Are You Paying Too Much of America's Taxes?

Let's face it: Nobody likes paying taxes. Those complex forms, the confusing rules ... and then there's the whole awful matter of surrendering a good chunk of your income to the government. Even if you move to one of the states with no income taxes, you'll invariably have to pay the federal government something -- unless you've got a fantastic (or particularly devious) tax attorney.

One of the biggest political battles in recent memory is over whether high earners are paying their "fair share" of the tax burden. Without taxes, the government wouldn't be able to support itself -- but are America's wealthiest taxpayers doing enough to support the government? Is it fair that some groups pay less than others? Should the burden shift from one group to another? These are all difficult questions for anyone to answer, but you'll hopefully find enough information here to at least come closer to an answer -- and if you've already found your answer, you might find a reason to change your mind.

First, let's take a look at how important your taxes are to the federal government, based on the current year's revenue projections from the White House budget:

Where Does the Government's Funding Come From? | Create infographics

Individual income taxes are the bulk of the U.S. government's revenue. In fact, when you consider all the taxes that rely on income but don't count as a direct income tax, the working American supports by far the largest part of federal spending:

Income and Everything Else | Create infographics

But not all taxpayers are taxed equally. Let's see how much different taxpayers at different income levels are paying relative to their share of America's paycheck pie. Don't forget to click on both buttons in the chart to see the difference between each group's share of income and its share of taxes:

Who Earns, Who Pays? | Infographics

But how much money do you really need to make each year to reach these tax brackets? The Urban-Brookings Tax Policy Center broke down just what it took to get into various tax brackets in 2011. Based on their numbers, and the effective average tax rate of each bracket, we can get some idea of how much might be left over for you:

Tax Bracket

Income Cutoff*

Effective Tax Rate

What's Left Over?

Top 1%

$506,553

23.4%

$388,020

2nd-5th percentile

$200,026

17.2%

$165,622

6th-10th percentile

$154,131

12%

$135,635

11th-25th percentile

$85,811

8.7%

$78,345

26th-50th percentile

$42,327

6%

$39,787

Bottom 50%**

$19,375

2.4%

$18,910

Sources: Urban-Brookings Tax Policy Center and The Tax Foundation.
*Includes all filing types.
**75th percentile used (bottom percentile is effectively zero income).

While high-earning taxpayers will have a larger chunk taken out, they're still left with a much larger chunk of income free and clear. Most higher-income taxpayers make excellent use of this extra income with investments, as more than 90% of the highest 10% of earners maintain a retirement account, and 48% own individual stocks. Contrast that with the poorest 20% of earners, only 11% of whom hold a retirement account and 4% of whom owned any stock.

Of course, this tax picture doesn't fully account for Social Security and Medicare taxes. What would a taxpayer in these brackets have to pay for these two mandatory programs, and how much would really be left over? We'll be calculating this on the assumption that the taxpayer isn't self-employed, which would double their payroll tax rates:

Tax Bracket

Pre-Payroll Tax Income

Payroll Taxes**

What's Really Left Over?

Top 1%

$388,020

$14,394

$373,626

2nd-5th percentile

$165,622

$9,949

$155,673

6th-10th percentile

$135,635

$9,284

$126,351

11th-25th percentile

$78,345

$5,993

$72,352

26th-50th percentile

$39,787

$1,037

$38,750

Bottom 50%^

$18,910

$475

$18,435

Sources: Urban-Brookings Tax Policy Center and The Tax Foundation.
*Includes all filing types.
**Social Security payroll tax has an income ceiling of $113,700.
^75th percentile used (bottom percentile is effectively zero income).

Because of the Social Security tax ceiling, taxpayers around the 10th percentile of income feel the payroll tax weight the most -- as a percentage of gross income, a 10th-percentile taxpayer would wind up paying twice as much in payroll taxes as someone in the top 1%.

Now that we've got an idea of who pays, let's see what, exactly, they're paying for.

U.S. Federal Budget | Infographics

There are two huge categories in the federal budget that don't get labeled very clearly. Most of the undefined "mandatory spending" represents other forms of income security, such as unemployment compensation, the supplemental nutrition assistance program (SNAP), and the like. Veterans' benefits are also part of this category. Non-defense discretionary spending is pretty broad, but its major expenditures can be broken down in a relatively straightforward way. Here's how Brookings fellow Isabel Sawhill analyzes it:

I estimate that out of the total nondefense domestic discretionary spending in 2012, 44% was for competitiveness purposes (mostly education, training, and transportation), another 12% was for low-income programs, 13% was for public safety and disaster relief, and 11% was for veterans. The remainder ... is only 4% of total federal spending. ... [M]ost of it is what I would call "overhead" -- salaries and office space for the people who run the government, administer the laws, promulgate and enforce the regulations, prepare Social Security checks, monitor fraud, respond to Congressional and citizen requests, and so forth. Even relatively efficient organizations have overhead rates that are as high or higher than 4%.

