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Only 3% of Taxpayers Earn $200,000 or More
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Remember in the last Presidential election, when various Presidential hopefuls talked about raising taxes on the wealthy (or argued that raising taxes on those people would hurt small business and job growth)? According to information from the IRS, reported by CNN Money, only 3% of tax returns showed income of more than $200,000 a year. Three percent.
The tricky part about politics is that the media and the pundits make things bigger than they are. It’s like Republican hopeful Michelle Bachmann’s promise that she’ll lower the price of a gallon of gas to $2 if she is elected President. While the price of gasoline is important to me, and to many Americans, it’s not something that drives my decision making when voting for the leader of the free world.
Whether or not you agree with the politics of raising taxes (or raising revenue, depending on how much vocabulary gymnastics you’re willing to play), the reality is that raising taxes on those earning $200,000 or more only affects 3% of filers.
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Please publish the link. Is that $200,000 the actual income or the “taxable income”? Big difference, you know.
This is the link I left out:
http://money.cnn.com/2011/08/11/pf/tax_increase_rich/index.htm
Jim, I think I also read that those top 3% pay more than half of all taxes collected in the U.S. Sounds to me like they are paying their share. But, if they feel they aren’t, the U.S. Treasury takes donations.
Maybe instead of raising the top 3%’s tax rates even higher, the government should look at scaling back on foreign wars, nation-building, bail outs for banks and big corporations, and limit themselves to, oh I don’t know, only the constitutionally appointed items they are to provide.
I used to believe in never increasing taxes, but my own philosphy has changed a bit. Instead, I think EVERYONE should have to pay something. If you enjoy the benefits of government services, including protection from our military, etc, you ought to have to pay something for it.
As it is, we have some 47% of taxpayers paying nothing, either through deductions or low income. Why does no one ever want to talk about that side of the equation?
http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0
I agree with you on how we should scale back on the military spending (the bail outs for banks are a separate matter, I think the liquidity infusions are necessary but those hidden loans that made some people very rich, a product of the scale of the rescue, should be examined for fraud). The problem is that many of those engagements were started with Bush, so Republicans, who went along with it, lose credibility when they demand scaling back now.
Some of those same Republicans were around then, and yes, they do lose credibility. But there are a few who A)didn’t go along with it, and B)only recently came on the scene as freshman (now sophomore) Congressman who still have a chance to earn some credibility.
If you take HALF of EVERYTHING those 47% own, that will be equivalent to increasing the “super rich” tax brackets back to pre-Bush era.
Sounds like a great idea.
Jason, that figure is for income taxes alone. It doesn’t include social security or medicare, which account for the majority of non-wealthy-taxpayer taxes paid. EVERYONE does pay something.
If you actually look at gross income and gross federal taxes paid the wealthy pay a far smaller percentage of their income in tax. They get a break at the $107K mark annually. They also tend to have higher proportion of investment income which is taxed at a lower rate than wage income. With more disposable income at hand, the wealthy have a lot more flexibility to take advantage of tax breaks, like the mortgage interest deduction and contributions to 401(k)s.
A worker making $30K per year will have a hard time saving anything for retirement so…no tax break for 401(k) or IRA contributions, AND no funds saved for retirement. That worker’s current income all goes towards current expenses…which is why lowering taxes for the poor actually does stimulate the economy. They have things to spend it on, while the wealthy has all needs met so just keeps those savings in the bank.
All this griping about the poor, poor, wealthy folks in this country gets really tired. How much data do this country’s politicians need to prove that lower tax rates on the wealthy do not translate into job growth, or higher government revenues? That little if any ‘trickles’ down? 11 years since Clinton left office isn’t enough? It’s like trying to prove the sky is blue.
That said, I am in complete agreement with regards to scaling back spending…and I believe the most obvious, glaring choice would be the military and the 3+ wars we are currently fighting for no apparent reason, with no end in sight. Leaving all those too-big-to-fail banks in place to become even bigger now was a gargantuan mistake as well.
