"The Rich Don't Pay Tax! …Or Do They?" IRS Data Update for 2010

Important 2012 Tax Data Update

IRS Data shows that the rich do pay tax… and lots of it.

John Gaver - Author of "The Rich Don't Pay Tax! …Or Do They?"
John Gaver
The Rich Don't Pay Tax! ...Or Do They? Book Cover

 

 

 

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Do the rich pay their fair share of income tax?

Or, do the rich take advantage of so many tax loopholes that they end up paying little or no federal income tax, leaving the rest of us to foot the bill?

You hear it everywhere - from members of Congress, from talking heads in the media, and even from celebrities. It has become a mantra for the left.

"The rich don't pay their fair share of taxes!"

That mantra echoes through the halls of Congress to the point that the echo doesn't die out, before someone else repeats it again. We're told all the time that the rich get tax breaks that allow them to pay little to no taxes at all.

But is that really true?

Well on December 11, 2014, the latest IRS Collections Data was released and it proves beyond any doubt whatsoever, that the answer to that question is an unqualified, "NO."

It is not true

In fact, the truth in that data goes even further. You see, as in years before, this year's IRS Collections Data proves that, contrary to the popular narrative, the rich pay far more than their share of taxes, based on income. To be more specific, the top 1% of income earners pay almost twice their share of personal income tax.

You read that right - twice their share. The new IRS Collections Data shows that in 2011 (the last year reported), the top-earning 1% of taxpayers earned 21.9% of all personal income, but paid 38.09% of all personal income taxes that were actually collected by the IRS. So do the math.

 38.09% of taxes
21.9% of income  = 1.74 times their share

Moreover, when we talk about the top 1%, we're not talking about billionaires or even people who earn millions of dollars a year. Sure, some of that top 1% will be really rich. But the same IRS Collections Data that gives us the tax shares, also shows us that the income floor to be in the top 1% in 2011, was only $434,682 and is made up of less than 1.4 million taxpayers.

For the top 5% of income earners, the tax numbers are not that different. To be in the top 5%, one must earn only $175,817 and that group pays 1.6 times their share of taxes, based on income.

But here are the really amazing numbers. To be in the top 10% of income earners one must earn a mere $125,195. Sure, that's a nice income. But it's not enough to call that person rich. Even IT directors can easily make that much. A good new car salesman can make that much. Of course, every member of Congress makes well over that amount. We're not talking about billionaires. Most of these people are just ordinary people who have worked hard and most would probably be surprised to learn that they're in the top 10% of income earners. But this group pays 1.5 times their share of federal personal income tax, based on income.

If you've read "The Rich Don't Pay Tax! …Or Do They?" then you know that a good portion of the calculations in that book are based on annually published IRS Collections Data by Income Percentile. As mentioned in the book, the IRS releases new collections data by percentile every year, on a very loose schedule.

On December 11, the IRS released its 2012 Collections Data detailing the amount of personal income tax collected in that year, broken down by income percentile. This new data shows that the disturbing trends that you learned about in the book, concerning tax inequity, is continuing.

Before going into the implications of this new data, the following table represents just the 2012 portion of the multi-year data found in those new multi-year spreadsheets. Also note that the data for the top 400 taxpayers comes from a different IRS report that is released on a different schedule. The most recent top 400 data is from the 2010 report.

2011 IRS Collections Data
Number of
Returns
(000)
AGI
(000,000)
Income
Taxes
Paid
(000,000)
Group's %
Share of
Total AGI
Group's %
Share of
Total Taxes
Group's
Avg. Tax
Rate (%)
Income
Floor for
Group
All
Taxpayers
136,080
9,041,744
1,184,978
100.00
100.00
13.11
(NA)
Top 400
400
108,055
19,134
1.31
2.01
18.04
99.1MM
Top 1%
1,361
1,976,738
451,328
21.86
38.09
22.83
434,682
Top 5%
6,804
3,330,944
698,543
36.84
58.95
20.97
175,817
Top 10%
13,608
4,327,899
831,445
47.87
70.17
19.21
125,195
Top 25%
34,020
6,261,677
1,024,046
69.25
86.42
16.35
73,354
Top 50%
68,040
8,037,800
1,152,063
88.90
97.22
14.33
36,055
Bottom 50%
68,040
1,003,944
32,915
11.1
2.78
* 3.28
(NA)
(* Taken from a related IRS spreadsheet)

