Lately there has been a lot of discussion about the amount of tax being paid by various segments of our society. Either the wealthy are not paying their fair share or there are too many that pay no income tax. The IRS recently released statistics related to the 2009 tax year and this debate, and there was also information related to the period 1992 to 2008.
According to the IRS for tax year 2009, the top 1 percent of adjusted gross incomes accounted for paying 36.73 percent of the total income tax share. The top 5 percent accounted for 58.66 percent of the total income tax share. The top 10 percent accounted for 70.47 percent of the total income tax share. The top 25 percent accounted for 87.30 percent of the total income tax share. The top 50 percent accounted for 97.75 percent of the total income tax share.
Conversely, the bottom 50 percent accounted for 2.25 percent of the total income tax share.
As for tax percentage rates for the various filers, the IRS found that for tax year 2009 the top 1 percent of adjusted gross incomes paid an average tax rate of 24.01 percent. The top 5 percent paid an average tax rate of 20.46 percent. The top 10 percent paid an average tax rate of 18.05 percent. The top 25 percent paid an average tax rate of 14.68 percent. The top 50 percent paid an average tax rate of 12.50 percent.
Thus, Warren Buffet’s story about him having a lower tax rate than the 20 people in his office that had tax rates of 33 percent to 41 percent would be the exception rather than the norm, assuming his story was accurate in the first place.
According to the IRS, to be in the top 1 percent in 2009 you had to have an adjusted gross income of at least $343,927. The top 5 percent had adjusted gross incomes of at least $154,643. The top 10 percent had adjusted gross incomes of at least $112,124. The top 25 percent had adjusted gross incomes of at least $66,193. The top 50 percent had adjusted gross incomes of at least $33,396.
Additionally, the IRS tables at www.irs.gov/pub/irs-soi/08intop400.pdf show the top 400 individual income tax returns for 1992 to 2008. Over that time, 6,800 returns representing 3,672 taxpayers were analyzed. In Table 4 of this IRS bulletin, some interesting information was obtained in analyzing the data collected:
- 2,676 of the 3,672, or 72.88 percent, appeared on the list for only one year over the 17 year span.
- 439 of 3,672, or 11.96 percent, appeared on the list for two years.
- 37 out of 3,672, 1 percent, appeared on the list for 14 or more years, and only four out of 3,672, or 0.11 percent, appeared on the list for all 17 years.
The above information indicates that being in the top 400 of tax return filers is a transitory honor. For the most part, the top 400 is always changing. With the figures above, you can be the judge of whether or not a segment of our society is paying their fair share or not.
Recently, Sen. Harry Reid proposed a 5 percent surtax on adjusted gross incomes in excess of $1 million that would start in 2012. Realizing that idea was not good in an election year, he revised it to a surtax of 5.6 percent to begin in 2013 so that it started after the election year and still raised the same amount of revenue. The proposal did not pass, but it is likely to be back, at least as a talking point by our politicians.
The federal deficit for fiscal year 2011 was projected to be $1.5 trillion and $1.1 trillion for fiscal year 2012. With deficits of this magnitude, is centering the debate on tax rates the proper place to start the discussion? Is there really a revenue problem or a spending problem? Some of both? A lot of one, a little of the other?
In doing research for this article, I wanted to find some information on historical deficits and the national debt. I came across an article by Stephen Bloch at home.adelphi.edu/sbloch/deficits.html, which showed that the last time the federal debt came down was in the fiscal year July 1956 to June 1957. The current national debt is approximately $14,790,340 (in millions). The last four fiscal year deficits total $5,777,686 (in millions). The last four fiscal year deficits account for 39% of the total current national debt. How can a society survive that continually spends more than it takes in?
So what’s the answer? Should taxes be raised on everyone? Should taxes be raised on only certain segments of our society? Should expenses be cut? Some tax increases and expense cuts? I sure do not want to see any tax increases until the deficit is erased and those increased revenues are used to pay down the national debt. Otherwise, what is the point of increased taxes if we are still running a deficit?
Here’s my suggestion: 1) pass a balanced budget amendment to the Constitution; 2) pass an amendment to the Constitution allowing the president of the United States to line item veto expenditure items in bills presented to him for signature; 3) enact a small surtax that can only go to paying down the national debt; and 4) find a way to tap into the underground economy that pays little or no tax as a result of dealing in cash. It’s time for politicians to stop worrying about being re-elected and start solving the problems they created.