People who don’t pay taxes include “some” of the following folks …
retirees
military
prisoners
people on disability
unemployed
students
low income earners
part time workers
welfare
single, stay at home housekeepers
high deductions (ex: medical)
unprofitable business owners
etc.
If I may quote one of my favorite cadences “They say that in the Army, the pay is mighty fine. They give you $100.00 and take back $99.00!” (and they do) The military pays Federal AND State Taxes!
I was also thinking the same that only 3% of taxpayers earn 200K or more in TAXABLE income. Link will be very helpful.
Flat tax. Every person pays the same rate regardless of pay… and no more tax ride-offs.
A strict flat tax, with no exclusion threshhold is extraordinarily unfair.
Take the extreme example of a 20% tax on two people, one makes $1 a year, and the other $1million. 20 cents is a LOT more precious to the person making $1 a year than the $200k is to the person making the $1million.
A graduated system is a much more fair way to tax.
Agreed. What is average income of those 47% mentioned above who don’t pay taxes? Isn’t it something like less than $35,000 for a family of four?
So let’s flat tax that family of four making $35,000 the same as a millionaire/billionaire living in a 16 room mansion.
What percentage of those 47% of people are in families of four? I’m guessing single people are more heavily represented in that group.
I would say it would more heavily represent families, not single people. Single people cannot take as many credits/deductions as a family. So therefore would probably pay some taxes.
NateUVM,
Simple and astute answer but reason and logic will be lost on most people.
True, but you could do away with the complexity that is the IRS tax code and the thousands of IRS people who go with it.
I really do think simple is more fair in the end.
This is a a horrible, horrible idea.
A flat tax is unfair to the poor people.
How about a national sales tax?
on top of state sales tax?
I don’t understand how this is unfair… I think that our current system is unfair. I don’t think its fair that 47% of the people in this country still get to drive on the roads that the other 53% of the people paid for.
I don’t think its fair that we punish people for success and reward people for laziness. Sure, not all poor people are lazy, but there’s a whole lot more lazy poor people than lazy rich people.
I think people need to get over the whole idea of fair. Life isn’t fair.
I also think we need to get over ourselves in this country – 85% of “poor” people in the US have color televisions and cable TV. To 99.99% of the rest of the world’s population, these “poor” people are rich.
“Sure, not all poor people are lazy, but there’s a whole lot more lazy poor people than lazy rich people.”
That’s an interesting hypothesis. One’s intuition might think that’s true – but I wonder if that’s really the case.
For example, how much work (I’m equating working for one’s money as not being lazy) is actually done on the part of those less well off versus those that already had wealth in their families?
I’d imagine most people with wealth don’t have to work at all and can consciously be “lazy” all their lives and still make more money that someone that starts off at the bottom. A modest $1 million of wealth can generate $10,000 a year sitting in a bank account. Even better, it can be in assets that throw off dividends that are taxed even lower than those individuals working for that same $10,000 which must pay the taxes of “earned income” vs. just “passive income.”
I think it’s great to believe that those that work harder and put in the effort deserve more and earn more. I’d like to think so too as I’ve come from an immigrant family that started with little to nothing. However, looking at the way we tax folks and the cold hard fact that it “takes money to make money” – often once you have wealth, IMHO you may not need to work very hard at all to keep that wealth.
And agreed, by the world’s standards, most of our poor are much better off. And I would add that our rich are even more so, and could share in the sacrifice to help those that are not as fortunately. And also agreed for those that mentioned reforming our spending, if there wasn’t so much waste and/or corruption in the system, people would feel much better about contributing to the system in the first place.
I don’t think its fair that the railroad industry had to build its own conveyances for its transportation needs (read: railroads) while the automobile industry had its means (read: roads) subsidized by the government. How did that happen? Special interests…?
But I digress…
It’s a weak argument that generalizes poor people as “lazy.” And by simply pointing out poor financial decisions, you don’t prove that they are lazy, either. It also ignores the simple fact that things like access to the internet are becoming more-and-more critical to daily survival.
