2007 October 07 Sunday
Top 1% Pays More Federal Income Taxes Than Bottom 90%

The Tax Foundation reports that the percentage of US federal income taxes the top `% pay is more than the amount paid by the bottom 90%.

Washington, DC, October 4, 2007 - New data released by the IRS today offers interesting insights into the distributional spread of the federal income tax burden, new analysis by the Tax Foundation shows.

Summary of Federal Individual Income Tax Data, 2005 (updated October 2007)

 

Number of Returns (thousands)

AGI

($ millions)

Income Taxes Paid

($ millions)

Group's Share of Total AGI

Group's Share of Income Taxes

Income Split Point

All Taxpayers

132,611,637

$7,507,958

$934,703

100.00%

100.00%

-

Top 1%

1,326,116

$1,591,711

$368,132

21.20%

39.38%

above $364,657

Top 5%

6,630,582

$2,683,934

$557,759

35.75%

59.67%

above $145,283

Top 10%

13,261,164

$3,487,010

$657,085

46.44%

70.30%

above $103,912

Top 25%

33,152,909

$5,069,455

$803,772

67.52%

85.99%

above $62,068

Top 50%

66,305,819

$6,544,824

$906,028

87.17%

96.93%

 above $30,881

Bottom 50%

66,305,818

963,134

28,675

12.83%

3.07%

below $30,881

Source: IRS

If you want to break into the top 1% club then you'll have to aim for $365k per year. But remember, unless a recession happens by the time you get up to that level the threshold for top 1% membership will have risen.

Growing inequality is a boon for federal tax collections because the higher income people are taxed at higher percentage rates. The same dollar earned by a high income person nets the IRS much more in taxes collected than if a lower income person in a low tax bracket earns that dollar. The top 1% alone paid almost 40% of total federal income taxes. This is why such a big chunk of the electorate isn't strongly opposed to more federal spending. They know they won't be the ones paying for it.

The table above shows that the top-earning 25 percent of taxpayers (AGI over $62,068) earned 67.5 percent of nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86 percent). The top 1 percent of taxpayers (AGI over $364,657) earned approximately 21.2 percent of the nation's income (as defined by AGI), yet paid 39.4 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.

The IRS data also shows increases in individual incomes across all income groups. Just as the highest earners lost the biggest percentage of their incomes during the recession of 2001, so they have prospered the most as the economy has continued to rebound. In sum, between 2000 and 2005, pre-tax income for the top 1 percent group grew by 19.1 percent. In the same time period, pre-tax income for the bottom 50 percent increased by 15.5 percent.

Will we reach a point where the top 1% are paying half of all income taxes?

You can see the full report here.

Share |      By Randall Parker at 2007 October 07 01:44 PM  Economics Inequality


Comments
averros said at October 7, 2007 7:12 PM:

It is not incomes which are getting bigger, it is dollars which are devaluing.

Did anyone plot evolution of tax bracket boundary amounts vs inflation?

Wolf-Dog said at October 8, 2007 12:45 PM:

"Did anyone plot evolution of tax bracket boundary amounts vs inflation?"
-----------------------------------------------------------------
Excellent question.
Here is a table and chart of historic high tax brackets since 1913:

http://www.truthandpolitics.org/top-rates.php

Especially during the 1970s when both inflation AND tax rates for the rich were high, this actually caused the net worth of the upper class to decline.

But with the Reagan revolution, since 1983, the net worth of the upper class dramatically increased to current levels. At the end of 1999, the top 10 % in the US owned nearly 90 % of the wealth. And although the bear market of 2000-2002 did cause some of this upper class wealth to disappear, by 2007 not only did the financial markets recuperated, but in addition, the US government re-ignited heavy deficit spending to stop the latter bear market, so that between 2002 and 2007, for nearly 5 years, there was an average of nearly $400 billion of government deficit spending (although recently this deficit spending is being reduced very drastically). Here is the historical chart of the annual US government deficit spending:

http://www.bullandbearwise.com/GovDefChart.asp

As you can see in the above chart, since 1983, the average U.S. annual government deficit spending has been quite high. But the main point is that that huge deficit spending, which is like printed money, always ends up going to the upper class. All the government deficit spending, happens to be the NET profit of some corporation, which happens to be owned by the upper class. Thus government deficit spending, adds to the net worth of the upper class exactly by that amount, since the after tax loss of the government, is supposed to be the after tax gain of some upper class citizens.

But my last sentence above is rather tricky: I said that some citizens are profiting from the US government deficit spending, but I did not say that these people are American citizens or foreign citizens. They just happen to be the citizens of some country, not necessarily American citizens. This is because the foreign trade deficit of the United States, became so much larger, that during the last 10 years, even the huge US government deficit spending is insufficient to compensate for it. In other words, the self-sacrificing noble attempts of the US government to enrich the American people by going into deficit spending, is no longer working as wonderfully as it used to, since that money is going to foreign citizens who profit from our trade deficit.