The source file for the above table, containing data going back to 2001 can be found on the IRS website at:
http://www.irs.gov/file_source/pub/irs-soi/12in01etr.xls

The source for the top 400 taxpayer data going back to 1992, can be found on the IRS website at:
http://www.irs.gov/pub/irs-soi/10intop400.pdf

It should be noted that beginning with the 2010 IRS Collections Data, the IRS began a new methodology of reporting this data. In particular, all individual income tax returns except returns of dependents are now used in the computation, whereas previous releases were based on only returns with positive AGI. The resulting data shows very slight changes in the actual percentages. For example, the 2009 data shows a very tiny 0.1% difference in tax versus income inequity. In other words, the changes are largely insignificant. But you should be aware of this change, nontheless.

Once again, this data shows that the top income earners pay a far greater percentage of the total tax load than justified by their percentage of total of US personal income earned. As mentioned above, the top 1% of income earners pay almost double their share in taxes, based on their share of income earned. So compare that with the bottom 50% of income earners, who earned 11.1% of the income, but paid only 2.78% of the taxes collected. In other words, they paid just 25% of their share, based on income.

Crocodile Tears

Don't shed any crocodile tears for the wealthy. If your attitude is, "Who cares about the rich? They can afford to pay more tax", then you need to re-think your position. That's because the rich can also afford to live wherever they want. If you punish them for success, they'll just take their money and the jobs it creates, to a more success-friendly jurisdiction.

When the people who pay the taxes and create the jobs leave, those who remain will be expected to make up the difference in taxes… and do so with fewer jobs and less income. They'll be saddled with a $17 Trillion Debt and nobody left with money enough to pay it off. That's a real fiscal cliff.

If you think that won't happen, think again. Since Barack Obama took office and began his "Soak the Rich" agenda, formal renunciations of U.S. citizenship by wealthy taxpayers have skyrocketed more than 1300% above what Obama inherited from Bush. Note that to be on the Federal Register lists of those who renounce U.S. citizenship, from which that count of expats is taken, one has to have had a tax liability of more than $157,000 per year for each of the previous five years or have a net worth of more than $2,000,000 at the time of renunciation. In other words, that 1300% increase in formal renunciations represents only those who are at least somewhat wealthy.

But for every formal expatriation of which we hear, thousands of Americans just "drop out." They become what is popularly termed, "Practically Transparent" (PT). They don't renounce. They just don't tell the U.S. government where they're going. They just acquire citizenship in some more success-friendly jurisdiction, move themselves and their money offshore and stop paying U.S. taxes. Sure, under U.S. law that's illegal, if they have not formally renounced. But since they're taxpaying, job-creating citizens of another country that won't extradite them for failure to pay U.S. taxes, they don't seem to be particularly concerned. Furthermore, as shown in "The Rich Don't Pay Tax! …Or Do They?", there are millions of them.

Remember too, as also detailed in the book, Zogby reported that more than 3 million US citizens "relocate" offshore every year. Of course, since the poor can't afford to leave all of our social programs behind, we have reason to believe that most of those 3 million people who are relocating offshore are at least upper middle class taxpayers.

This of course, means that the middle class and the poor will have to pick up the slack in taxes and job creation in the USA, as more and more of the rich leave. Now before you dismiss that as a problem, just ask yourself this very important question:

"When was the last time you heard of anyone getting a job from a poor person?"

Put this all together and you have the makings of an economic disaster of epic proportions, for "Main Street" USA. Make no mistake. "Soak the Rich" will hurt the middle class and the poor far more than it will hurt the wealthy, if it hurts the wealthy at all.

I remember my karate instructor telling us that the only thing better than blocking a blow, was to avoid it entirely - to not be where the blow is aimed, when it gets there. This works for the wealthy, concerning taxes, as well. The wealthy have the means to simply avoid any overly aggressive attack from our tax-hungry government and, as these numbers so strongly indicate, many are already doing just that. They're avoiding being a target, by taking their money, their jobs and themselves to a more success-friendly jurisdiction.

If you don't entirely grasp the severity of what you just read, then you probably haven't read, "The Rich Don't Pay Tax! …Or Do They?"

Click one of the links on the left or below, to order your copy now.

All of this is explained in the book, in much greater detail than we have room for here, along with lot's more statistical information. After reading the book, you'll understand even more clearly, just how severe the problems are that face this nation. Of course the book also provides a thoroughly vetted solution for this problem and more.

Order your copy now.

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