1% of Taxpayers Pay Nearly 40% of All Income Taxes
Income tax rates are always a source of lots of disputes between the political parties, but also among economists, business people and almost everyone else. Unfortunately, a great deal of the dialogue is based on incomplete or even inaccurate information. This report sheds some light on the topic with a pretty interesting factual presentation of income groups and tax contribution. The report, written by Gerald Prante, was just released by the Tax Foundation, a nonprofit organization that has been tracking tax information since 1937
The latest release of Internal Revenue Service data on individual income taxes comes from calendar year 2005, a year in which the economy remained healthy and continued to grow, as well as a year with higher-than-average price inflation. This year’s numbers show that both the income share earned by the top 1 percent and the tax share paid by the top 1 percent have reached all-time highs. In 2005, the top 1 percent of tax returns paid 39.4 percent of all federal individual income taxes and earned 21.2 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of AGI and paid 36.9 percent of federal individual income taxes…
…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. For example, from 2000 to 2002, the adjusted gross income (AGI) of the top 1 percent of tax returns fell by over 26 percent. In that same period, the AGI of the bottom 50 percent of tax returns actually increased by 4.3 percent. However, since 2002, as the recession has ended, AGI has risen by 61 percent for the top 1 percent and 10.7 percent for the bottom 50 percent.
From the report we learn that the highest earners have incomes that are substantially more volatile than lower income earners. In fact, during the stock market downturn of 2000-2002, the top earners saw a drop of 26%, while those in the bottom 50% actually saw their incomes go up by over 4%. And, despite all the rhetoric about income inequality growing steadily, it appears from the data that over the period from 2000-2005, the gains were very close.
In sum, between 2000 and 2005, pre-tax income for the top 1 percent group grew by 19.1 percent. On the other hand, in that same time period, pre-tax income for the bottom 50 percent increased by 15.5 percent. This pattern of income loss and growth at the top of the income spectrum is the same during every recession and recovery. The net result has also been a sharp rise in federal government tax revenue from 2003-2005 compared to previous years.
The IRS data below [see full report for IRS tables] include all of the 132.6 million tax returns filed in 2005 that had a positive AGI, not just the returns from people who earn enough to owe taxes. From other IRS data, we can see that 90.6 million of the tax returns came from people who paid taxes into the Treasury. That leaves 42 million tax returns filed by people with positive AGI who used exemptions, deductions and tax credits to completely wipe out their federal income tax liability. Not only did they get back every dollar that the federal government withheld from their paychecks during 2005; but some even received more back from the IRS. This is a result of refundable tax credits like the Earned Income Tax Credit, which are not included in the aggregate percentile data here.
Including all tax returns that had a positive AGI, those taxpayers with an AGI of $145,283 or more in 2005 constituted the nation’s top 5 percent of earners. To break into the top 1 percent, a tax return had to have an AGI of $364,657 or more. These numbers are up significantly from 2003 when the equivalent thresholds were $130,080 and $295,495. Top incomes in 2005 are also continuing to surpass the peak they reached in 2000. At the height of the boom and bubble, $313,469 was the threshold to break into the top 1 percent, and then it fell to $285,424 in 2002 only to finally recover fully last year. The top-earning 25 percent of taxpayers (AGI over $62,068) earned 67.5 percent of the 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.
I really think we have a problem in our democracy if millions of citizens pay little or nothing in income taxes. I agree with the basic outline of our tax structure in that those who make more in income pay a higher rate of taxes. In this case, the top 1% of earners paid 39.4% of income taxes. However, I do believe that everyone who earns some income should contribute something. I also think we are at risk of a serious moral hazard in that those who pay little or nothing in income taxes would be more susceptible to appeals to ’soak’ the rich.
Average tax rates increased once again as the economy continues to grow, even though there were no significant pieces of tax legislation enacted in 2005. Overall, the average tax rate for returns with a positive liability went from 11.9 percent to 12.1 percent from 2003 to 2004 and then up to 12.5 percent for 2005. (Note this does not include any refundable credits.) The 2003 tax cut was the second in three years, but the tax code still remains highly progressive. The average tax rate in 2005 ranges from 2.98 percent of income for the bottom half of the earning spectrum to 23.13 percent for the top 1 percent…’
This is very interesting data because it takes a look at income as well as tax contribution. I am certain that people of different political persuasions could look at this data and draw vastly different conclusions. That’s fine with me. I just think it is useful to start with hard information, so that at least we can agree on the starting point.
