Income Taxes

Vince Farrell on taxes:

If you are lucky or hard-working enough to have earned $364,657 in 2006, the last year for which data is fully available, you are in the top 1% of earners. That group earned 22% of all income and paid 40.4% of all taxes levied on individuals. The top 1% paid almost as much as the lower 95%! The percent of taxes paid by the top 1% has increased from 19% of all tax to the current 40% over the last 25 years.

$145,283 in earnings landed you in the top 5% of earners, and the top 5% paid 60% of all taxes. $103,912 was needed to qualify for the top 10%, and that group paid 70% of all taxes. The top 25% of incomes (over $62,066) paid 86% of taxes. It’s estimated that, in 2009, well over 40% of American earners will pay no Federal tax.

The campaign promise was that 95% of Americans would get a tax break of some kind. The 5% that won’t get a tax reduction now pay 60% of all tax. The campaign slogan was it’s “all about fairness.” I don’t quibble with that concept nor do I think we should have anything but a graduated tax system. I need to be told the definition of “fair.” Is it fair for the top 1% to earn 22% of income and pay more than 40% of taxes? Is it fair for the top 5% to pay 60% of taxes but not share in a tax reduction program? Maybe it is fair, but what I believe is needed is not what was a very effective campaign argument but a thoughtful discussion and explanation of what our tax program should be.

HT: Barry Ritholtz

3 responses to “Income Taxes

  1. The percent of taxes paid by the top 1% has increased from 19% of all tax to the current 40% over the last 25 years.

    The percent of income earned by the top 1% has increased from 9.3% to 18.1% over the last 25 year.

    The effective tax income tax rate of the top 1% is 19.4% and has ranged from a high of 24.2% in 1996 and 2000 to a low of 18.3% in 1986.

    The share of income earned by the top 5% has increased from 20.7% to 31.1% over the last 25 years.

    The effective income tax rate of the top 5% is 17.6% and has ranged from a high of 21.6% in 2000 to a low of 16.6% in 1986.

    The Obamanomics income tax target is the top 1% and insofar as increases are in store, fairness would dictate a tax rate nearer the higher end of the 25 year range.

    Data sourced from the CBO: http://www.cbo.gov/ftpdocs/88xx/doc8885/Appendix_wtoc.pdf

  2. And yet income and wealth disparity continue to grow….

    Hmm.. BTW, that Top 1% owns 40% of the wealth. Paying 40% of the taxes….seems….fair.

    When you get to the bottom 20% of workers, roughly 1 in 5 working people in the country, they have NO WEALTH.

    Again, a billionaire can invest a million dollars and make more money and pay less taxes in a year ( by essentially having a “job” of “owning capital” ) than someone working hard labor 40 hours a week.

    When you break your back your whole life, you should gain ground, not lose it.

  3. I have a different take on income taxes. Foreign manufacturers actually price their products to come in at a certain amount lower, actually at an average income tax rate lower in percentages than american made products. Income taxes drive the American consumer to buy foreign because they can’t afford American Made anymore. I describe income taxes as the “serial killer of the blood spattered American Dream.”

    Perhaps you’d like to stop in and read the essay at my blog.

    Sincerely,

    William Thien
    http://williamthien.wordpress.com/2010/11/05/how-u-s-income-and-sales-taxes-destroy-american-industr/

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