As millions of procrastinators scramble to meet Monday’s tax-filing deadline, ponder this: The super-rich pay a lot less in taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
The top income tax rate is 35 percent, so how can people who make so much pay so much less than that in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college and even for paying other taxes.
The top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank. . . .
The sheer number of credits, deductions and exemptions has Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate to 25 percent from 35 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Obama said last week that he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama’s proposal would result in $1 trillion in tax increases over the next 12 years.
The proposals from the GOP and Obama included few details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the independent national taxpayer advocate within the IRS.
More than half of the nation’s tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.
Obama wants this to change so “the amount of taxes you pay isn’t determined by what kind of accountant you can afford.” . . .
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.
via For richest, federal taxes have gone down; for some in U.S., they’re nonexistent – The Washington Post.
So it turns out that the rich already pay taxes at a rate nearly twice that of the average, that the top 10% in income already pay half of the nation’s taxes, that the top 5% already pay 44% of those taxes, and the 45% of Americans who pay nothing at all are not the wealthy but poor and middle income people!
Isn’t it a bad thing for so much of the government’s income to come from only 5% of its citizens? And that nearly half of Americans cannot claim the stakeholder status of “taxpayer”? Not that I begrudge anyone’s good fortune in getting tax breaks, but if taxes should be raised (not that I think they should be), shouldn’t those who don’t pay any get targeted before people who are already paying half of the government’s income?
As a matter of principle, shouldn’t everyone chip in something, if only a couple of bucks? When the topic is tax fairness, isn’t it unfair for a few to pay so much, while so many pay nothing?
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