The difference between what the government spends and what it takes in is projected to be $973 billion this year. Social Security, Medicare, and Medicaid will have a shortfall of $703 billion -- much of which is due to Medicaid, which doesn't get its own payroll tax. There are a number of ways to handle the Social Security shortfall, but even the strongest efforts at reform only seem capable of closing the gap by more than $100 billion. What could we do to get rid of that awful deficit? Don't forget to click every button in the following chart:

How Can We Reduce the Deficit? | Create infographics

None of these quick-and-dirty fixes comes close to solving the problem, except for a broad 20% spending cut -- and the impact of that reduction in spending would probably cause tax revenue to shrivel. You can't take more than $700 billion out of the economy all at once without causing a whole lot of problems. But let's say your taxes suddenly increased by 10% (not your tax rate, just the total amount of income taxes you paid). Someone in the top 1% would be paying nearly $12,000 more but would still have more than $360,000 in net after-tax income. Someone just edging his or her way into the top half of the income scale would wind up paying about $250 more -- but that person's total after-tax income would only be a tenth as much as the top one-percenter.

It's not quite as easy as saying "I should pay less" or "they should pay more." There are many different ways that the government might solve the deficit problem, or at least get closer to it. Most of these methods, unfortunately, will probably involve some manner of higher taxes. Should we expect everyone to pay more, or are some people paying too much already?

Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically under-saving for retirement, it's clear not enough is being done. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.


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  • Report this Comment On April 13, 2013, at 11:37 AM, taxpayingcrybaby wrote:

    The rich DO Not pay to much!!!

    Percentage wise they are way under taxed.

    They the 1% have manipulated the tax code for there benefit. They also have suppressed they wages the rest of us are earning.

    Its time for them to pay they're fair share.

  • Report this Comment On April 13, 2013, at 11:52 AM, Wally1117 wrote:

    Our govt is not lean enough. Obamacare is a joke and he is now talking about hiring 9 to 10 thousand people to be at phones and computers to ask Obamacare questions. Again making govt too big. Controling the cost of healthcare should start with the hospitals and their rediculous charges.

    So the answer is we are paying too much in taxes because our legislators spend too much

  • Report this Comment On April 13, 2013, at 12:08 PM, ganjed wrote:

    Definitely time to tax those churches. There are millions of dollars to be taxed; they should not be exempt because they tell a great mythological-story. If they have money to pay off their abuse victims, they have money for taxes.

  • Report this Comment On April 13, 2013, at 12:08 PM, sampsondiane wrote:

    Where did you come up with table showing "effective tax rates"? Those rates are much lower than those included in the 2012 tax bracket.

  • Report this Comment On April 13, 2013, at 12:12 PM, lorcanbonda wrote:

    Thank you for the Fox News party line. Yes the rich pay a higher percentage of income taxes than the poor and middle class. But income taxes are not the complete picture. Almost all other taxes are regressive -- some severely so.

    The highest tax burden for most people are payroll taxes (Social Security, Medicare, & Unemployment insurance.) Half of these taxes are hidden from you -- but they still come from people's compensation. You are not including the hidden half from your calculations.

    In addition, Property taxes, sales taxes, gasoline taxes, sin taxes, and fees are all significantly regressive. Health Care has also become an effective payroll tax -- but it always has been. It is just growing at such a rapid rate. We all expect the benefits of a universal health care model, but our system transfers money from the middle class to the wealthy.

    And that leads to the final point. Wealthy are able to petition the government for more income off the books -- GE's 1.8% tax rate comes to mind as well as the bank bailouts and credits for oil drilling. Such welfare for the rich is one of the greatest tax problems for the government -- yet it is ignored.

    Signed,

    A recovering Republican

  • Report this Comment On April 13, 2013, at 12:16 PM, Mejosey wrote:

    The rich need to pay thier fair share. They have a very wide area of discretionary income. While the poor have a very, very narrow if any discretionary income. So if you continually raise taxes on the poor you are taking money for food, shelter, heat, medical, etc. necessities for taxes. While the rich can meet those obligations without dipping into money necessary to sustain life, not extreme lifestyle, but life itself. And right now that is where it is at. So cough it up you wealthy and pay the bills your success have created.

  • Report this Comment On April 13, 2013, at 12:18 PM, sampsondiane wrote:

    Taxpayingcrybaby. Please explain:

    1) "percentage wise they are way under taxed". The top 1% pay the highest percentage of income tax. And the top 1% pays about 20% of the total. How much more is enough for you?

    2) "they have manipulated the tax code for their benefit". Blame that on YOUR elected representatives, not the wealthy.

    3) "they have suppressed the wages the rest of us are earning". And how, exactly, have they done that? Please cite an example. Wage depression is a natural result of increased global competition. Can't blame that on the top 1%.

    4) "its time for them to pay their fair share". I love this one. And what, exactly, do you think their fair share should be? 5% more? 10% more? Again, according to this article clearly shows that 1% of the people are carrying 20% of the load. That not enough for you?

  • Report this Comment On April 13, 2013, at 12:21 PM, airjackie wrote:

    This is an april fools joke right? Romney earned 21 million got a return 1.6 million, Cheney 3 million return 134 thousand, Bush 932 thousand return 17,000,Obama 609 thousand return 16,000. Now a person earning 24 thousand return 724 hundred a person income 50,000 return 932 hundred. Who pays more? As we can't even count the off shore accounts the wealthy, lawmakers use. Corportation pay no taxes look at GE and others. Many wealthy people haven't paid in years so get real and honest. People will learn this on April 15th when they pay up.

