Super rich see federal taxes drop dramatically
AP – FILE - In this President Barack Obama outlines his fiscal policy during an address at George Washington … 
WASHINGTON – As millions of procrastinators scramble to meet Monday's tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.
The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.
More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.
Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.
"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.
Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.
"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.
Schoenberg said Hatch's suggestion misses the point.
"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"
The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.
The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.
In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.
About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.
"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."
___
Online:
Tax Policy Center: http://www.taxpolicycenter.org
National Taxpayer Advocate: http://www.irs.gov/advocate
United for a Fair Economy: http://www.faireconomy.org
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.
The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.
More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.
Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.
"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.
Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.
"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.
Schoenberg said Hatch's suggestion misses the point.
"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"
The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.
The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.
In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.
About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.
"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."
___
Online:
Tax Policy Center: http://www.taxpolicycenter.org
National Taxpayer Advocate: http://www.irs.gov/advocate
United for a Fair Economy: http://www.faireconomy.org
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11,940 Comments
- 2183 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 88 users disliked this commentBobby Report Abuse
Politicians are the only people in the world who create problems and
Replies (211)
then campaign against them.
Have you ever wondered, if both the Democrats and the Republicans are
against deficits, WHY do we have deficits?
Have you ever wondered, if all the politicians are against inflation
and high taxes, WHY do we have inflation and high taxes?
You and I don't propose a federal budget. The President does.
You and I don't have the Constitutional authority to vote on
appropriations. The House of Representatives does.
You and I don't write the tax code, Congress does.
You and I don't set fiscal policy, Congress does.
You and I don't control monetary policy, the Federal Reserve Bank does.
One hundred senators, 435 congressmen, one President, and nine Supreme
Court justices equates to 545 human beings out of the 300 million are
directly, legally, morally, and individually responsible for the
domestic problems that plague this country.
I excluded the members of the Federal Reserve Board because that
problem was created by the Congress. In 1913, Congress delegated its
Constitutional duty to provide a sound currency to a federally
chartered, but private, central bank.
I excluded all the special interests and lobbyists for a sound reason.
They have no legal authority. They have no ability to coerce a senator,
a congressman, or a President to do one cotton-picking thing. I don't
care if they offer a politician $1 million dollars in cash. The
politician has the power to accept or reject it. No matter what the
lobbyist promises, it is the legislator's responsibility to determine
how he votes.
Those 545 human beings spend much of their energy convincing you that
what they did is not their fault. They cooperate in this common con
regardless of party.
What separates a politician from a normal human being is an excessive
amount of gall. No normal human being would have the gall of a Speaker,
who stood up and criticized the President for creating deficits. The
President can only propose a budget. He cannot force the Congress to
accept it.
The Constitution, which is the supreme law of the land, gives sole
responsibility to the House of Representatives for originating and
approving appropriations and taxes. Who is the speaker of the House?
John Boehner. He is the leader of the majority party. He and fellow
House members, not the President, can approve any budget they want. If
the President vetoes it, they can pass it over his veto if they agree
to.
It seems inconceivable to me that a nation of 300 million cannot
replace 545 people who stand convicted -- by present facts -- of
incompetence and irresponsibility. I can't think of a single domestic
problem that is not traceable directly to those 545 people. When you
fully grasp the plain truth that 545 people exercise the power of the
federal government, then it must follow that what exists is what they
want to exist.
If the tax code is unfair, it's because they want it unfair.
If the budget is in the red, it's because they want it in the red.
If the Army & Marines are in Iraq and Afghanistan it's because they
want them in Iraq and Afghanistan ....
If they do not receive social security but are on an elite retirement
plan not available to the people, it's because they want it that way.
There are no insoluble government problems.
Do not let these 545 people shift the blame to bureaucrats, whom they
hire and whose jobs they can abolish; to lobbyists, whose gifts and
advice they can reject; to regulators, to whom they give the power to
regulate and from whom they can take this power. Above all, do not let
them con you into the belief that there exists disembodied mystical
forces like "the economy," "inflation," or "politics" that prevent them
from doing what they take an oath to do. - 1923 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 77 users disliked this commentTMiles Report Abuse
The Answer is.. abolish the Lobbyists..
Replies (56) - 2176 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 88 users disliked this commentForgiven Report Abuse
They say they will have to gut spending on poor, disabled, seniors exc... How bout gut spending on elected govt plane rides, vacations, golf, pay, health care, pension.
Replies (42) - 2432 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 99 users disliked this commentGlenn Report Abuse
It seems most of our 'tax loopholes' are written/passed by our congress-people at the urgence of lobbiest (Who pays for the lobby and helps put a 'spin' on these laws to try to make them palatable?) Of course the same congressionals are benefitted at the same time. Why is it that reelection is more important than helping to save our nation? The answer is our human nature toward greed! If for some unknown reason you think someone in Washington is there to help you. . .God help you!
Replies (60) - 2417 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 103 users disliked this commentKathleen Report Abuse
"Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000."
Replies (138)
I earned barely 10% of Shoenberg's income last year, and had to pay in $2,000 on top of what had been taken out of my pay. I'm retired and have to hold three part-time jobs to make ends meet. There's something wrong with this picture. - 214 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 6 users disliked this commentsams Report Abuse
Intelligently thought and elegantly expressed, Ross. I couldn't agree with you more. A majority of our elected representative are crooked to the core, and will go to any limits to serve themselves. We need a revolution in our nation's thinking. we need to reduce our focus on trivial pursuits, while the proverbial Rome is burning. This is a great country, I immigrated to it for that reason, and am astonished that this country's politics are as fecund as the country I came from. If we have to fight wars on other soils, let the owners of those soils pick up the tab. Let us set our ow home right, find alternative energy sources pronto, stop sending $2 Billion every day towards harm's way, and hold ourselves and our legislators accountable. Our country is faced with a serious bankruptcy of leadership. God help America.
Replies (5) - 1461 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 69 users disliked this commentJustin Okello Report Abuse
Doesn'y anyone "get" the fact that if you get a refund it's not a "bonus"?? What you've done is loaned the Federal Govt money at no interest! It was YOUR money to begin with, so it's NOT extra money!
Replies (39) - 670 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 32 users disliked this commentJamesB Report Abuse
Where are the jobs??
Replies (50) - 489 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 23 users disliked this commentfinfan Report Abuse
The problem with this Country? STUPIDITY!
Replies (17) - 227 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 9 users disliked this commentTina H Report Abuse
What a joke we have become.
Replies (7)
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