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More on America’s flat tax structure


Citizens for Tax Justice has a breakdown of the effective tax rate paid by various income groups, taking all federal and state taxes into account. Some highlights:

(1) Outside the poorest 20% (average cash income $12,400) every other subgroup in the survey pays essentially a flat tax. For instance, those averaging 66K a year pay 28.5% of their income in taxes, while those averaging $1.3 million a year pay 30.8%

(2) This means, of course, that the percentage of taxes collected very closely reflects the percentage of income received by each group. For instance the fourth 20% of income earners (60th-79th percentile of income) received 18.9% of the total income of the U.S. population, and paid 18.9% of the total taxes.

(3) The bottom 99% of income earners paid an effective tax rate of 28.2%, in comparison to an overall national tax rate of 28.6%.

(4) If the data had been broken down into smaller increments, we would see that the super-rich actually pay considerably less than the national average effective tax rate. The 400 richest taxpayers in America in 2007 paid 16.7% in federal taxes, as compared to 18.0% for all taxpayers in 2009. In other words at the very top end the system is actually regressive.

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  • maxr

    What’s a country gotta do to get back to taxing the top earners at an 80% clip?

    • Warren Terra

      Every time I see some pissant Republican praising JFK’s move to reduce the top marginal rate I wish we’d see more Democrats offering to emulate JFK and “lower” the top rate to 77%.

    • richie

      than you will be in the bread line if your not already

      • Malaclypse

        Wow, a troll who opens long-dead threads with a post in which one-sixth of his words are not spelled correctly. I’m now convinced that the 1950s were an economic wasteland thanks to that socialist Eisenhower.

  • Warren Terra

    This is all about tax burden versus income – what about tax burden versus wealth?
    According to Wikipedia, the top 1% owned 40% of the wealth in 2001 (about twice what they owned a couple decades earlier, if I recall correctly). 2001 is now awhile ago, but from everything I read I don’t think our society has gotten less stratified since then. According to the PDF you link, the wealthiest 1% earn about 20% of all income and pay about 20% of all taxes – but when you consider that they’ve got 40% of all wealth, and consider that their share of all wealth has only been growing, it seems like while they are paying in equal proportion to their income they are paying much less than the poorer folks in proportion to their wealth, and much less in proportion to their ability to pay.

    • strategichamlet

      So how do you want to fix that given that income taxes won’t work?

      • Warren Terra

        (1) I’m not convinced by your “given”, i.e. I’m not convinced that progress towards addressing the issue I raised can’t be made by means of income taxes. After all, I suspect the overlap between people with high wealth and people with high incomes is pretty good. So we could simply make income taxes more progressive, and it’s likely that the wealthiest would pay more in proportion to their wealth than they do now.

        (2) A wealth tax is not an impossibility. Well, it’s not impossible to administer; like all new taxes, it’s likely a political impossibility.

        (3) It doesn’t really address this issue in any direct or timely way, but I’m strongly in favor of an estate tax (kicking in after a generous exemption).

      • Agent420

        The solution is not that hard, just institute an inventory tax. Every year everyone has to list their items that lead to their wealth and tax accordingly.
        Ask yourself this question: Why, if corporations are “people”, why don’t they have to pay taxes at the same rate as real people? Why doesn’t the entire corporation go to jail when they break the law.
        I think it is obvious to the most casual observer, corporations are nothing like people, more like cancer.

  • larryb33

    I just love the way that flat tax is framed as a “simpler tax”. What makes the tax code complicated is not the fact that it is progressive (sort of), but the mind numbing array of deductions and loopholes.
    At any rate– I don’t think we have to return to an Eisenhower era top marginal rate, rather we need to increase the capital gains rate and restore the estate tax to pre Bush levels. It is ridiculous that wealthy individuals are paying a 15% rate on their income.

    • Agent420

      A flat tax is not a progressive tax in any way. A poor person has to pay a larger percentage of their income compared to how much money it takes to live a reasonable life. My $927 per month is not enough to live a reasonable life, but what I have is a life and I am reasonably happy. Twice that and I would have a reasonable life, buy I digress.
      A rich person saying, “But it cost me a million a year just to stay alive”, is not reasonable. The fairest tax is the only one you have complete control over and that is property tax. Don’t like paying tax, live in the woods. Live in a multimillion dollar house, you have to pay the piper, commonly know as the taxman.

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  • Old Timer

    These charts are, if anything, under-inclusive of revenue extraction from the poor because they rarely include penal fines (e.g. speeding tickets, parking tickets, etc.) and “user fees” that are implemented with an overt desire to raise revenue.

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