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The Report begins: "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 US households pay no income taxes at all."

President Barack Obama, flanked by House Minority Leader John Boehner and Senate Minority Leader Mitch McConnell, 07/27/10. (photo: Getty Images)
President Barack Obama, flanked by House Minority Leader John Boehner and Senate Minority Leader Mitch McConnell, 07/27/10. (photo: Getty Images)



Super Rich See Federal Taxes Drop Dramatically

By Stephen Ohlemacher, Associated Press

17 April 11

 

s 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

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+16 # historywriter 2011-04-17 11:48
A couple of very wealthy people have already come out in favor of higher taxes for the rich. Warren Buffet is one; he noted a few years ago his secretary paid a higher rate than he did. But a whole bunch of rich people! That could have an impact.
 
 
-1 # KittatinyHawk 2011-04-17 20:15
Letterman also said that he would pay his fair share but it never works that way. He has plenty to write off. If those who could pay their fair share did so, they still would get more write offs than us as their charitable deductions alone is over our yearly income.
 
 
+4 # Sully747 2011-04-17 12:26
Witness the evolution of man… A new species, homopartetea. Evolution is random and not always positive.
 
 
+16 # Astrid 2011-04-17 12:43
the writer ignores payroll tax. the poorest of the poor pay 8%. my monthly cleaning woman pays 15%, about the same as billionaires. saying payroll tax is not "income tax" even though it is a tax on income is sophistry.
 
 
+16 # AML 2011-04-17 12:44
We're not even talking about dragging people down with burdensome tax levies; we're talking about raising the rate 4%. For ten years now the Bush Tax cuts have been in place. They were supposed to be temporary, and we can see why. Revenue dry-up.
The top 1% have seen their incomes go up dramatically, and the bottom 98% stagnating or going down.
In the Bush years, those tax breaks did NOT create jobs, even though the economy was in much better shape. The jobs are not coming back any time soon, since the outsourcing has demolished the jobs market. Good luck, America.
 
 
-4 # Ernest J. Smith 2011-04-17 12:48
Boehner is the House MAJORITY leader! (see photo text.)
 
 
0 # billy bob 2011-04-18 07:47
I didn't realize the midterm election was BEFORE 07/27/10 when the picture was taken.
 
 
0 # billy bob 2011-04-18 07:49
Is this an example of the media's "liberal bias"?
 
 
-17 # MidwestTom 2011-04-17 12:53
The very wealthy are also the largest supporters of most charities and churches. According to the IRS most of the super rich did not inherit their money, but earned it by hard work===except for the wall street crowd. With inflation running wild one needs to avoid fixed definitions of "rich". The number of Federal workers making over $250,000 per year has doubled in the last two years. When gasoline hits $15/gallon, and eggs are $10/doz. we will all need to make $250,000 just to survive.
 
 
+7 # billy bob 2011-04-18 07:39
If the very wealthy are the largest supporters of most charities, they shouldn't have any problem paying their fair share of taxes either then, right?

You're right. We need to look at ALL of the super rich and increase taxes on ALL of them. There shouldn't be ANY exemptions, whether they "earned" their money from work, or investing money they already had, or inheriting it from their rich uncle. It really shouldn't matter why they're rich or what they might promise to do with some of their money as long as we don't bother to tax them. They should pay their fair share.

By the way, could you be a little more specific as to WHO the federal workers are that are making over $250,000? While we're at it, why did you even bring that up?
 
 
+7 # Former Govt Atty 2011-04-18 12:24
Quoting MidwestTom:
The number of Federal workers making over $250,000 per year has doubled in the last two years.
Your made up figures are impressive (but based upon...what? "Tea Party Journal of Hogwash" According to http://www.opm.gov, the 2011 salary table:
RATES OF BASIC PAY FOR THE EXECUTIVE SCHEDULE (EX) JANUARY 2011
Level I $ 199,700
Level II 179,700
Level III 165,300
Level IV 155,500
Level V 145,700
Top Federal Executive pay tops out at $199,700.00. Government employees simply DO NOT make the same (let alone more) than their private sector counterparts when education and experience are included in the equation. (I am a former Criminal Prosecutor; for over a decade I earned $40K or less while possessing a college degree and a doctoral degree. Having since left government employment and joined the private sector, I am able to earn 10 times that amount.) So no, the problem isn't government workers. It is very rich people LEGALLY avoiding their tax obligation (This does not even include all those super rich tax cheats!) If you want to increase government income, increase the tax burden on the very wealthy. (I'd rather pay an increase and have those who make far more than me pay their fair share as well!) Our government is collapsing due to greed & stupidity of the super rich who run it.
 
