Finance / Politics

The Facts About Who Pays the Most in Taxes in America

taxes-moneyPoliticians exploit public ignorance. Few areas of public ignorance provide as many opportunities for political demagoguery as taxation.

Today some politicians argue that the rich must pay their fair share and label the proposed changes in tax law as tax cuts for the rich.

Let’s look at who pays what, with an eye toward attempting to answer this question: Are the rich paying their fair share?

According to the latest IRS data, the payment of income taxes is as follows.

The top 1 percent of income earners, those having an adjusted annual gross income of $480,930 or higher, pay about 39 percent of federal income taxes. That means about 892,000 Americans are stuck with paying 39 percent of all federal taxes.

The top 10 percent of income earners, those having an adjusted gross income over $138,031, pay about 70.6 percent of federal income taxes.

About 1.7 million Americans, less than 1 percent of our population, pay 70.6 percent of federal income taxes. Is that fair, or do you think they should pay more?

By the way, earning $500,000 a year doesn’t make one rich. It’s not even yacht money.

But the fairness question goes further. The bottom 50 percent of income earners, those having an adjusted gross income of $39,275 or less, pay 2.83 percent of federal income taxes.

Thirty-seven million tax filers have no tax obligation at all. The Tax Policy Center estimates that 45.5 percent of households will not pay federal income tax this year.

There’s a severe political problem of so many Americans not having any skin in the game. These Americans become natural constituencies for big-spending politicians. After all, if you don’t pay federal taxes, what do you care about big spending?

Also, if you don’t pay federal taxes, why should you be happy about a tax cut? What’s in it for you? In fact, you might see tax cuts as threatening your handout programs.

Our nation has a 38.91 percent tax on corporate earnings, the fourth-highest in the world. The House of Representatives has proposed that it be cut to 20 percent—some members of Congress call for a 15 percent rate.

The nation’s political hustlers object, saying corporations should pay their fair share of taxes. The fact of the matter—which even leftist economists understand, though they might not publicly admit it—is corporations do not pay taxes.

An important subject area in economics is called tax incidence. It holds that the entity upon whom a tax is levied does not necessarily bear its full burden. Some of it can be shifted to another party.

If a tax is levied on a corporation, it will have one of four responses or some combination thereof. It will raise the price of its product, lower dividends, cut salaries, or lay off workers. In each case, a flesh-and-blood person bears the tax burden.

The important point is that corporations are legal fictions and as such do not pay taxes. Corporations are merely tax collectors for the government.

Politicians love to trick people by suggesting that they will impose taxes not on them but on some other entity instead. We can personalize the trick by talking about property taxes.

Imagine that you are a homeowner and a politician tells you he is not going to tax you. Instead, he’s going to tax your property and land.

You would easily see the political chicanery. Land and property cannot and do not pay taxes. Again, only people pay taxes. The same principle applies to corporations.

There’s another side to taxes that goes completely unappreciated. According to a 2013 study by the Virginia-based Mercatus Center, Americans spend up to $378 billion annually in tax-related accounting costs, and in 2011, Americans spent more than 6 billion hours complying with the tax code.

Those hours are equivalent to the annual hours of a workforce of 3.4 million, or the number of people employed by four of the largest U.S. companies—Wal-Mart, IBM, McDonald’s, and Target—combined.

Along with tax cuts, tax simplification should be on the agenda.

From - The Daily Signal - by Walter E. Williams

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3 years ago

Just in order to get a little “feel” of the president’s tax plan, I used his proposal of doubling the standard deduction. Last year I itemized – and had deductions for state income tax, real estate tax, charitable deductions, and misc. deductions – total was $14,201. The 2017 tax year has a standard deduction of $12,700 (surviving spouse) double that and it is $25,400. Now, if my calculations are correct, how would anyone have an argument against that? I am an 82 year old widow – no medical deductions at all, and of course, no mortgage – Am I missing something, or does this look like a splendid idea?!!

Steve Armstrong
3 years ago
Reply to  Mimi

If you had a mortgage, it wouldn’t be splendid.

