>Income group, Average pretax income, Total government tax receipts, As a
>percentage of income
>Bottom 20%, $7,946, $1449, 18%
>Second 20%, $20,319, $2847, 14%
>Middle 20%, $35,536, $5,622, 16%
>Fourth 20%, $56,891, $9,835, 17%
>Top 20%, $116,666, $21,623, 19%
This looks utterly bogus!
I am afraid not. The Bureau of Labor Statistics knows what they are talking about. Other authoritative studies have reached similar conclusions.
Possibly more oriented around witholding than actual tax maybe? It looks like no one bothered to even look at a form 1040.
As noted, this includes all types of government taxes, including income tax, sales tax, FICA, surtaxes, Federal, state and local. Form 1040 only covers a fraction of people's taxes, and only a very small fraction of wealthy people's income. Most wealthy people make money from capital gains, which are taxed at 15%, or from tax-free bonds, which are not taxed at all by the Feds or the state. (The Bush administration is pushing to make capital gains tax free.) Wealthy people know many more tricks, so the upshot is they pay only 19% of their total income. I admit that I myself am just wealthy enough to hire a tax accountant and take advantage of some of these things, and my taxes are quite low.
Corporate CEOs who make hundreds of millions per year use so many tricks and ways to defer income tax they typically pay only a few percent. They also use things like tax shelters in foreign countries.
Also, inheritance taxes have been largely eliminated, and they will be completely eliminated soon. Bill Gates pointed out that he never paid any money on his billions, because they are capital gains and he has not cashed them in. When his children inherit those billions (the ones he has not given away), they will pay nothing. Gates and several other leading moguls are in favor of the inheritance tax. They are lobbying to preserve it. Wealthy people also use trust funds and life insurance to circumvent taxes. Inheritances bring nothing to poor people, and usually only minor sums to middle class people, but for a very wealthy person an inheritance or trust fund may be worth hundreds of thousands or even millions of dollars per year over his entire lifetime -- far more than most people ever earn -- and he pays no taxes on it at all.
Consider this year for example (other years similar, just slightly
different numbers). A single person gets $7,950 in deductions right off,
so would not pay any federal taxes at all on $7,946.
Federal taxes are not the issue here. The other taxes add up to 14%, especially in poor, backward states such as Georgia and Alabama, where state taxes, sales taxes and property taxes are high.
If the percentage is based on taxable income and not adjusted gross income, then that percentage
is highly misleading.
The percentages shown above are for all income. What this means is that a working person earning $7,950 ends up paying $1,449 in FICA, state and local taxes, sales tax, beer taxes, gasoline taxes, telephone taxes and so on. FICA (Social Security) is 12.4% off the top ($985). Local sales tax in Atlanta is another 8% (except for food). Poor people spend every dollar for rent, utilities, gas and in retail stores. Rent is not deductible, unlike the mortgages money middle class people pay. A poor person who does have his own house in Atlanta will pay at least $500 in property tax, and if he owns a car he will pay a few hundred for the tag fee. My Geo Metro is officially worth $450, but I still have to pay $60. Wealthy people do not own cars or pay tag fees; they use company-owned vehicles. Things like that add up to $1,400 quickly. My daughter in college made about $7,000 in part time jobs, and she would have paid ~$1,400 but tuition is tax deductible. If she had been a high school drop out working at McDonald's and paying for her own gas and car tag she would have paid ~$1,400.
For example the first line of numbers for this year should be: Bottom 20%, $7,946, $795, 5%, where the 5% is of actual income of $7,946 + $7,950 = $15,896.
Not sure what this means. The table above means people who earn $7,900 per year from all sources. 20% of the people in the U.S. make this much on average. Most of them get no public assistance. All the ones I personally know get nothing. However, as the Bureau of Labor Statistics points out, they often have off-the-books hidden income, usually amounting to a few thousand dollars a year.
HOWEVER, people making over $100,000 are increasingly getting it socked to
them at a much higher rate in the form of an alternative minimum tax.
Believe me, people earning more than $100,000 are on easy street. They have not had it so good since the Guilded Age, the 1880s. They know so many ways to avoid taxes that anything they do pay is more or less voluntary.
There is no way to get to $1,449 taxes on $7,946 actual income.
I assure you there is. I know several dirt-poor people who live on that much, and pay that much in taxes.
- Jed
