Who Pays Taxes and How Much?

Tax Foundation Data shows who pays taxes and who doesn't.

The Tax Foundation (which does have a conservative bent) released its analysis of federal income taxes for 2009 a few weeks ago.  It is based on individual tax returns that have been filed which have a positive AGI (Adjusted Gross Income); that is, a positive gross income after adding wages, capital gains, dividends, rent, royalty, and income from businesses, but also subtracting small business losses and investment losses.

Federal income taxes collected from individuals have declined about 22% since 2007.

The total percentage of individual taxes paid as a percentage of Adjusted Gross Income (AGI) continued to decline, which is one of the reasons for our increasing budget deficit:  The effective tax rate for individual tax returns is  lower than it has been in decades.  In 2009, the average tax paid was 11.1% of AGI (Table 8, bottom left), in 2008, it was 12.24% of AGI.  In 1980 this number was 15.3%; in the Reagan years, 13 to 14%; in the Clinton years, 13 to 14%, with a peak of 15.26% in 2000.  This number was mostly in the 12% range in the Bush II years.  (again, Table 8, left column).  

The Adjusted Gross Incomes of Americans as a whole went down in 2009, the worst year of the recession, so the Federal government was collecting a lower percent of income from a smaller tax base.  2007 was the recent peak:  We collected 12.68% from a collective Adjusted Gross Income of $8,799,000,000 (That's almost 9 trillion dollars in Adjust Gross Income.)  That comes out to about $1.1 trillion in revenues from individual tax returns.   In 2009, we collected 11.06% from $7,825,000,000 (almost 8 trillion in Adjusted Gross Income.)  That comes out to about  $865 billion in revenues in 2009.  This is a decrease of about 251 billion (about 22%) from the revenue collected 2007.  

How much do the wealthiest among us really pay in income taxes?

Let's look at the various income groups in this report:  First of all, the top income earners among us will complain that they pay much more than their "fair share" in taxes:  The top 1% (family incomes over $343,000 in 2009) earn about 17% of the total income in Adjusted Gross Income in this country, while they pay about 37% of the federal income taxes in total.  Meanwhile, the bottom 50% earn 13.5% and pay only 2.25% of the federal income taxes in total.  It's a good talking point and it sounds as if those top earners are getting socked compared to those bottom-feeding 50%.     

If you take it up to the top 5% it sounds even worse:  The top 5% of filers (family incomes over $155,000 in 2009) earn 32% of the money, while they pay 59% of the taxes!  The bottom 95% of filers pay only 41% of the taxes!  I guess the whole bottom 95% are bottom feeders of some sort.

How much do families really have to live on?

But let's look at what those numbers really mean:  The top 1% of families, with incomes over $343,000, pay an average of 24% in federal income taxes.  That means a family right on the cutoff with an income of $350,000 pays about $84,000 in federal income taxes, leaving them $266,000 in after-federal tax income (not counting FICA, state and local taxes) on which to live.  

A family at the 50% mark, with an income of $33,000, pays somewhere about 6%, or about $2,000 in federal income taxes.  They are left with $31,000 with which to pay FICA, state and local taxes, shelter, food, transportation, utilities.  (A family with two earners working full-time making minimum wage would make just about $33,000.)  

Would you rather live on $31K a year after federal taxes or $266K a year after federal taxes?

Let's be honest, rich guys:  Would you really rather be that $33,000 family paying less than $2000 in federal taxes and trying to pay everything else with $31,000?  Or that top 1% who has a mere $266,000 with which to pay everything else?      

The wealthy do pay federal income taxes at a higher rate than "average earners".

Another important point:  The top income earners do pay federal income taxes, and they do pay a higher rate on average than most "average working" people.  Many people concerned with income inequality believe that the wealthiest among us pay no federal income taxes, which is generally not true.  But, even with an effective tax rate of 24% for the wealthiest compared to 2% for the poorest, the top wage earners have so, so much more income than most of the rest of us.   

Here's the link to the Tax Foundation data, which is based on IRS data.  Read through the report yourself.  Notice the tone of the report, and notice some of the things that aren't said:  1.  The bottom 50% of tax filers are trying to live on $32,000 a year or less.  2.  A family income of $66,000 puts you in the top 25% of families in the US in 2009!  3. Though the concern of the Tax Foundation is taxes and the idea that the wealthiest among us are paying more than their fair share, the most obvious thing about the data that is presented isn't tax inequity-- It's income inequality.  