  • Report this Comment On April 13, 2013, at 12:24 PM, sampsondiane wrote:

    Recovering Republican. Your example regarding GE is non sequiter. Who cares if the "company" isn't paying a higher rate. If the "company" makes a ton of money, their choices are 1) save it for a rainy day, 2) reinvest back into the company, or 3) distribute it to investors or pass out executive bonuses. The minute that they do number 3, the recipients are subject to personal income tax. The point is, the minute the money is distributed it gets taxed at the personal level.

  • Report this Comment On April 13, 2013, at 12:25 PM, Mejosey wrote:

    There is no way to make money amounts or percentages, to make a fair comparison of rich to poor. It is all about basic requirements for life, versus eleborate excesses. Discretionary income is the big difference, and that should be the determining factor. 10% of $40,000. is $4,000. Which leaves $36,000. to live on. 10% of $400,000,000. is $40,000,000. a lot of dollars, but still leaves $360,000,000. to live on. hmmm not too shabby. And even if they paid 50% it would leave $200,000,000. to live on. Can buy plenty of extras with that.

  • Report this Comment On April 13, 2013, at 12:28 PM, Wopalongcassidy wrote:

    The documentary "We're not Broke" Explains how the rich (Like Mitt) and Corporation's use Ireland as a jumping off point to pay virtually pay NOTHING in Federal taxes. We, the middle class are being suckered. A flat tax with no deductions will be the only thing that would work...but it'll never happen!

  • Report this Comment On April 13, 2013, at 12:28 PM, sampsondiane wrote:

    Airjackie. "Many wealthy people haven't paid in years..." No, you are simply making stuff up. If the vast majority of a wealthy person's earning are based on dividend income, then that is taxed at a much lower rate. Any person, whether rich or poor, can buy dividend paying stocks and thus earn dividend income at a reduced rate.

  • Report this Comment On April 13, 2013, at 12:37 PM, tateorourke wrote:

    The author of this piece must really be disheartened if he reads the comments, seeing that most of the commenters haven't bothered to read the article, but just reacted with right or left wing buzzwords. Mencken said something to the effect that every difficult, complex problem has a simple solution... which is wrong. Kudos to the author for the hours of research put into this very important topic. Wish I could say it would do some good.

  • Report this Comment On April 13, 2013, at 12:38 PM, sampsondiane wrote:

    Mejosey. So how much do you think the person making $400,000,000 should pay in taxes? How about 95% - that would be $380,000,000 in taxes, leaving him with a cool $20,000,000. Is that enough, or should we tax him more?

  • Report this Comment On April 13, 2013, at 12:39 PM, adum7 wrote:

    All I know is that the Top 1% has 90% of the wealth...they should at least pay 90% of the taxes collected. (not pay 90% tax rate)

  • Report this Comment On April 13, 2013, at 12:42 PM, Riznott wrote:

    These numbers are misleading in a few ways, one is that many of the 1% are in that category because both spouses work meaning both pay payroll tax. In addition, many of the !% are considered to be self-employed (doctors, lawyers, dentists, etc) who pay double the payroll tax of an employee. The real payroll tax number for many 1% is probably closer to $35,000 than $14,000.

    And Airjacke, stop posting lies. Mitt paid over $2 million in taxes, his effective tax rate was just slightly lower than Obama's.

  • Report this Comment On April 13, 2013, at 12:48 PM, Riznott wrote:

    Adum: I guess that I missed it when we changed to a wealth tax, when did that happen? And the top 1% control about 35% of the wealth, not 90%.

  • Report this Comment On April 13, 2013, at 12:51 PM, Harley117 wrote:

    One conclusion from the data is that Obama has certainly distorted the truth on taxes. To "taxpayingcrybaby" the top 10% of income have 45% of income and pay 71% of taxes so I don't know how you conclude they don't pay their fair share.

  • Report this Comment On April 13, 2013, at 1:01 PM, funfred wrote:

    Depending on the year's success, my wife and I are either in or just out of the 1%.

    Given the poverty rate is somewhere around $24,500 and we've paid as much as $140,000 in taxes at times, effectively enough to support 5 households ABOVE the poverty level, I think it's time for at least 5 households to return the (mandated) favor.

    I don't mind paying a fair share of tax, but show me where it's going. I have yet to see my sole contributions reduce poverty levels, etc.

    Apparently, knowing where your money goes is not part of the game we're forced to play.

    You other than 1%-ers, show me where your tax rate is over 33% and I'll listen. Otherwise, you're talking out of your you-know-what.

    When there's talk of reducing our tax rates by 5-10%, it seems like the uninformed assume that means we'll only pay 23-27% in taxes. No, my media misguided sheeple. It means 5-10% out of the 33% we already pay. So, we're looking at a 29.7-31.35% tax rate. As far as I know, that's still far above everyone else's tax rates.

    Who's not paying a fair share?

    That's right. You.

    Get to work. You have a whole country that needs more than just our support. It needs yours, too.

    (Unless you're comfortable relinquishing your duties and responsibilities as a citizen).

