentive to cheat. Spend more–>pay more tax–>stimulate the economy. Spend less–>save more–>stimulate the economy. Remove corporate income tax–>lower the cost of US-made goods enough to make them more affordable for Americans AND export-worthy again–>stimulate the economy. Simplified yes, simplistic no.
Worth a shot, anyway. The current 70-year experiment has certainly failed spectacularly, leaving a thick trail of wasted money and shattered lives in its wake. They could always implement the NRST with the provision that if for some reason it doesn’t work as planned, they just go back to the (unfair and against the Founding Fathers’ vision) income tax. Probably at a nominal rate of 10-15% or less, they would collect a lot MORE revenue though, at a tiny fraction of what it costs to run the IRS now. Plus, YOU would get to decide what to do with your money.
Dude, most of the reason why the wealthy don’t pay alot of taxes on their wealth is that alot of the wealth is in unrealized value of appreciated property, like stocks and such. What happens is the media sees that the value of Bill Gates’ stock rose 10% in a certain period, so they say he “made” $X but only pays a tax of some small percentage. The reason for this most often is that he didn’t realize or recognize any of that gain, which is of course a basic prereq to being taxed on income.
You say “some wealthy people don’t pay ANY income taxes,” but there could be any number of reasons for that, one simple one being that the person lost more money than they made in a certain year (i.e., an investment goes sour), hardly anything to toot one’s horn about. Everyone needs money to live on, and the only way to get money to live on is to realize income at some point, which income will be taxed by the income tax.
The high income folks are very bi-polar in the percentage of gross income paid as taxes. If the situation is right, and they can find/develop enough tax loopholes or tax dodges, they can end up paying little (or even nothing) in income tax but have great income. Others in this group may have no tax writeoffs and they may a much higher rate than the middle class.
In any case, the top few percent of high income people pay is very disproportional amount of total taxes.
There’s also the alternative minimun tax, where in rare situations your tax bill can be GREATER can you income, or at least your net income. Some court settlements are taxed based upon the gross settlement, without being able to deduct attorneys fees. So there you may have to pay the attorney 80%, you clear 20% before taxes but its not enough to Uncle Sam.
Respectfully, that isn’t even remotely fair. Under that plan the poor will bear a much higher tax burden. Don’t be fooled into thinking that dollars paid equal the tax burden. See for example the taxation chapter of H. Peyton Young’s Equity. I’m sure you can get it through interlibrary loan.
My question is, how much does it level out? If all taxes are included how level does it become?
Just because there is a small proportion of high earners who find a way to get away with not paying any taxes does not mean that EVERYONE who makes a high income is doing this. You can’t just pick out the exceptions to the rule and use this as a reason that everything is unfair. No tax law is going to be perfect. The goal is for it to be as fair as possible across the board. There are always going to be people who find a way around the rules or a way to bend the rules no matter what the law says.
So why do these people keep trying so hard to get even richer? Why don’t they boycott richness, until the rest of us start treating the poor souls more fairly?
Peace,
mangeorge
BTW; define “burden”. I see sales tax as much more of a burden on a 20k/yr family than on a 200k/yr family of the same size. I imagine sales tax actually has no effect on the lifestyles of the really rich. Nor do any taxes, for that matter.
You are naive. You are probably thinking that tax evasion is done only by the super-wealthy, and that they personally are the ones who come up with them. C’mon. There are tax accountants and tax attorneys who specialize in this sort of thing. So, you’ve got 240,000 in income for the year, and you’re looking at losing $60K of it in taxes. But you pay a tax attorney $10 K and he shows you how to pay only $20K in taxes. You’re “up” $30K over what you would have paid in taxes, and your real effective tax rate is less than 10 percent.
I once read an article about why businessmen shouldn’t use the most basic tax dodge there is: taking money from the til before it gets on the books and is subject to taxation. It’s very easy to do and very easy to get away with because it’s very hard to detect. The article said that businessmen who do this are not likely to get full value if they sell their business because the only income they can site for the business is what’s on the books for the benefit of the IRS. But the author left it as an open question as to whether it’s smarter to draw tax-free money out of the business consistently or take a (relative) loss when selling the business.
Another obvious tack: at a time when I was getting 31 cents a mile travel allowance as permitted by the IRS at that time, my wife was getting 17 cents a mile. I strongly suspect that her employers were takng the full 31 cents a mile. (This is probably illegal, I don’t know, but also hard to detect, if someone in the family did the accounting, as was the case here).
I personally know of one tax dodge. My wife used to work for some publishers and was friends with the accountant. The accountant told her that the publishers all had salaries of less than $100K for tax reasons. They got income in other ways. Frex, all of them had a $900 a month company car allowance (an amount almost equal to the after-tax pay of the assistant editors they employed at $12K a year). The “car allowance” was just a way to boost income without incurring taxes.
I would suspect that the vast majority of wealthy individuals use techniques like these to avoid taxes. They are “perfectly legal” but of course employees whose entire income comes from their salaries have no such options available. If you know anything about the differing way taxes operate when you run a biz, you know that businessmen have MANY options at their disposal here.
It’s just incredibly naive to assume they aren’t in widespread use. Maybe you are that naive. I’m not.
I know of one (maybe 2) also.
A resort owner I worked for had his house,and those of his children (2 more married adults) their cars,and possibly (probably) their credit cards,all listed under the Resort corporation.
He would eat his meals in the resort,most times with other family members present,or they’d eat at different times with others,without being presented a check,and used whatever stock the resort had at their disposal,including maids,groundskeepers,etc. Daughter’s wedding?Guess where the reception was held.
In short the only actual money they had to fork out was for those times when cash fiilled the bill.The average middle class family is probably paying at least 50% of their gross (probably more) to keep food on the table and a roof over their heads.Add that into their tax bill next to those paper millionaires.
The second one I know is probably doing it with his restaurant,tho on a smaller scale.He doesn’t after all, have a winter home and boat in So.Fla.under a corporate banner.
I’d imagine whatever they paid themselves after the taxes,they could just piss away.Knowing them,tho they probably ratholed it.