Thousands of wealthy earners manage to zero out tax bills

archer wrote: I don't have the numbers here......and not particularly inclined to go digging for them.....but if 25% pay almost 90% of the income taxes.....how much of the total income does that 25% represent? Without that number your numbers, Bear, are meaningless.

I bookmarked the page with those numbers archer - and I'm happy to pass that information along for your education.

The top 1% have 20% of AGI and pay 38% of the income taxes
The top 5% have 35% of AGI and pay 59% of the income taxes
The top 10% have 46% of AGI and pay 70% of the income taxes
The top 25% have 67% of AGI and pay 87% of the income taxes
The top 50% have 87% of AGI and pay 97% of the income taxes
The bottom 50% have 13% of AGI and pay 3% of the income taxes

All in all, our top earners pay a higher share of the tax burden than their share of the income. The top 25% of wage earners pay a 20% premium above their share of the income in income taxes.

I've said it before, but I think it bears repeating. Our tax system is upside down. We should be paying the largest share of our taxes to the level of government that is closest to us, the one over which we have the most control and the one that is most able to be responsive to our needs. The higher the level of government, the less of our tax dollars it should be receiving with the federal government receiving the smallest share of our tax dollars instead of the largest one.

This union is supposed to be weighted more towards self government than centralized government. The concept is that we govern ourselves to the limits of our competency, at which point we elect a group of representatives to govern to the limit of their competency, and another to represent us at the State level to govern to the limits of their competency and finally to elect a group of representatives to represent us at the federal level. By the time we get to the least responsive level of government, the federal one, there should be only federal and foreign relations left for it to administer. That shouldn't take the lion's share of the total tax revenues generated by the population of the union to accomplish.

And that is the difference between you and I PS...the percentages seem fair to me overall...what isn't fair is the complexity of the tax code and the numerous crazy loopholes that let two individuals making equal incomes, with similar situations ( say married with 2 kids) pay vastly different taxes.

The wealthy and powerful have always tried to get everything. What is the one thing that brought about a middle-class? What is the one thing that helped people move out of poverty? What is the one thing the wealthy and powerful couldn't grab so easily? Home ownership.

And now, they have figured out how to do that and push more people out of the middle class into poverty.

Just scanning the articles here is what I saw:

There are about 4 million taxpayer who made over $200K and about 4,000 of them didn't owe income tax. That's about 1%.

The main reasons they saved are not loopholes or tax shelters available only to the rich.

One big reason was they invested in tax exempt items like municipal bond funds (you don't have to be rich to invest in these, you just need money you can invest).

Their biggest tax savings came from their deductions. The two biggest were the deductions for taxes and interest (usually home mortgage) paid. Next came charitable deductions.

They were helped by certain tax credits which did not exempt high income earners. This included the credit for first time home buyers and the Making Work Pay credit. They currenly save due to the 2% cut in payroll taxes.

They also save due to an Alternative Minimun Tax credit some receive. Some people might get hit with an AMT tax even with unrealised income (like exercising a stock option where they don't actually make money until they sell the stock).

There are also some in this group who had income outide the US (and paid taxes to those countries), but little US income.

You could also have people living off investment income who have a large capital gains loss one year but can only deduct the $3000 max allowed. But they can carry the loss over the following years and once they have a good gain that loss could mean they don't pay taxes one year.


If you want to "fix" much of this, you could just lower tax rates and eliminate all deductions and credits. Credits and deductions make taxes much more complicated as well.

archer wrote: And that is the difference between you and I PS...the percentages seem fair to me overall...what isn't fair is the complexity of the tax code and the numerous crazy loopholes that let two individuals making equal incomes, with similar situations ( say married with 2 kids) pay vastly different taxes.

If the percentages seem fair to you overall, then why the push to have those at the top pay even more than they already are to satisfy the "progressive" demand that they pay their "fair" share?

If two individuals in similar circumstances (married with 2 kids) have vastly different tax burdens it is because the two individuals are not so similar after all in how their money is managed. One would be giving generously to charity, where others and not themselves are the beneficiaries of the money (which is why charitable donations are not taxed), paying for insurance pre-tax instead of post-tax, putting more money into college funds for their children and retirement funds for themselves and doing many other things differently than spending every nickel, or more, that they made that year. And those two individuals, who manage their income in significantly different manners, should rightly have two vastly different tax burdens. Yes, they are both taking in approximately the same amount of raw dollars, but the manner in which those dollars are used is, and should be, more relevant to how it is taxed than the raw number of dollars is.

archer wrote: And that is the difference between you and I PS...the percentages seem fair to me overall...what isn't fair is the complexity of the tax code and the numerous crazy loopholes that let two individuals making equal incomes, with similar situations ( say married with 2 kids) pay vastly different taxes.

I'm not sure what crazy loopholes you are talking about, but a married couple with 2 kids benefits a lot with our current tax law if they are low to mid income.

After exemptions, standard deduction, and child tax credits a couple with 2 kids can make over $50,000 and owe zero federal income tax.

And if they make under $40,000 they will owe no tax but get money from the government in the form of the Earned Income Credit which can be as high as a $5100 "refund" (plus a $2000 child tax credit on top of that).

There is really nothing new in this story, the income tax system has been broken for decades. Everyone with a clue knows it, and it won't ever change except to get even worse. Ho Hum.

Pine's analysis is spot on as usual.

The real story here is that anyone is actually shocked or surprised by any of this. Were you people paying attention the last 20 years?

Joe wrote: There is really nothing new in this story, the income tax system has been broken for decades. Everyone with a clue knows it, and it won't ever change except to get even worse. Ho Hum.

Pine's analysis is spot on as usual.

The real story here is that anyone is actually shocked or surprised by any of this. Were you people paying attention the last 20 years?

[/b]

Zactly I said it many years ago.
And a good CPA can make anyone look poor in the eyes of the tax code.