James Bowery said at October 8, 2007 1:29 PM:

A more important figure than the percent of taxes paid by the upper 1% is the percent of households not belonging to a sexist culture (Hispanic, Hindu, Muslim, Mormon, etc.) that are:

1) Below replacement rate reproduction

AND

2) Below the level of income required by the wife to consent to have another child

Kurt9 said at October 8, 2007 2:19 PM:

If this is true, then what is all of this BS about "haves" and "have-nots"? It looks like the tax system is already progressive enough.

James Bowery said at October 8, 2007 2:28 PM:

Yeah, populations that are being economically exterminated should just shut their collective pie holes, huh?

Wolf-Dog said at October 8, 2007 4:38 PM:

Kurt9:"If this is true, then what is all of this about "haves" and "have-nots"? It looks like the tax system is already progressive enough."
--------------------------------------------------------------

The issue about the progressiveness of the tax system, is the conservation laws in physics. In the capitalist economy, the main income of the upper class ("Haves") comes from the consumption (i.e. purchases of goods and services) done by the lower class (in this context defined to be the below average income group, which happens to be the majority). The reason the upper class has a positive net gain every year, is because the lower class is unable to economize, and is forced to spend ALL the annual subsidies given to them by the US Government. (These "subsidies" given to the lower class, are nearly 50 % of the government deficit spending, the other 50 % is directly given to the upper class for purchasing goods and services for the government.) But it is because the lower class is unable to economize the government's annual gift to them that the upper class makes a profit year after year. If the lower class were able to economize that money, the NET financial income of the upper class, would be zero. The system which sets the prices, makes it impossible for the lower class to economize, because they cannot compete with the upper class. That the lower class cannot compete with the upper class, is documented and quantified in the Bell Curve book.

Wolf-Dog said at October 8, 2007 4:42 PM:

Sorry I made a mistake, if the lower class can economize the government subsidy given to them, the income of the upper class will not be exactly equal to zero, since as I mentioned, nearly 50 % of the government deficit is given to the upper class, not all of the gov't deficit spending is given to the lower class. What I should have said is that in the even that the lower class can economize, then the income of the upper class would be cut in half. But in any case, the lower class can at best break even.

gcochran said at October 9, 2007 6:13 AM:

If you sum all taxes, income tax plus FICA plus state and local, the percentage of income paid is close to flat.

Kurt9 said at October 9, 2007 8:40 AM:

According to the following website:

http://www.usgovernmentspending.com/index.php

nearly 50% of the federal pie goes to old-age entitlements. Another 20% or so financies our interventionist foreign policy.

This suggests that effective SENS (www.sens.org) therapies, combined with a comprehensive re-evaluation of our foreign policy are the two most useful policies that should be promoted by advocates of limited government.

Bled White said at October 9, 2007 8:41 AM:

How much money goes to the fucking schools and useless minorities?

Half Sigma said at October 10, 2007 3:35 PM:

Considering how little the bottom 50% contribute, why bother with the pretense of taxing them at all?

Sonny said at October 11, 2007 12:05 AM:

Most taxpayers move from the lower 50% to the upper 50% at some point in their lives. If taxpayers didn't get started filing W2s and tax returns with their first low-wage jobs, but had to sign up only when they start to make above average income, there would be a lot more tax resistance. A lot of the resistance would be passive or accidental to start.

Anyway the Federal income tax was meant to tax mainly the top 1% in the first place, who were beneficiaries of United States corporations, in a marketplace built by canals, railroads, and U.S. territorial growth. The extension of income taxes to middle class individuals, including Social Security taxes and state taxes, was a product of the socialist revolution under FDR, which also brought such brilliant innovations as price controls, destruction of surpluses, forbidding farmers to grow crops, and so on, adding up to the extension of the Great Depression beyond a temporary market crash. The burden of record keeping, as if every middle class household is a business that needs a tax accountant, applies only to "income taxes" while FICA actually takes a lot more out of average wages and isn't subject to tax returns.

The sensible way to collect justifiable taxes would be to have all United States corporations pay their employees and investors through a bank that automatically deducts Federal taxes, at a progressive rate and according to previous individual income processed through the system, with one personal deduction and no exceptions.

Anonymous said at April 10, 2011 1:23 AM:

The simple solution is to tax every equally... but not on INCOME - because the INCOME tax is full of loopholes for those who
already HAVE most of the assets. Why on earth would anyone want to tax people for working?
The TAX should be equal to be fair too...

So... TAX 1% of EVERYONE's ASSETS, no loopholes at all- ZERO loopholes.
Just a flat 1% tax on everyone's assets.

People without any assets will pay nothing - obviously.
If people work and make 50,000 per year and then spend it all to survive...
obviously someone else got that money! who? well you will find out when you tax the assets and not the income.

Taxing assets is the ONLY tax that makes sense. It's the only thing that is fair.
Because money does not, and never has trickled down! It flows UP to the the rich.

So someone with 100,000 to 1,000,000 in total assets would pay $1,000 to $10,000 - those being the middle class.

Of course if this were law, we know who would hide their assets... they always do.

But this right there would solve the problem.

horace said at July 24, 2011 3:43 PM:

http://www.youtube.com/watch?v=H6b70TUbdfs


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