As more-and-more people are denied access to things like cable/internet as they become more-and-more integral to daily life, these marginilized populations get left further and farther behind. And due to nothing short of their pre-existing socio-economic status.
Laziness has nothing to do with it.
(As an aside, if you assume that the “rate of laziness,” as it were, were the same, regardless of wealth, there would naturally be more lazy poor people than lazy rich people. This is due to the simple fact that there are so many more rich people. As such, stating that there are so many more lazy poor people is akin to mentioning that the sun is bright. Again, kind-of a weak argument.)
I certainly wasn’t generalizing poor people as lazy – My intent was simplify my belief that in order to become “rich”, there is a whole lot more hard work getting there than it takes to become poor. There are always specific examples of individuals who had bad luck financially and became poor, the same as you have people who won the genetic lottery and were born into rich families.
You call this a weak arguement, but I certainly think that is a much more logical and legitiate argument than making a blanket statement that a flat tax is “unfair” to poor people. I’m sorry, I don’t think it is fair that 47% of the people who live in this country don’t pay taxes, and the other 53% pay for them to survive. I think everyone needs to put into the system, especially everyone is getting something out of it.
You are arguing a point that the current tax system isn’t fair, but yet in the same post you say “I think people need to get over the whole idea of fair. Life isn’t fair.” Which is it you are arguing for here? So the bottom 50% owns about 2% of the all the networth in the US how much do you want from them? (http://www.politifact.com/wisconsin/statements/2011/mar/10/michael-moore/michael-moore-says-400-americans-have-more-wealth-/) Half, two thirds, all? I mean talk about penny wise pound foolish.
Your assumption that poor people are generally lazy makes me think that you never been poor or lived in a poor community. There is no logic or validity to your statement. This is just your opinion. I’ve been poor and I can tell you that most of the poor people I’ve been around, work hard just to survive day to day. And if they have children, they work hard so that their children can have a better life and opportunities.
Most people who are rich are rich because they had lots of opportunities and not just because they work hard. Opportunities (jobs, friends, connections, educational resources) that are most likely never present for poor people.
Not necessarily. The rate doesn’t have to be 20%. If it was truly flat for everyone with no exemptions, the rate could be a more reasonable 4% (guess) or so. Does that sound more fair?
I don’t know any of the numbers, but what would 4% do?
4% of the bottom 50% who don’t pay will be a drop in the bucket and reducing the top 2% earners to a 4% tax bracket will obviously generate less.
There would be no way, even with reduced spending, to get out of debt.
As the spread between rich and poor increases, the flat line approach would work. I’m not sure on the exact %, but I know its under today’s current rates. You have such a small % of people making well north of 200k. The only trouble today is that these 200k people get to take tons of deductions to get that number way down. So if there was a flat tax without any deductions they would pay in much more essentially making up for the 50k people who dont pay so much in tax.
I havent thought through the numbers fully, but in theory there is a % where the gvt can have enough money to spend if they charged a flat rate. That number is below todays current rates.
how about a cost of living adjustment? 200k is barely middle class in manhattan.
Cutting benefits (food stamps, public housing, etc) on the bottom 3% of tax payers would only affect 3% as well.
I’d rather raise taxes on the top 3%, but your argument does absolutely nothing to convince those who want to cut benefits rather than raise revenue. They are two (possibly irreconsilable) mindsets.
Those that would argue that we need to cut more should take a look at all the underfunded programs that we already have, all the cutting that has already occured.
They need to realize that part of what has made this country great is the ability of its leaders to COMPROMISE. They need to realize that they live in a country with many different people, and, subsequently, ideas on how to make the current situation improve. A “my way or the highway” approach is patently un-American, nevermind unproductive.
Close loopholes in the tax code and return tax rates to the budget-friendly rates that existed during the mid/late-90′s. That, along with what we’ve already done with budget cuts and ending two wars would go a LONG ways in fixing our budgetary problems. Oh yeah, and implementing socialized medicine.
Everything is a compromise – the question is just where to draw the line.
Perhaps some would prefer a flat tax. Others might prefer a value addeed tax or a consumption tax. The current tax rates are a compromise – just like it would be a compromise if the tax rates are changed to the way they were 10 years ago.