  • Report this Comment On April 13, 2013, at 1:06 PM, Jcc44 wrote:

    @ sampsondiane : While i agree we can just go around asking the top earners for more % in taxes. You still dont understand the other sides POV. You say the top earners carry 20% of the load, ok BUT the bottom must use 100%(if they have savings it wont amount to significant numbers affecting this issue.) of their income to add their support to America. While the top earners find ways to hide their money from being taxed (not all i am sure, there will be some honest 1%ers who pay all their proper taxes.) If you want to argue %'s remember how much the top has left after taxes and spending (on items the bottom cannot afford.) I would say no to tax raises, but punish those who avoid or hide taxes severely, close the "rich" only loopholes (if someone making 35k yearly cant use it, it shouldnt exist.) Understanding goes a long way towards a better discussion.

  • Report this Comment On April 13, 2013, at 1:10 PM, brent10001 wrote:

    if you lived in the '40's, 50's, and 60's the top bracket was over 90%. In the 70's it was over 70% and even with Reagn it was 50%. Todays millionaires and billionaires are getting off easy. Under Bush the top bracket was 36%. Mitt Romney made over $65 Million in two years and paid around $10 million in taxes. What do you do with an extra $30-50 million. Sad part is he even wanted more tax breaks. The last generation sacrificed a lot. Defeated the Nazi's rebuilt the government and paid down the debt. Today we live in an uneducated selfish society. The people who back the 1% don't even realize what they are doing. They are only hurting themselves.

  • Report this Comment On April 13, 2013, at 1:15 PM, Riznott wrote:

    @brent: it is true that top tax brackets have, since WWII, been higher and, at times much higher than they are now. It is also true that the lower tax brackets were much higher, we didn't have families making $50K per year paying no federal income tax. It you want to roll back the calendar to those days, then everyone needs to contribute more.

  • Report this Comment On April 13, 2013, at 1:19 PM, cityperson wrote:

    Everyone one in America pays to many taxes and fees to keep our elected politicians and others in money and the American citizen that keeps being strapped by their wishes. The we here in America have the dummies that vote for taxes and fees at the local and state levels. People also have to be aware that the so called loopholes (tax write offs) they do not like for the so called rich also will hurt them if these loopholes are done away with. Be aware what you want, none thinkers.

  • Report this Comment On April 13, 2013, at 1:35 PM, sampsondiane wrote:

    Funfred. Looking right now at my completed tax return. Here are the basics:

    total income/adjusted gross = $556,782

    taxable income = $479, 653

    tax before AMT = $131,491

    alt min tax = $14,072

    amount I owe = $32,140

    marginal tax rate = 35%

    effective tax rate = 30.3%

    Now, don't get me wrong. My wife and I are quite blessed. But we work hard. We both obtained advanced college degrees. Nothing was given to us - nothing.

    So people like me bristle when we others that are less fortunate whine about the hand that life dealt them and also imply that, somehow, people like me are cheating them. There was a time in this country when wealthy people, business owners, etc. were admired and people aspired to be like them. Now wealthy folks are considered pariahs to be "taxed more" so that they pay their "fair share".

    And honestly, I used to pay my annual income tax with a sense of pride, as if I was fulfilling my civic duty. But today, I resent the tax burden that I am saddled with because all I see is waste everywhere. The politicians spend MY money like water. That is where the true cheating is occurring.

  • Report this Comment On April 13, 2013, at 1:39 PM, geowb wrote:

    I just cross checked four different sources of this same information and I came back with four entirely different versions of "tax brackets(?)".

    Three of which claimed they got their information from the Brookings Institute.

    They can't even agree on what the poverty levels are.

    If you're going to allow article to be posted under your "Yahoo" name, at least check the validity of their content.

  • Report this Comment On April 13, 2013, at 1:42 PM, NOENVY wrote:

    Pay fair share please , why should one person have to pay more than another person in actual dollars because of envy. a rich person gets the same max social security as a poor person even if they pay far more in to it,the police fire and EMT come to both even tho the rich pay more the rich don't get there own lane on the freeway even tho they pay more or get to drive ten times faster because they pay ten times what a poor person does. I could go on and on but the point is they carry their own weight and a large number of other peoples as well and get nothing but scorn instead of the well deserved thank you for the charity they are forced to give to ones that feel entitled .....Well from me at least one person says THANK YOU!

  • Report this Comment On April 13, 2013, at 1:48 PM, geowb wrote:

    Don't try to pass on "I work hard" based solely on the amount of your incomes. I dmnd sure there are plenty of lower paid people that work even harder than you.

    There are also plenty of "hard working" workers out there that would "work hard" even if they were not paid to do so.

    I'm a retired electronics tech/engineer and I have all the income I need. The work I did was my "calling"(a hobby that crossed over into a career, making it so easy and enjoyable, I really couldn't call it work) and I would do it for free just to be able to get back in there again.

    Some of you righteous people make me want to throw up.

  • Report this Comment On April 13, 2013, at 1:55 PM, geowb wrote:

    @brent10001:

    "if you lived in the '40's, 50's, and 60's the top bracket was over 90%. In the 70's it was over 70% and even with Reagn it was 50%. Todays millionaires and billionaires are getting off easy. Under Bush the top bracket was 36%. Mitt Romney made over $65 Million in two years and paid around $10 million in taxes. What do you do with an extra $30-50 million. Sad part is he even wanted more tax breaks. The last generation sacrificed a lot. Defeated the Nazi's rebuilt the government and paid down the debt. Today we live in an uneducated selfish society. The people who back the 1% don't even realize what they are doing. They are only hurting themselves."

    ======================================

    ABSOLUTELY TRUE.......