A Historical Look at Income Inequality


Since 1980:

• The Adjusted Gross Income of all tax returns increased 225%.  
• For the top 1%, the AGI increased 549%.  
• For the top 50%, 241%. 
• For the bottom 50%, the AGI increased 147%. 

But 2009 was a bad year for the wealthiest among us.  According to the Tax Foundation:  "In 2009, the top 1 percent of tax returns paid 36.7 percent of all federal individual income taxes and earned 16.9 percent of adjusted gross income (AGI), compared to 2008 when those figures were 38.0 percent and 20.0 percent, respectively."  Let's see what a bad year looks like for the wealthy in the US:

In 2009, that "bad" year for the wealthy:

• The AGI on the average tax return was about $56,710.  
• The average AGI for those in the top one-tenth of one percent was $4,420,290.  
• The average AGI for those in the top 1% was $960,869.  
• The average AGI for those in the top 50% was $98,128.  
• The average AGI for those in the bottom 50% was $15,291.  

Look at that last number again:  The top 50% of individual income tax returns, with thanks to the top 1%, averaged $98,128.  The bottom 50% of individual tax returns averaged $15,291.  And there are plenty of people out there who don't need to file because they don't have enough income. 

Other tax commentary here: 45% of Filers Pay No Taxes!

Tomorrow I will compare the average tax rates with the average AGI's at various income levels, and we will see if the wealthiest among us are indeed treated unfairly by our tax code.  (Yes, a bit of sarcasm there.) 

Thanks again to the conservative Tax Foundation for putting all of these numbers together and providing a spreadsheet to download.     

           

Notes:  This report is based on individual income tax forms.  It doesn't include people who don't need to file, who are among the oldest and the poorest in our country.  I believe, however, that it does include young people, still dependents on their parents' taxes who work part-time or summer jobs and need to file individual tax returns to get a refund of income taxes paid by their employers.  It also reflects family income in terms of people who are legally allowed to file together (husband and wife, for instance, and a single parent with children).  It doesn't include households who are not legally allowed to file together (unmarried couples living together who share household expenses). The "Adjusted Gross Income" excludes capital losses, carry overs, and other such techniques which allow usually wealthier people to offset or write off some income.  The Adjusted Gross Income does not include many government benefits which allow poorer people to survive.

Therefore, this is not a perfect collection of data, but nonetheless, very useful, particularly for comparative purposes.

Crushing the Human Spirit Indeed!

Crushing the human spirit indeed.


A comment by a conservative at the Huffington Post a few weeks ago:

The thing the Dems need to work on is completely crushing the human spirit. Once they can make sure nobody thinks they have a chance to succeed, the more they will realize that they need to join the collective and surrender their individual­ity and creativity­.

Crushing the human spirit?  Does this poster even know what that means? 


What kind of things really crush the human spirit?  

Conservatives Put a Spin on Food Stamps

The fact that more and more people need food stamps is gong to "Ruin Your Day".


The title is "Here's a Food Stamp Graph That Will Ruin Your Day".

It shows that the percentage of people who are receiving food stamps has gone up precipitously over the past three years.  


Now, the scary title was found on a right-wing blog, and what will "ruin your day" is the number of people who are now dependent on the government.   


Before I read the article and the comments, I had two thoughts:  First, it's really unfortunate that so many people need to rely on food stamps, and, secondly, thank heavens that the program is in place to help so many.


Then I looked at the graph, and noticed that it was formatted for maximum impact.  The left axis isn't scaled from 0 people needing food stamps; it starts at 26 million.  Instead of the left axis running from 0 to 45 million, it runs from 26 to 45 million.  It makes the increase in food stamps recipients seem much more onerous.     


I had just found the food stamp article and graph after reading this at Huffington Post:  Budget Cuts Kill  the Middle Class 


The Increasing Inequality of Income in our Country


The article at the Huffington Post included this dramatic graph which shows the percentage of total income that is going to the top ten percent over the last 100 years:

You don't need to be particularly skilled in graph reading to notice that the middle class was strongest when the top ten percent received only about 35% of national total income.  This last chart only goes up to about 2007, so it doesn't show the impact of the recession.  


So, keeping in mind that the top earners have received a greater and greater percentage of national income over the past three decades and that the number of people who receive food stamps has gone up dramatically over the past three years, let's look at the spin put on the food stamp graph by conservatives. 