The budget friendly years you noted included a lower level of benefits being paid by government.
By “lower level of benefits”, being paid out then, I assume that you are referring to the government currently “providing” two wars, lower taxes, and stimulus packages made necessary by a financial collapse. A financial collapse that we have yet to address in the way of additional regulation in an effort to prevent its recurrance.
Because, other than the above spending that benefit conglomerates and corporations, all I have seen since that period are cuts to programs that promote health and education and that benefit students, the poor and the elderly.
I just read the article on CNN.
I laughed when I read that restoring the Bush tax cuts would only add $750B. That does not solve the problem.
You need tax raises on all and you also have to cut back on entitlement programs.
Bill Snider
The real issue, though, is sustainability. You can spend a greater portion of GDP, you just can’t have it be an ever increasing proportion of GDP for it to be sustainable, which is what we have now.
End the two wars. Repeal the Bush tax cuts. Without cutting a single additional program we would then have a sustainable system. We might be spending at a higher level, relative to GDP, but it would be sustainable.
Amazing how the acts of one administration can totally derail a nation and its economy.
To generate $750B from the bottom who pay no taxes would require them to give away HALF of everything they own. That’s why this country ranks so poorly in income disparity.
JJ I have read many of your comments. I am trying to picture your background. Could you answer 3 questions for me. Rep/Democrat? Income (approx) and city you live in.
How many of those 3% employ you?
This tired argument again?
I submit that raising taxes on taxable income over a certain limit by 3% is not going to make anyone decide to:
1. Earn less money themselves
2. Hire less people
It’s not like domestic job growth outperformed when taxes were cut.
I hope you are not talking about small businesses that have tight budgets to pay their workers and grow their businesses. I was specifically talking about those small businesses that employ the majority of the country. Not everyone can afford corporate jets and gold plated toilet seats.
These business that you speak of, the ones with the tight budgets? Sound like they arne’t netting more than $200k, either. So they’ve got nothing to worry about here.
I think we were talking about individuals and not corporations, but for the sake of the discussion, let’s change the topic to corporations…
Considering the massive cash hoards they are sitting on (see: Apple, among others), they can afford to either 1) hire more, or 2) be taxed more.
As they aren’t doing much of the former, they should be compelled to do the latter.
That’s not fair. That’s like telling someone they have to spend their money or be taxed more on it.
You’re absolutely correct. That was how it reads, but that’s not what I meant.
What I meant to say is that these corporations are using their political connections to fight higher taxes under the false premise that it won’t allow them to create jobs.
It’s simply not true. If their access to additional funds were the limiting factor to their creating new jobs, they would have already been hiring. See: their cash hoards.
As such, reject the argument that increased taxes would hamper job growth and pass legislation that would increase revenue.
Hopefully that is clearer.
A lot of small businesses are not corporations.
And most small business don’t net more than $200k, to they aren’t in the discussion.
An awful lot of small businesses do net $200k.
If they net more than $200k, then how tight are things, really? So tight that they can’t pay another 1-2% on the income over $200k? I don’t think so.
Probably none of them, because CEOs get their compensation as stock and benefits instead of income, and pay capital gains taxes at preferential rates instead of normal income tax rates. Hence why Warren Buffett pays a lower tax rate than his housekeeper.
Warren buffet should tell the whole story.
He pays 15% on capital gains. That is his arguement. He forgets to mention that his corporation pays federal and state taxes at a high rate and he also pays on dividends.
He wishes that he was paying at his secretaries rate.
Bill Snider
“his corporation pays federal and state taxes at a high rate” – and that affects his personal return how? My company pays federal and state taxes too, and it doesn’t affect me one lick.
Unfortunately, if you want to have a good paying job out of college ($60,000+). People making over $200,000 need to hire you. If Obama wanted to tax the “billionaires” with corporate jets that don’t hire workers in the US, I’m all for it. His plan to tax small business families with incomes of $250,000 – $1,000,000 are stupid. They buy the real estate and own small businesses that could actually help him keep unemployment from crashing. They aren’t really living as lavishly is he portrays in the media. A lot of their income goes to pay their workers or to fund their business.