    AND

    IN SPITE OF THE POST WW2 90% AND A 33% UNION MEMBERSHIP, THE ECONOMY GREW LIKE A WILD WEED.

  • Report this Comment On April 13, 2013, at 2:08 PM, JoeDH wrote:

    The top one percent controls 40% of the financial wealth in this country while the top ten percent controls 93%, yet their share of the income tax burden is just under 60%. Relatively speaking they're getting a deal. With such a large disparity in incomes the rich will necessarily have to pay more in income tax because they're the ones with all the income! If it's such a problem then perhaps they should work toward helping restore the American middle class instead of ruthlessly demanding maximum returns on their investments regardless of the consequences to the economy.

    The biggest tax dodgers of all though are the corporations, seventy years ago they paid 50% more in income tax than individuals, today they've whittled their burden down to less than 10% of all revenues.

  • Report this Comment On April 13, 2013, at 2:15 PM, peterwolf wrote:

    Am I paying too much taxes. Yes, if I compare myself against what the Obama's paid? Yes, Im paying too much. That guy ran on a platform of socking it too the rich ( which at $600,000/year, he certainly is) and having them pay their 'fair share'. He paid 18% taxes in 2012. Far below that of the average worker in this country. I paid 28% on a far lower income than his. So yes. I pay too much taxes.

  • Report this Comment On April 13, 2013, at 2:22 PM, NOENVY wrote:

    The question is not ones value to society based on how hard you work , Hard work is a virtue but not all work pays the same.Picking employment or non employment is a choice or some times it chooses you based on habits, drive or health. it irrelevant to fairness of taxes a person should expect the same value for a dollar as anyone else. We are all created equal are we not? Paying more and getting less is charity or theft but never fair share. Those that try to justify why they deserve others money even if they worked smarter not harder are pathetic again should be thankful. What makes me want to throw up is even tho I make a decent wage I could have done better for my family friends and society if I had applied my self earlier in life . But I have never stooped so low as to think anyone owes me a dime I did not work for. Reminds me of JFK "ask not" just replace country with others and you get my point ,doing for others should never be forced by law I choose to help those that help themselves or cant help themselves not waste that help on the ungrateful majority that feel entitled.

  • Report this Comment On April 13, 2013, at 2:24 PM, amandapanda918 wrote:

    So the rich pay the majority of taxes in this country and they still need to pay their "fair share"? Give me a break. They are already taxed higher than those with low incomes but because they have more than enough left over, you feel that they should pay more than they already do? Let's give people great motivation in the country to work hard and make something of themselves by being taxed more and having a huge portion of what they earn each year given to the government to support those not willing to work or to achieve something better in their lives. Bottom line is that the government has needless, wasted spending that the rich are paying for. It's ridiculous. Do away with all tax write offs and let everyone be taxed at the same exact percentage so that everyone is paying their fair share. If someone makes more money than you, they are still paying more in taxes because it's based upon their income...why should someone who makes $500,000 have to pay a higher percentage than someone who makes $30,000? If everyone paid the same exact percentage with no ability to write anything off or claim any exemptions, the rich would still be paying more money into the government each year than the poor.

  • Report this Comment On April 13, 2013, at 2:29 PM, sampsondiane wrote:

    Uh, geowb I presume your "self righteous" comment was directed to me. You misinterpret, and now your bitterness is exposed. The issue is that I, and people like me, pay a ton. As this article indicates, 1% carry about 20% of the tax load. But, when it comes time to decide how OUR money is doled out, we still get only 1 vote - funny how that works. Again, I don't mind so much paying taxes. What I detest is the mindset that somehow we "owe" more to others. This, of course, is socialism at its finest. And that model simply doesn't work. But that is a discussion for another day.

    And for those of you talking about the much higher tax rates in the past. The high rates in the 1940s and 1950s were required to pay for the massive debt that we accumulated during World War 2. And the explosive growth in the 1950s was a direct function of the millions of GIs returning home and the associated demand for housing and other stuff. And the late 1960s and 1970s were not exactly economic times of plenty, arguably because of the continued oppressive tax rates.

    So again, I don't mind paying taxes. But I do mind the sense of entitlement that others have - whether it be from politicians or from those that think I am cheating them. The fact is, government is way, way too bloated now to the extent that our founding fathers must be rolling in their graves.

  • Report this Comment On April 13, 2013, at 4:40 PM, herky46q wrote:

    Interesting article and comments. If I were in the top 1 percent of income earners, I would certainly be donating more than the 20 percent of my gross income that I currently give back. I should have that freedom to do that rather than the government taking away a larger portion of it. I really hate that phrase fair share because the rich pay more than their fair share in taxes.

  • Report this Comment On April 13, 2013, at 4:59 PM, Schwaggz wrote:

    By law corporations must deliver the most value possible to their shareholders. It's not like they could just choose to pay more taxes to quiet down the ill informed population who feels corporations are evil entities. They have to take as many deductions as they legally can, so stop thinking of them as "tax dodgers". And blame the politicians who actually vote for and allow the deductions.