 
0 # Ken Hall 2011-04-21 06:43
FGA: Thank you for calling a spade, a spade. And for "Tea Party Journal of Hogwash". Love it! Added some much needed humor to my day as I contemplate the lemurs throwing themselves off the cliff.
 
 
+6 # timmuggs 2011-04-17 14:09
The author says:
"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. "

This statistic is misleading.

First, in order to be meaningful, we need to know what percent of all income was earned by the top 10% and top 5%. I'm guessing that the top 10% earned significantly more than half of all the taxable income that was earned, and the top 5% earned way more than 44% of the taxable income. The only way to determine if the rates are fair is to compare the taxes paid with the income earned.

Second, as someone else mentioned, you need to include social security payments as income tax -- it is a tax on income, and a very regressive one.

I would like to see the author do such an analysis, it would be good to have it published, and I have not seen the statistics summarized this way elsewhere. I have seen the stats on taxes paid by top percentage earners before, often published by anti-tax writers, but no comparison to the percent of income earned by the top percentage earners. It seems to me that it is essential to know this before we can have a rational discussion.
 
 
+8 # Glen 2011-04-17 17:40
Also, how about the close to $100 per month that those 65 and older pay for their medicare.
 
 
+4 # Regina 2011-04-18 01:15
Medicare B goes well over $100 per month for a lot of us oldies. One of the factors that drive it is tax-exempt income, such as the dividends from a muni fund -- suddenly the "shelter" stops sheltering.
 
 
+1 # KittatinyHawk 2011-04-17 20:17
Yes we were taxed and now will have to pay taxes on it, not unlike Unemployment.
I do believe that Railroad and Service should pay taxes on their income/pension. They should have no right to not to pay.
 
 
+1 # billy bob 2011-04-18 07:43
The ONLY statistic that would be truthful would be, "what NET percentage of income does someone pay back in taxes?" Not "what percentage of 'taxable" income", or "income earned from working", or "how much did they pay in taxes, not including all the money they RECEIVED from the government for other things (such as subsidies to help give American jobs to people in India)."

It's obvious that the "discussion" the media is having (especially in sources like the AP) is NOT an honest one.
 
 
+8 # Carroll 2011-04-17 17:17
Dear Timmuggs,
Very few have the time or the inclination to calculate the percentage earned, paid or consumed by the top 5% or top 10%. What we can determine with minimum effort is who benefits and who gets screwed by our current tax system.
The rich benefit immensely; the upper-middle class enjoy immeasurably, the working man and woman get screwed royally. Damn all the statistics - Give us all a fair, progressive income tax - no loopholes, no tax dodges for the rich.
GE made $14 billion last year and paid no U.S. taxes. They have also shipped about 95% of their jobs overseas.
Such behavior is not only unconscionable
and unscrupulous - it is a high crime, and it is time we treated it as such.
Our fine, over-stretched Army protects all these feckless corporate CEO's, now infamous for outsourcing good, American, middle-class jobs. How much more of this felonious, elitist corporate behavior are Americans willing to take?
 
 
-2 # NCMike 2011-04-18 10:23
Are you aware that corporations exist for the sole purpose of making a profit? People put capital at risk in an attempt to make more. Corporations do not exist to give people jobs (it is a byproduct of profit), nor do they exist for the sole purpose of helping others or performing some social good. There are groups that do these things, they are called non-profit organizations. A job being shipped overseas is a byproduct of policy. We live in a world with a global market, so corporations have to compete globally. When regulations or labor costs get too high in one place, the corporation moves to a lower cost alternative. If this didn't happen, the corporation would cease to exist (expenses would be greater than revenues). Maybe the problem is over-regulation and high labor costs that overseas competitors don't have.

