This week congress is expected to begin negotiations on sweeping changes to the U.S. tax code. We expect taxes to go up, particularly for the wealthy, but the specific percentages, cutoff points, and rule changes will be determined in the coming months. The current mantra is that the wealthy should pay their fair share. Agreed. Everyone should pay their fair share, but what is a fair share? Is that more or less than what they are currently paying? How much are they paying now?
As the debate begins, we believe that it is important to get a good understanding of the starting point. How does the current tax code work and how much do the wealthy pay in taxes? Whatever your political perspective, it seems a reasonable starting point to answer these questions first, so that we can have a basis for deciding what to do next. In our Cedarstone way, we want to make sure that the opinions that we hold and the decisions that we make are based on data.
Here are a few key statistics based on IRS data and compiled by the Tax Foundation, using the most recently released IRS data for 2018, the year following the tax cuts induced by the Tax Cuts and Jobs Act.
We found the following:
The top 1% of Americans received 20.9% of Adjusted Gross Income and paid 40% of all individual income taxes, the highest share percentage since 1980.
The top 1% of Americans paid more in taxes than is borne by the bottom 90% combined.
The top 1% of Americans have an average income tax rate of 25.4%, which is 7.5 times the rate of the bottom 50% of taxpayers.
60% of American households received more in direct government benefits than they paid in federal taxes.
In case you were wondering, the top 1% of all taxpayers represent those with Adjusted Gross Income of $540,009 and above.
My goal in this article is not to sway your opinion, but to provide you with a starting point. Clearly, the American tax code is very progressive, meaning that the rich do pay a high percentage of all taxes. Is that fair? Are they paying their ‘fair share’? That is for you to decide, but I hope you make those decisions armed with an understanding of how the tax code is currently working. If you would like to dig more into the details, here is a great source for understanding the IRS statistics.
Comentários