First of all, the USDA has made it easier for people to get food stamps.  Thirty-eight states loosened eligibility requirements.  You no longer have to be down to your last dollar to qualify for food stamps.  This should be a good thing, as you can supplement your low income with food stamps without spending down all of your assets.  This also explains some of the increase.   


People Receiving Food Stamps Like "Being Dependent"?


Now, conservatives see the increased need for food stamps as a bad thing because it shows "government dependency".  They don't interpret it as a graphic representation of the nation's suffering; they complain about people becoming dependent on the government. 


Let's look at some comments:

"Fox Piven must look at graphs like this one and jump for joy. Just look at how many Americans are now dependent on the government for"

"Democrats see this as a plus, more and more people on the dole means more votes and MORE POWER." 

Other than I have no idea who or what Fox Piven is, why would anyone jump for joy that more and more people have a low enough income to qualify for food stamps?  Do the right-wingers really think that people enjoy being "dependent on government"?  Democrats are happy that people are struggling?  Only in bizarro-conservative right-wing world. I tend to think that most people would rather have a decent-paying job.

  We need to place limits on these programs. We can’t support participants forever. Break the cycle.

What cycle?  People are getting food stamps who have never gotten food stamps before.  Obviously, then, this is not about a cycle.  Of course, the writer of this remark thinks that if we let people starve, they will suddenly find work in a nation with 28,000,000 unemployed or underemployed. Or maybe the poor will demand that the "government wage" (right wing rhetoric for minimum wage laws) be reduced so that they can all work for $1/hour.  

 The 14% graph is his base for 2012 and the house should introduce a bill to exempt people on government assistance from voting. Call it the Conflict of Interest Act. It will get some headlines and put the issue front and center where we can make the case of Obama spending policy and jobless economy

Great. Let's go back to the days of poll taxes and such and only let people with means vote. Really sick thinking going on here. Also really dangerous thinking; that only people with decent jobs should be able to vote. 

By this "Conflict of Interest" act, then nobody in Congress should vote either, right?

Then a poster called the Democrats the "Party of food stamps" and talked about Republican policies that create jobs.  O.K., what policies, Republicans?

Finally: 

Its all Bush’s fault

This was posted sarcastically, but it is probably truer than blaming this on Obama.  The decimation of the middle class has been going on for decades now; the recession just made it more obvious to a greater number of people.
  

47% of the People Pay No Taxes!

An Update for Tax Day:


Check out my update to this article:  45% of Households Pay No Taxes.

Updated 9/18/2012:  Republican Presidential Candidate Mitt Romney speaks with derision and disdain about the "47%" who supposedly pay no taxes.  Commentary HERE.

____________________________________________________________

This is one of the constant rallying cries of those of the right-wing.

Many appear to be incensed that they pay taxes and so many of their fellow Americans do not.

I've often ansewred these kinds of whines with a comment on the order of: "Be glad that you have the income to pay taxes." Or:  "I would gladly pay the taxes that you whine about if only I could also have your income."

Now, I'm not a fool. I have close friends who make a lot of money...not millions, but low to mid 6 figure money. They pay a lot of taxes. But they live a very, very good life. They have big homes, vacation homes, a boat, new cars, weekend trips frequently; you get the picture. They are not hurting, taxes or not.

But I just read the best answer to the "Working class and poor people don't pay any taxes" complaint.  Here's the specific comment:

"HELLO!

THE POOR PAY NO FEDERAL TAX

47% of Ameican househods pay NO federal tax

PLEASE!"

To which my friend at Huffington Post, "APMOTRBC", replied:

And that should horrify you . . . that 47% of your fellow Americans are being paid so poorly by the businesses for which they work they don't make enough to sustain themselves as well as contribute financiall­y to the common good.

I'm going to say this slowly because it seems that conservati­ves can't grasp the concept. THE REASON THAT 47% OF ALL AMERICANS DON'T PAY FEDERAL INCOME TAXES is that they don't make enough income to PAY IT.

They don't have the money. The reason the rich pay the income tax is because they have the WEALTH.

You do know that the bottom 50% of the country holds only 7% of the assets/wea­lth, while the top 10% controls 83%......

You don't just want your share . . you believe you are entitled to everyone else's share too.”

Thanks, APMO!