Enough Is Enough – Stop the Stupidity! Learn the Truth About Government Spending & Taxes

I am disgusted with the politicians in Washington.  This battling and posturing do no one any good.  The results of the recent Pyrrhic debacle showed up on world markets as doomsday.  Trying to pit Americans against one another is insidious and ugly.  I have heard enough about “millionaires should pay their fair share,” and “these measures put all the burden on the people who can least afford it.”

In plain language, cutting spending means fewer benefits from the government for people who vote.  Raising someone else’s taxes sounds very tempting, especially targeting “millionaires with their jets,” and giant, profitable, villain, oil corporations, that are using “loopholes” and “write-offs” to avoid taxes, and sending all the good jobs overseas to boot.

A lot of political rhetoric seems aimed at creating class hatred, and barriers between so-called “rich” and “poor” people.  Politicians are fond of disparaging successful Americans, implying that they are somehow dishonest, uncaring, evil, and greedy for not sharing more of their wealth with our government.  On the other side, politicians seem to say that less successful Americans would be helpless victims of the rich, if it were not for the championship, and protection of the federal government.  A fair person puts this pandering aside and looks at who is paying for the government.

Do you really know how the government spends money and who pays for it?  Well try this on.

We do not need to guess about government spending or taxes.  The IRS provides good information on their websites.  Here is the IRS chart for the 2009 budget, in billions of dollars.  In this example, the government spent 40.2% more than it collected in taxes.  The deficit for 2009, is 1.4 trillion dollars

This chart shows how much the federal government collected from each type of tax they levy.  They collected 2.3 trillion dollars.

*Source Internal Revenue Service

Only 50% of total taxes come from personal income tax.  The rest comes from other taxes.

Corporations pay taxes too.

When we pay for gasoline, telephone, internet, and cable TV, excise tax is included in the price.  http://www.irs.gov/pub/irs-soi/histab20.xls

When a wealthy person makes large gifts, or dies with a large estate, the government collects Gift & Estate taxes.

Who really pays taxes?

Corporations pay 29%

Corporations pay 29% of the total tax bill for the USA.  In addition to income tax, they match the amount withheld from employee paychecks for Medicare and Social Security.  They pay all of the Federal Unemployment Taxes for their employees.  Think of how much gasoline, telecommunications, airline tickets, and other excise taxed items corporations buy.

Top 1% pay 20%

Would it shock you to find out that the people in the top 1% of individual taxpayers (those making more than $340,000 in a year, including all the millionaires we hear about) pay 20% of the total.  These 1.4 million taxpayers pay an average of $332,000 per return.

Top 2-5% pay 10%

The next 2-5% of taxpayers are people who earn between $140,000 and $340,000 per year .  This 4% of taxpayers (5.6 million returns) pays 10% of all taxes, averaging $44,000 per return.

Together, the top 5%, 7 million Americans,  pay 30% of the total tax burden, more than all the corporations, put together.

Top 5-10% pay 7%

The next 7 million people earn $100,000 to 140,000.  They are 5% of all taxpayers; they pay 7% of total taxes, averaging $23,000.

Top 10-25% pay 13%

The next category includes 21 million returns – 15% of all taxpayers.  They make $60,000 to $100,000 per year and pay an average of $15,000 per return, 13% of the total tax bill.

Top 25-50% pay 14%

The next 25% of taxpayers (35 million) earn between $33,000 and $60,000 per year.  They pay 14% of the taxes, and average $9,000 per return.

The Other 50% pay 7%

The other 70 million taxpayers, make under $33,000 per year, and average $2,000 per return (mostly payroll and excise taxes).  They pay 7%.

Here is the IRS analysis of effective tax rates by income bracket:  https://2thinkis2be.wordpress.com/2012/06/23/for-those-who-doubt-irs-income-tax-analysis-2009-by-income-bracket/

Is This Fair?

Unfortunately, the U.S. Government does not publish its spending by taxpayer.  I imagine the proportion of benefits does not match the proportion of taxes.

  1. Numbers may not be exactly comparable.  US Government budget (fiscal) years are Oct 1 – Sep 30.  Taxes are collected based on the calendar year.
  2. Number of Returns and % Paid are 10-year averages for 1999-2008
  3. Corporations Pay the Employer portion of Employment taxes, plus unemployment taxes, and a large proportion of excise taxes.
  4. Estate & Gift Taxes were allocated to the top two income brackets.
  5. The table uses IRS 2009 revenue numbers.