  • Report this Comment On April 13, 2013, at 6:22 PM, TsutomuChoro wrote:

    Its always amusing when people expose their ignorance by citing partially accurate information. Yes, in the past income tax rates got as high as 90% on income above a certain level. But how many high earners paid that rate? ZERO. Why, because there used to be oodles of loopholes and legal tax dodges that the wealthy used to legally avoid those draconian and confiscatory tax rates. The effective tax rates were nowhere near the marginal tax rates. As rates have come down over the years, the loopholes and tax shelters have been closed or removed. Today there are very few tax shelters.

    One of the arguments for low rates with few or no tax shelters is that often people put their money in tax sheltered investments that really provided no benefit to the economy or the individual, other than to avoid a confiscatory tax rate. By lowering rates and eliminating loopholes and/or tax shelters, then investors are encouraged to invest in really useful ventures that benefit all society.

  • Report this Comment On April 13, 2013, at 7:34 PM, Gr8life4me wrote:

    No Matter what, you got to admit that the across the board cut seems to be the best option for cutting the deficit.

  • Report this Comment On April 13, 2013, at 7:49 PM, Luannabelle wrote:

    Yes, the rich pay much too much in income tax, much more than their "fair share". However, an ENORMOUS mistake is made in exempting almost 50% of Americans from paying any federal income tax. EVERY adult American should have an "investment" in the US and should be required to file a federal tax form and pay a minimum of $100. If that were to happen we'd see many more Americans involved and paying attention to government.

  • Report this Comment On April 13, 2013, at 9:56 PM, MCCrockett wrote:

    The strange use of percentiles makes this article confusing. Why use 2nd-5th percentile instead of 95th-99th percentile?

  • Report this Comment On April 13, 2013, at 10:13 PM, MCCrockett wrote:

    My notion of a "fair" tax policy is one in which anyone that has a higher income than mine pays, at least, the same effective tax rate as I.

    Another way of stating this is that someone with lower income shouldn't bear a greater proportional tax burden than someone with a higher income.

  • Report this Comment On April 14, 2013, at 8:53 AM, onempo wrote:

    "Given the poverty rate is somewhere around $24,500 and we've paid as much as $140,000 in taxes at times, effectively enough to support 5 households ABOVE the poverty level, I think it's time for at least 5 households to return the (mandated) favor." "Get to work. You have a whole country that needs more than just our support. It needs yours, too."

    @Funfred - I'm part of the top 10% - not the 1% like you - and I'm glad I don't have your attitude towards my fellow Americans. If that's what happens when you get to the 1%, I hope I never make it.

    The people who work for minimum wage clean your office at night, collect your garbage, cook and serve your meals at restaurants, clean public bathrooms, and on and on. I personally am grateful they do such thankless work. My life is much easier and pleasant because of their efforts.

  • Report this Comment On April 14, 2013, at 12:02 PM, funfred wrote:

    What is this attitude I have that you speak of?

    I have no problems with people making a living to support themselves. I have a problem with people expecting MY living to support them.

  • Report this Comment On April 15, 2013, at 7:33 PM, phrush wrote:

    Too many people talk about "fairness" without thinking of what makes things "fair". Those arguing for lower rates on top incomes think "fair" means everybody should pay something equivalent. I prefer to think in terms of "fair" lives.

    I am top 1%, and I have a very good life. I would have a very good life if I earned a lot less, but I "work hard for my money" and - frankly - I enjoy what I do. ALL of my brothers and sisters are in the bottom 50%. They also work hard for their money, but I have as much money to spend in a week as they do in a year.

    Yes, I got a better education than they did. Yes, I made sacrifices in time early in my career to succeed. And yes, I have been more dedicated to my work than they have been. I think it is "fair" that I have a lot more money than they do.

    But I have 50 times as much disposable income as they do, and they are all hard-working responsible family leaders themselves. When you consider income, payroll, sales and property taxes, I pay about about 3 times as much of my income as they do. But I still have 50 times as much as they do in disposable income.

    And, no, I do NOT think that is FAIR. I can and should pay a lot more, as should the Koch brothers, Sheldon Adelman, all hedge fund managers and all the other people as rich or far richer than I.

    No hard working and responsible person (or those wanting but unable to work) should have to choose between food and medicine while people as well off as me find our tough choices to be whether we have enough money for our new BMWs and both our European and Caribbean vacations this year.

    And this is how I think about what is "fair".

    How do you think about it?

  • Report this Comment On April 15, 2013, at 7:47 PM, funfred wrote:

    You earned it.

    They didn't.

  • Report this Comment On April 16, 2013, at 11:32 AM, gskinner75006 wrote:

    As we have become a county riddled with PC whiners, this same group is also evolving into "what's mine is mine and what's yours is mine" or "everyone needs to pay but me crowd". This was once a great county where everyone worked hard for the American dream. Now they just want it taken from others and given to them. It is sad how far we have fallen.

  • Report this Comment On April 16, 2013, at 11:51 AM, Archondan wrote:

    All this bickering back and forth about who pays more, how pays their "fair" share, who should pay more or less all seems like a nice deflection of the true problem. WHERE is all the money going? How are the politicians managing it?

    I'm betting the politicians love that the country is more concerned with pointing fingers at each other than digging into their or governmental financial records. It seems easy to get the "50%" worked up about what the "other half" pay than it really how the money is used. Conspiracy theory or not, it's a tactic used for generations.

  • Report this Comment On April 16, 2013, at 11:56 AM, MFlahaven wrote:

    There are too many paying no taxes at all and have no incentive to care who pays or where their taxes are going. We are welfare nation now with the few carrying the many. It can't be sustained.