The latest release of Internal Revenue Service data on individual income taxes comes from calendar year 2005, a year in which the economy remained healthy and continued to grow, as well as a year with higher-than-average price inflation. This year’s numbers show that both the income share earned by the top 1 percent and the tax share paid by the top 1 percent have reached all-time highs. In 2005, the top 1 percent of tax returns paid 39.4 percent of all federal individual income taxes and earned 21.2 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of AGI and paid 36.9 percent of federal individual income taxes…
…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. For example, from 2000 to 2002, the adjusted gross income (AGI) of the top 1 percent of tax returns fell by over 26 percent. In that same period, the AGI of the bottom 50 percent of tax returns actually increased by 4.3 percent. However, since 2002, as the recession has ended, AGI has risen by 61 percent for the top 1 percent and 10.7 percent for the bottom 50 percent.
From the report we learn that the highest earners have incomes that are substantially more volatile than lower income earners. In fact, during the stock market downturn of 2000-2002, the top earners saw a drop of 26%, while those in the bottom 50% actually saw their incomes go up by over 4%. And, despite all the rhetoric about income inequality growing steadily, it appears from the data that over the period from 2000-2005, the gains were very close.
In sum, between 2000 and 2005, pre-tax income for the top 1 percent group grew by 19.1 percent. On the other hand, in that same time period, pre-tax income for the bottom 50 percent increased by 15.5 percent. This pattern of income loss and growth at the top of the income spectrum is the same during every recession and recovery. The net result has also been a sharp rise in federal government tax revenue from 2003-2005 compared to previous years.
The IRS data below [see full report for IRS tables] include all of the 132.6 million tax returns filed in 2005 that had a positive AGI, not just the returns from people who earn enough to owe taxes. From other IRS data, we can see that 90.6 million of the tax returns came from people who paid taxes into the Treasury. That leaves 42 million tax returns filed by people with positive AGI who used exemptions, deductions and tax credits to completely wipe out their federal income tax liability. Not only did they get back every dollar that the federal government withheld from their paychecks during 2005; but some even received more back from the IRS. This is a result of refundable tax credits like the Earned Income Tax Credit, which are not included in the aggregate percentile data here.
Including all tax returns that had a positive AGI, those taxpayers with an AGI of $145,283 or more in 2005 constituted the nation’s top 5 percent of earners. To break into the top 1 percent, a tax return had to have an AGI of $364,657 or more. These numbers are up significantly from 2003 when the equivalent thresholds were $130,080 and $295,495. Top incomes in 2005 are also continuing to surpass the peak they reached in 2000. At the height of the boom and bubble, $313,469 was the threshold to break into the top 1 percent, and then it fell to $285,424 in 2002 only to finally recover fully last year. The top-earning 25 percent of taxpayers (AGI over $62,068) earned 67.5 percent of the 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.
I really think we have a problem in our democracy if millions of citizens pay little or nothing in income taxes. I agree with the basic outline of our tax structure in that those who make more in income pay a higher rate of taxes. In this case, the top 1% of earners paid 39.4% of income taxes. However, I do believe that everyone who earns some income should contribute something. I also think we are at risk of a serious moral hazard in that those who pay little or nothing in income taxes would be more susceptible to appeals to ’soak’ the rich.
Average tax rates increased once again as the economy continues to grow, even though there were no significant pieces of tax legislation enacted in 2005. Overall, the average tax rate for returns with a positive liability went from 11.9 percent to 12.1 percent from 2003 to 2004 and then up to 12.5 percent for 2005. (Note this does not include any refundable credits.) The 2003 tax cut was the second in three years, but the tax code still remains highly progressive. The average tax rate in 2005 ranges from 2.98 percent of income for the bottom half of the earning spectrum to 23.13 percent for the top 1 percent…’
This is very interesting data because it takes a look at income as well as tax contribution. I am certain that people of different political persuasions could look at this data and draw vastly different conclusions. That’s fine with me. I just think it is useful to start with hard information, so that at least we can agree on the starting point.
entrada de Gekko a las
4:51 a. m.
0 comentarios:
Publicar un comentario
Suscribirse a Enviar comentarios [Atom]
<< Inicio