With all of that being said, no corporation should be allowed to avoid paying an income tax. If the people pay for what they make, corporations should too.
 
 
+1 # billy bob 2011-04-18 11:46
So by your logic, we need a greater amount of federal regulation to police corporations since it's obvious they cannot do it themselves. You said it yourself. Corporations serve the sole purpose of MAKING PROFIT.

Also, by your logic, we need to raise taxes on the rich (ESPECIALLY CORPORATIONS), because it's obvious the argument about them being more charitable and producing more American jobs if we leave them alone is a lie, RIGHT?

You made a good point! We need to raise corporate taxes and increase federal regulations on them! Well said!
 
 
-1 # KittatinyHawk 2011-04-17 20:26
I would like to know if the author realizes that most income is taxed taxed again.unemploye mnt and social security?

If that tax was not enough, we must pay school taxes if we have no kids, or kids are graduated. We have to pay earned income tax to area if we are not working. We have to pay per capita tax if we are not working. Then we pay for the Utilities taxes, We pay for Cable/dish taxes, we pay four taxes on Gas that the oil companies should be paying, we pay for food tax, shipping tax, in fact I do not know anymore if there is anything that is not taxed directly or indirectly that we do not pay for in hidden cost or outright. So I believe that income tax should be done fairly in such a way that all pay their fair share. I believe that those using the Utilities should pay the fair amount not get % off due to being large company/governm ent. If you use little Electric than you should pay the lesser amount in rate same with phone etc. Less you use, you should be charged less. Credit cards, less you charge, less you hold up money, less rate you pay for interest.
All Companies that can during a Recession Brag that they made Profits during should pay just for bragging. Wall Street should have to pay large interest rate///their own making for their abuse of Power. Next time the Barrel goes up, perhaps Wall Stree can take their interest and pay for it!
 
 
-3 # NCMike 2011-04-18 07:45
So, by your logic, the people that use the least amount of federal government services should pay the least amount of federal taxes. Since you want to be fair and you describe fair as those who use more should pay more, I guess that means that those who get more federal assistance should pay a higher percentage. Sounds like a plan to me.

On another note, you just listed several taxes (and left out plenty more) and even with all of those, our Federal, State, and local governments still can't balance a budget.
 
 
+1 # billy bob 2011-04-18 11:42
I agree, we shouldn't just be paying for ourselves. If we love our country we should be responsible citizens and pay the tab. People who have more money need less help. This is EXACTLY WHY they need to HELP MORE. Do you have a problem with my logic?
 
 
+1 # billy bob 2011-04-18 12:09
Actually, by your logic, the oil industry, for instance, should be paying MUCH MUCH more in taxes than they currently are to compensate for all the handouts they receive from the federal government, right? Sounds like a plan to me.
 
 
0 # Ken Hall 2011-04-21 06:51
NC: "...those who get the most assistance should pay a higher percentage." I reference Bernie Sander's list of 10 corporations that not only didn't pay any taxes, but received huge transfers of public funds in the form of tax subsidies. They received a lot of public assistance and didn't pay a thing.
 
 
+3 # billy bob 2011-04-18 08:05
Personally, I think the REAL question here should be, "since we've lowered taxes on the super duper rich, and since repugnicans say doing so will solve all our problems with the economy, WHAT HAPPENS IF THE ECONOMY DOESN'T IMPROVE?"

Midwest Tom, Are you willing to PROMISE that the new tax cuts for the super duper rich will make the economy better? Do you promise that it will bring jobs back from India? Do you promise that it will mean we pay less at the pump? Do you promise that it will mean our kids get a better education at school or can afford college? Do you promise that it will mean we can all suddenly afford our health care costs out of pocket? Do you promise that our infrastructure will actually IMPROVE with less revenue from the rich?

It doesn't make much sense to me that any of these claims could be true, but then again, I'm not the one making them. Repugnicans ARE actually making these claims. Otherwise, why would we willingly lower our country's revenue while fighting a recession and claiming to care about not running up the deficit? Other repugs who respond to these threads: Do you care to PROMISE us that all these claims WILL come true? What happens if we find out you were just lying through your teeth?

