[Winona Online Democracy] I have had a long standing interest in the shares of taxes paid by various income levels. I have never seen any compilation of numbers of the tax burden as a share of income for federal, state and local taxes. Using Google I was able to find some sources I was not previously aware of which allowed me to put together the table below.
This table is admittedly a first attempt. One of the difficulties was that the sources did not use consistent income brackets which means there is some estimating involved. Another is that I could not find FICA/FMHI taxes as a share of income for the upper two brackets (1%, 5%). The maximum amount of income taxable for FICA/FMHI approximates the floor for the top 10% bracket which means the income share for that level and all below it is 7.5%. For the top two income brackets FICA and FMHI were calculated by dividing the maximum FICA/FMHI tax ($94,000 times 7.5%) by the average income for all the 2002 returns in each bracket. This clearly does not produce a precise figure, but it is useful as a ball park figure in the absence of anything else. Any input on fallacies in methodology would be welcome. Please be specific and offer an alternative. Col 1: Income Group Col 2: 2002 Fed Inc Tax As Share of Income (1) Col 3: 2002 State/Local Tax as Share of Income (2) Col 4: FICA & FMHI Taxes Col 5: Total Tax as Share of Income (Sum of 2, 3 & 4) Col 6: Income Share (1) & (3) Col 7: Share of Fed Inc Tax (1) I wish there were also columns for: Share of State/Local tax and Share of FICA/FMHI tax. The picture would then be pretty complete. Col 1 Col 2 Col 3 Col 4 Col 5 Col 6 Col 7 Top 1% 27.3 5.5 0.9 33.7 16.0 33.7 Top 5% 23.0 6.5 2.4 31.9 30.6 53.8 Top 20% 17.0 8.0 7.5 32.5 41.8 75.0 Top 50% 14.7 9.5 7.5 31.7 85.8 96.5 Bottom 50% 3.5 10.0 7.5 21.0 13.8 3.5 Bottom 20% 1.5 11.0 7.5 20.0 3.4 Thoughts: The table supports the case that the lower income taxpayers may be paying too large a share of TOTAL taxes. However, they are already paying essentially NO federal income taxes. Since we already know Social Security and Medicare are facing looming funding problems, there is not much room for reductions there. Reducing the tax burdens on lower income tax payers will require cutting state and local taxes. Minnesota could start by further reducing the property tax on rental property (which is really paid by the tenant). I think homestead property taxes are already somewhat graduated based on assessed value. Is that correct? I think the case that the top brackets are not paying enough is weak. In addition, if you study the first source, you learn that as federal income tax rates for the top brackets have fallen, the share of federal income tax they pay and the share of their income they pay in taxes have both risen. This argues for further reductions in the upper income tax brackets until we find the point at which this trend is reversed (and then we should raise them slightly). An equitable tax system would have each share of income paying the same share of taxes (10% of the income pays 10% of the taxes). This would be easiest to manage if all taxes at all levels were income taxes. Sources: (1) IRS Statistics of Income, Table 5: Number of Returns, Shares of AGI and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates, 1986-2004 http://www.irs.gov/taxstats/indtaxstats/article/0,,id=129270,00.html (2) Institute on Taxation and Economic Policy, State and Local Taxes in 2002, All States, As share of Income http://newstandardnews.net/content/index.cfm/items/2879 (3) U.S. Census Bureau, Alternative Income Estimates in the United States: 2003 http://www.census.gov/prod/2005pubs/p60-228.pdf Glen Schumann Winona, MN [EMAIL PROTECTED] Phone: 507.454.3056 FAX: 507.454.3056 www.hbci.com/~gschuman _______________________________________________ This message was posted to Winona Online Democracy All messages must be signed by the senders actual name. No commercial solicitations are allowed on this list. To manage your subscription or view the message archives, please visit http://mapnp.mnforum.org/mailman/listinfo/winona Any problems or suggestions can be directed to mailto:[EMAIL PROTECTED] If you want help on how to contact elected officials, go to the Contact page at http://www.winonaonlinedemocracy.org
