Filed your tax return, did you? What a relief! A little depressing, when you think how much you had to pay, but government costs money, and you have to pay your fair share. And Uncle Sam is deeply in debt.
Well, there’s this nagging suspicion that it isn’t completely fair. And there are all these things we keep hearing about so many other people not paying taxes at all, while receiving all sorts of services and benefits. You are paying and they are not!
You’ve heard statements to the effect that 47 percent of Americans don’t pay any taxes. Bunch of freeloaders, huh! But they get to live in the Land of the Free and be protected by our military law enforcement and drive on our streets and highways and drink safe water and send their kids to our schools, without paying anything for it.
But they do pay taxes. They may not owe any federal income taxes at tax time, but that is not the same as not paying taxes. Those who are not benefitting very much from earning opportunities and the present state of our economy are not paying as much as those who are doing well (but not those who are doing extremely, obscenely well…)
In 2008 Americans in the bottom 50 percent of taxpayers averaged $15,300.
The first $9,350 of income for singles was shielded from taxes this year; for couples it was $18,700. (No, make that married couples.) Those are 2010 numbers; but it was about the same in 2008. So there were lots of people who did not owe federal income taxes.
That doesn’t mean they had not paid any federal payroll taxes, or didn’t pay lots of sales taxes, property taxes, utility taxes, fuel taxes, phone taxes, and a whole swat of others.
In fact, the poor, as delineated in terms of paying or owing federal income taxes, or not, carry more of the state and local tax burden than do the rich, in all states except Vermont.
What do we know about the tax-paying situation of the people at the tippy-top of the income range? According to the IRS, they are paying less than they used to.
Going back to 1961, there were 398 taxpayers who made a million bucks or more, that year. The IRS keeps track of the top 400 taxpayers’ income and tax obligations, for purposes of an annual report. (This report was suppressed during most of the George W. Bush administration, but now is public again.)
The tax burden on the top 400 has been cut drastically! The share of their income paid in taxes turns out to be 16.6 percent, once all the special deductions and dodges have been applied. That’s income tax, mind you. How about payroll taxes? Hardly makes any difference.
But most of us had a different kind of change in our federal tax obligation, from 1961 until now. For lower echelon wage slaves, income taxes were about 13 percent back then. Now—22.5.
The top 400 taxpayers now pay, on average, 18.7 percent of their income in federal income taxes. Their average income is $344,760,000. The average income of the single working stiff is about $26,000.
We are told that the rich are paying a huge share of the total income taxes the IRS receives. Apparently not enough that they are willing to get rid of the extra money, and we certainly don’t want them to feel painful hardship, but this should be looked at just out of fairness.
If they made a ton of money as hedge-fund managers, as John Paulson did, they can duck current income taxes. Paulson got fees totaling $9 billion in the past two years. He would have to pay only after the first $300,000, but that leaves a bunch of money that would be taxable—except that in 2007 Congress decided hedge-fund managers pay only 15 percent, not the top rate of 35 percent, because their fees are not income, but capital gains.
Well, 15 percent of $4-billion-plus is still a nice little contribution to the national treasury, right? Except that if it is called “carried interest” and left in the fund, taxes can be deferred indefinitely.
But surely these find managers will want to spend some of that money, won’t they! There are yachts and luxury homes (and members of Congress?) to be bought.
Not a problem. The hedgies can borrow against their carried interest or whatever else they are leaving in place for tax non-payment purposes. The interest on their borrowings is tiny, compared with the tax rate they would pay if they didn’t cloister their fee income.
Donald Trump aspires to the highest office in the land. No, that does not mean an office suite at the top of Trump Tower, which he has anyhow.
There’s a 1993 law that lets real estate high-rollers use paper losses to offset cash income. Depreciation against rentals, for instance. There were two years when Donald Trump lived large and wheeled and dealt, and paid no income taxes.
The McCourts, Frank and Jamie, own the Dodgers, and are pretty good tax dodgers. They haven’t paid income taxes in six years or so. They spent a lot, but it was all borrowed, against their ticket take and so on.
Some folks are either too rich or too poor to pay any income taxes. Which do you think should continue to be excused from that onerous annual contribution to our deeply-in-debt Uncle?