  • Report this Comment On April 16, 2013, at 12:11 PM, TMFBiggles wrote:

    @ Archondan -

    Want to see where those income taxes are actually going? Here's a companion article that breaks it down:

    http://www.fool.com/investing/general/2013/04/14/what-are-yo...

    - Alex

  • Report this Comment On April 16, 2013, at 12:34 PM, diogenes01 wrote:

    I suppose I would be around the 25th percentile, for whatever that is worth. I am also self-employed, which includes a 15.3% self-employment tax on top of my income bracket. I am perfectly content to pay the taxes that I pay because I know many people who are "hardworking people" but are currently down on their luck and in need of the public assistance that our taxes are meant to provide. I believe that the crux of this argument is that the extremely fortunate seem to view the less fortunate as some kind of "other" that do nothing but plot on how they can get your money. This is simply not the case. Also, if we want the lower-middle and lower class to not be a large tax burden in the future than we must make it possible for them to build a future for themselves; something that is impossible if someone were to not make much money and also pay any disposable income in taxes.

    I am certainly not part of the 1%, but I have enough disposable income to do much of what I want to do as well as pay my tax burden. I also find it interesting that such a small percentage of overall tax revenue comes from corporate taxes.

    It seems to me that the best way to reduce spending would be for Americans to be able to individually choose what programs they want their taxes to support and then cut and reposition spending to accurately reflect the will of the people. That way everyone can feel better about taxes and those who vehemently oppose helping the less fortunate can feel better about sending money to another cause.

  • Report this Comment On April 16, 2013, at 1:10 PM, GordonsGecko wrote:

    The lesson is, as always, to budget spending according to the revenue available. If I ran my business or my household the way our government runs it's fiscal business, I'd be in bankruptcy within 2 years.

    There's a reason that under-accumulators of wealth remain that way and often wonder "when will I be able to retire?". They spend every dollar they earn and when that's gone, they spend more on credit. They do not live within their means and expect everyone else to bail them out when they can no longer work; or when they CHOOSE to stop working.

    The government is just one giant under-accumulator of wealth. Hell, they can't even break even. Spend. Spend. Spend. What do the politicians care? It's not their money and they will never truly be held accountable. They will just kick the can down the road and make the citizens of this country pay for their selfishness.

  • Report this Comment On April 16, 2013, at 1:12 PM, irvingfisher wrote:

    Love the graphs!

  • Report this Comment On April 16, 2013, at 1:22 PM, irvingfisher wrote:

    Try to balance the budget yourself with this budget simulator. Keep in mind that the simulator does not appear to take the dynamic effects of spending and tax cuts into account. Keynesian economics proposes that stimulative measures (tax cuts and more spending) lead to economic growth which increases revenues, but the game doesn't seem to take this into account.

    Also, there is no soylent green option.

    http://www.marketplace.org/topics/economy/budget-hero

  • Report this Comment On April 16, 2013, at 1:34 PM, wolfman225 wrote:

    @diogenes01--"It seems to me that the best way to reduce spending would be for Americans to be able to individually choose what programs they want their taxes to support and then cut and reposition spending to accurately reflect the will of the people. That way everyone can feel better about taxes and those who vehemently oppose helping the less fortunate can feel better about sending money to another cause."

    For one thing, such a system could never work; for another, it would be unconstitutional (barring either Amendment or Constitutional Convention) as the Federal government is obligated to fulfill certain Constitutionally mandated duties.

    However, if you would be willing to propose that everything outside Constitutionally mandated obligations be funded according to individual taxpayer's choices....? I could get behind that. Although personally I think we should move towards a Federal government limited only to those powers and authority listed in the "Enumerated Powers" section of the Constitution, leaving all else the province of the individual state's and their citizens. At least under that system people would be free to "vote with their feet" if they didn't agree with the political/spending/taxation decisions of the majority.

  • Report this Comment On April 16, 2013, at 1:38 PM, XXF wrote:

    A large part of the problem is the constant uncertainty. I am a proponent of lower taxes, but if we could pass a law that raised taxes but put a moratorium on any additional tax changes for 10 years I would gladly make that trade. How about writing a forward looking bill?

    Tax rates on all brackets will rise 1% a year for the next 5 years and no changes will occur for the 5 years subsequent to that and federal spending will be cut 1% per quarter for the next three years and will not grow from that minimum amount the 7 years after that excepting in the event of Congressionally approved war.

    Ease us into new cuts, ease us into new revenues, and have all the politicians sit on their hands because the one thing that is certain out of all of this budget debate is that none of them are qualified.

  • Report this Comment On April 16, 2013, at 2:18 PM, diogenes01 wrote:

    Wofman225,

    I wasn't really suggesting that such a system would work, merely that many Americans believe in different things and that we would all feel better if we felt that we were solely funding programs that we personally believed in then people would feel less bad about having to pony up.

    Although, hypothetically, I think that were we to do such a thing the government would have to take a long look at what the American people want rather than what their taxes are actually spent on.