Although Warren Buffet was against raising taxes on corporate jets.
Because he owns NetJets. Raising taxes on those would be bad for business.
Why do people think that raising the top marginal tax rate will hurt small businesses?
If Joe Small Business owner takes home $200k in his salary then has to pay 1-2% more taxes on his take home pay then how does that mean his business is hurt? I don’t understand.
Are you assuming that the small business owner would be taxed on all of their business revenue and that raising his personal income tax would somehow make the business lose money? If you are then you don’t understand how taxes work.
Or is the business owner just going to lay off someone so he can make sure he pockets his full $200k profit after any taxes? Does laying off employees actually save him money? If so why hasn’t he already laid off that employee? Does he normally run his business as a charity but then turn into greedy McSCrooge if his marginal tax rate goes up 2%?
Explain to me exactly how raising the marginal personal income tax rate would cost anyone their job.
Sadly, a lot of people don’t understand how taxes work… which is why this whole “taxing the wealthy hurts small business” argument is even still around.
“is the business owner just going to lay off someone so he can make sure he pockets his full $200k profit after any taxes?”
In a word yes. My old boss just did that to 50 of his employees where I used to work. When business slows down and the economy is bad, they won’t take a hit to their wallets if their company goes in the red. This isn’t a charity. If they can’t make a certain profit, they will obviously hire less. Perhaps if the economy was doing better, Obama may be able to tax us all a bit more. Good luck doing this with 9% unemployment.
As the comments show, they are two irreconcilable mindsets. More taxes on the top 3% vs. fewer government benefits to the bottom 3%. Both sides wine to the point of making me sick.
BooHoo, if the government cuts food stamps poor people will suffer.
BooHoo, if the government taxes the rich more, they won’t hire.
The second premise is false. The rich currently aren’t hiring whether they are taxed or not.
I know a lot of people that make over $200k that are currently hiring.
I’m sure the gov’t can be a little smarter about this than taxing everyone over $200,000. If someone owns a company that hires people and is trying to grow their business, I’m sure they are doing “their fair share” for the country during these hard economic times.
I’ve seen the gov’t in action with our money and I have not been impressed. The stimulus plans have not done what they were promised to do. They did not lower unemployment. Their attempts to fix the housing market have failed miserably. What exactly will they achieve by taxing the rich?
Paying down the debt that was caused by failed stimulus plans, ongoing wars, and a healthcare bill that “won’t cost us a dime but will insure everyone one in America”.
Perhaps instead of taxing them more, they should lower the corporate tax rate in the U.S. which is already one of the highest in the world. Fix the confusing tax code which allows some companies to pay less than others. Maybe lay of on adding more gov’t regulations and just enforce the ones already in the books.
I’m sure if they can do that, they can get the economy going enough to afford to fund “some” of the social programs like food stamps and be able to raise taxes on the rich a bit more.
Well written, but I would need a stronger point to understand why the tax cuts are being imposed on pensioners only!
If it’s only 3%, they’re a minority that should be protected; therefore their tax rates should be lowered.
raising taxes on the “rich” while painful to small business owners is mostly symbolic since it doesn’t raise but $40 billion. That’s not close to covering the $1.4 trillion borrowing our government is projecting. At some point someone is going to have to repay all the borrowed money which means higher taxes for everyone. At the same time we’ll probably be experiencing huge cuts in domestic spending and high inflation. The young people in the US should be outraged at all the spending/borrowing that is going to haunt them and their children.
I am puzzled that it is easy to find individual incomes broken into number of earners for incomes under $100,000. However, from there up,the upper 6% of earners, I cannot find such breakdowns. There is so much difference between the top 95-99% of earners and the 1% we hear so much about. Is there any source that would set out information in a way to make it comparable to the breakdowns of the lower 94%? For example: How many individuals earn between 100,000-150,000; 150,000-200,000; etc.