Right-wingers: ARE YOUR ACCOUNTABLE FOR THESE PROMISES?
 
 
+4 # Glen 2011-04-18 09:47
If you have a neighbor who works in a sawmill and his wife as a house cleaner, and they have to pay additional income taxes at the end of the year, in addition to county, personal, groceries, and all else that is taxed, but another neighbor and his wife pull in 60 to 70 thousand a year and pay just about zero in end of the year income tax, who is getting screwed?

Certainly there are ways to get out of some taxes, but that is not available to everyone.

Giving tax breaks to the extremely wealthy is not going to improve this country. The burden will be added to those working sawmill type jobs. Any who argue otherwise should read billy bob's post.
 
 
-1 # NCMike 2011-04-18 10:16
The husband and wife making 60 to 70 thousand are getting some kind of benefit? They should pay more? Are you taking into account the amount that is deducted throughout the year? You do know that they are also paying all of those other taxes you listed? Are people making 60-70 thousand now rich? Do those people now have to pay more? That is the middle class that everyone is so desperately trying to protect.
 
 
+1 # billy bob 2011-04-18 11:40
Actually, middle class would mean middle income right? In some areas of the country 60 or 70 thousand are the middle. Overall, as a nation, the middle is about $45,000. Most people who make over $100,000 a year ALSO consider themselves "middle-class".
 
 
+1 # Glen 2011-04-18 16:44
Yes, Mike, but there are the working poor who have no deductions, as the neighbor making 60 to 70 thou, and must pay MORE than their fair share.

The question is not who is rich, but who is paying their share. Of course, I am taking into account the amount that is deducted throughout the year. The issue is whether or not a worker should pay additional taxes on top of that, as the sawmill worker and his wife.

The genius of the wealthy elite is they have convinced U.S. citizens that they should be resenting each other. They are succeeding quite nicely, and encouraging future discrepancy between worker income. They then get away with little, if no, tax payments themselves.

Pushing for fairness should be a goal of citizens.
 
 
-4 # NCMike 2011-04-18 19:12
Fairness should be a goal. The Fair Tax treats everyone the same, so does the flat tax. I'm all for getting rid of deductions and for the government to stop trying to dictate social policy through the tax code. However, so long as half of working Americans aren't paying and many more are taking deductions, it would be financially unwise for anyone to give up his deductions.

The wealthy are not promoting class warfare, those who are in the lower income groups and the organizations that claim to support them are advocating for class warfare. It really is an odd idea since the US offers upward mobility unlike what you will see in other nations. The IRS data shows that 50% of people in the bottom bracket are out of it within 10 years. The falsity of classes in America needs to end.
 
 
+1 # billy bob 2011-04-19 07:25
But everyone is NOT the same. The rich have reaped enormous benefits from our society that are unfair and disproportionat e to their worth. A TRULY fair tax would take this into account and make them pay their TRUE fair share, which ABSOLUTELY SHOULD be a higher percentage than people making less. That's not "class warfare". That's fairness.

Then again, right now, they're paying EVEN LESS in percentage of ALL income earned from ALL sources. As a matter of fact, when you're poor, sales tax and the tax on your utilities and the extra you pay to rent property so the owner can cover their property taxes (unless they have a loophole) are all SIGNIFICANT amounts, even though they don't seem like it to the rich.

You're right. Fairness SHOULD be the goal.

It's not yours.
 
 
+2 # billy bob 2011-04-19 07:29
"The falsity of classes in America needs to end."

You really should get out of the Hamptons more often. There's a whole world to be experienced beyond your vinyard and your summer home.
 
 
+2 # Glen 2011-04-19 07:48
Reality does not always gibe with statistics. There might have been a time when the bottom of the heap was able to move up, especially the young, but with fewer and fewer jobs available, even those who worked to get a college degree are having a problem finding jobs to help them move up. Moving up, also, is a relative term. Up to what? A low paying job that pays 50 cents more an hour than what a person was making.

The elites do promote a type of separation and stylized war with the rest of the population. They always have. Those who are hurt by elitist policies and grow resentful then get blamed for promoting the issue themselves. Just as folks in a ghetto could not fight against those who kept them down, we turn on each other.

The wealthy do know that.
 

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