    (Although it wouldn't matter because nobody would choose to fund the IRS)

  • Report this Comment On April 16, 2013, at 2:24 PM, damilkman wrote:

    Greetings. I will second the individual who pointed out it appears most people did not read the article and are just spouting the rhetoric they already believed as fact. So I would kindly ask that people look at the graphs carefully. If you look at the government expense pie you hit the crux of the problem. The governement is mostly a wealth redistribution machine. Most of your taxes are going out of your pocket into someone elses. Only a minority of the money you give goes for anything that actually improves the country and thus it's citizens.

    I would not mind paying a higher tax rate if I saw the money was going to worthy causes be it a thousand mundane projects or something massive like a lunar colony or mission to Mars. Instead I get very little.

    In summary we can reword the statement "The Rich have to pay their share" to "The Rich have to pay us more money". Can you understand why perhaps the rich resent being asked to pay more when it goes right into some one elses hands? At least with charity they can choose whose hands it goes into.

    Which leads to another question. If we make entry level jobs, disability, or even chronic unemployment comfortable why bother working at all for anything or improving oneself? Why bother saving for retirement if there is the expectation that the government will take care of your every need?

    Ambition is a fragile flower? Back in my youth when I was stuck in a part time job making minimum wage, if I was rescued by well meaning Liberals such that I had a "LIVING WAGE", I would never have accomplished even a fraction of what I have done as I would have been quite content to exist instead of live.

    In summary I am of the opinion that massive wealth redistribution will ultimately fail with the end state being either default or massive inflation leading to a functional default. If a greater percentage of people do less because they know the redistribution engine will take care of them, the distribution of makers verses takers will decrease until the model breaks under it's own weight. Instead of bringing society together, massive wealth redistribution only renforces an individuals tendancy to stay at rest.

  • Report this Comment On April 20, 2013, at 2:38 PM, peterhswift wrote:

    There is a rather large math mistake in this article. If you click on "double taxes on the top 1%", it only decreases the deficit by only $231 billion. However if you look at the numbers higher up in the article, it should actually reduce the deficit by $805.12 billion.

    Percent paid by the top 1% = 37%.

    Total income taxes = $2,176 billion

    37% of $2,176 billion = $805.12

  • Report this Comment On October 18, 2013, at 9:41 PM, 67chopper wrote:

    onempo, I am glad to see that someone was thinking about the majority of workers. As much as most of the rich are so because of hard work, (though some have had a lot of luck, and can't see it) most of the poor are hard workers too. People seem to forget that most of the poor are WORKING POOR (not jobless takers). There are people who are working one or two jobs to support a child when the other parent left, or to support a sick loved one, or to pay medical bills or student loans, or just to pay the rent in NY, for example. There are far too many people in this rich country of ours who work hard.... this used to be enough to at least get you a house, some security, maybe put your kid through college. Now, a degree may not even get you a job, or get you a job that pays well, or one that won't get downsized when you are a year from retiring. Many who are rich are lucky, and seem to forget about the breaks they had along the way. At the same time, many of the poor pay higher rates for just about everything, while the rich get comps, deals, gifts. The rich naturally live in areas that have higher property taxes, which means that their schools are better equipped to teach their children, or they can afford private schools. They have extra money that they can use to invest to make more money without lifting a finger. EVERY PENNY of a poor person's income MUST go to food, rent, gas, medical expenses...they must PAY essentially for the things that allow them to continue to work. Many of those who serve our food, do so while sick, because if they take even one day off, they are often replaced on the spot. They can't afford to see a doctor anyway, and if they loose even one day of pay, this can mean homelessness, or their kids go without a meal... or they can't afford gas or a bus ticket to go to work. Many who work part time and on-call are treated like indentured servants by their places of employment, keeping them from getting more sustainable employment. We should all open our eyes and ask ourselves what our FELLOW Americans have to do to make it in this world. We are all in this together, we all depend on each other, even though some like to think they do not need the rest of us.

  • Report this Comment On October 18, 2013, at 10:07 PM, 67chopper wrote:

    Thank you, phrush for trying to make a great point, and to recognize yourself as part of the American community (and welcome!) You may work harder, or you may have just made better choices, or you may have been lucky enough to make the right choice at the right time, but you value human beings. Sure there are some who deserve more because that is what they work for. But there are also people in EVERY tax bracket who give of themselves regardless of how hard they work, and regardless of how high or low their income.

    Side note, I love the article... even with a few errors it makes it clear that you can't just cut spending- we don't know how much income will go down- you can't just tax the rich- you don't know how much money will end up unavailable to our economy.

    Being a liberal, I agree that there is no simple fix- that means we have to have a lot of minds at the table and we have to listen. But being a liberal means I have to consider the needs of those dropping from the middle class to the poor, those in poverty who will never have hope of an American dream- they just hope to pay for their next prescription or the next month's rent... those in the most dire and unstable conditions need our attention first. I am an atheist, but I believe that the Bible teaches that we shall be judged by how we treat the least among us- even if they are just plain lazy. They may not deserve a mansion (don't worry they may never get it unless they are lazy AND born rich), but they are still human, they still deserve food, they deserve to see a doctor.

    When we talk about cutting "government" it is not some aimless entity taking your hard earned money and giving it to someone who doesn't deserve it. It is a collective agreement that the American people have built up over two centuries. It is what we as a community have decided it is worth supporting together. We disagree from time to time on what is worth it, but until now, at least we thought that (most of) our fellow humans deserved us all spending a little so that every American can at least have their humanity. Now so many of us seem to have forgotten that.

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