3 years ago

I cannot conceive of any 82 year old widow having a mortgage. At least not in conservative Nebraska, where I live. I doubt I could even get a mortgage.

3 years ago
Reply to  Mimi

You misread her comment; she does not have a mortgage.

3 years ago

Are the listed income amounts those for single individuals or for married filing jointly?

3 years ago

I have yet to hear how these proposed tax changes will apply to retirees living on social security and small 401/IRA distributions. When are we going to hear about. By the way, most people receiving social sercurity pat taxes when they were working while other non retirees paid nothing. I want answers…..

3 years ago
Reply to  Clare


If you are on a lower income, your taxes will be lower as it said above. Only people with higher income brackets may be slightly higher. Yes, most people receiving Social Security pay taxes when they were working. Non retires like federal employees do not pay for their Social Security because it is part of their pension plan. I hope I am right on this.

Anita Kulvinskas
3 years ago
Reply to  Sheila

Actually, Shelia, that use to be true but changed in the 90’s I believe it was. The federal employees were given a choice to pay into Social Security or to pay into a pension. I know that was for “new hires” I do not know if it included those already working if it also applied to them. Retirees stayed on what they had.

Anita Kulvinskas
3 years ago

Also the so called Social Security the federal retirees cost us an arm and a leg. For a couple covered under Blue Cross Retired Program we are paying $649 a month and we no longer as of the beginning of 2015 any dental coverage or vision coverage, our copays are higher once again and we have less coverage. now remember, we do not collect Social Security and do not qualify for Medicare Part B. We have to pay for other vision and dental coverage and do not qualify for any type of nursing care coverage.

E. Guter
3 years ago

The law allowing progressive taxation was one of the pillars beginning of the downfall of America. It sounds reasonable but socialist politicians learned how to, over time, manipulate this law into legalized theft. Yes, call it what it is – “Legallized Theft”. The MANY who are sold that the goverment owes them “something” – income, health care, etc. – then elect politicians who get the money to provide these benefits from the FEW. So, people vote to get benefits (money) with other peoples taxes (their money). It’s exactly equivalent to makiing it legal for someone without money to pay for something to stop someone else who has money in the street or break into their home and take it.

Flat tax is the answer – but flat tax without exclusions, deduction, loopholes, etc.

Jack Bindner
3 years ago

My question to any of the people in chargr of the money is ” WHAT DID YOU DO WITH THE MONEY WE GAVE YOU LAST TIME ????????

Wayne Peterkin
3 years ago

Outstanding article and true. The taxpayer/consumer pays for EVERYTHING! And as far as those not having skin in the game by not paying income taxes, I have advocated that if you don’t pay an income tax you should not be allowed to vote! Our founders understood that and had it right. Initially there were no income taxes, only property taxes. Therefore, only property owners were allowed to vote. They knew that those with no skin in the game who voted skewed the rules against those who bore the burden. And that is one big reason I’m a “Fair Tax” advocate although the proposed tax reform is far better than nothing so I support it.

Bryan B
3 years ago

The fact that politicians think that most Americans are only motivated by greed and self enrichment is, in itself, a look into their soul. We are lazy, not stupid. We do take the easy way out most of the time and our elected officials take advantage of our lack of interest or attention to what they are doing. Most of us can not see any way too effect what is going on and Washington makes sure that the process stays complicated enough to discourage any attempt to meddle in “their business”.

3 years ago

Well said folks.Now I know for sure the income tax was passed as a ponzi scheme to “soak the rich.” However, one financial teacher sings praises of same thinking that it’s the only way to support the gov’t, but I don’t believe all that, esp. w/ the movement to replace it w/ a flat tax or a consumption tax which is old school.

Patricia A Billings
3 years ago

Thank you for this easy to understand explanation of taxes, et al,

3 years ago

Interesting and informative. Why should any citizen be targeted for a higher rate? The flat tax is fair and would apply to all. If you have little income,you pay little tax, but you do contribute; if you have more income, you pay more, but it’s all based on your income.

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