New IRS Collections Data Available for 2010

If you've read "The Rich Don't Pay Tax! …Or Do They?" then you know that a good portion of our calculations are based on annually published IRS Collections Data by Income Percentile. At the time of original publication, the most recent such data was for the 2009 tax year. As also mentioned in the book, the IRS releases new collections data by percentile every year, on a very loose schedule.

The IRS has released its 2010 Collections Data detailing the amount of personal income tax collected in 2010, 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 2010 portion of the multi-year data in those new spreadsheets.

2010 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	135,033	8,039,779	949,144	100.00	100.00	11.81	(NA)
Top 400	400	108,204	19,593	1.31	1.9	18.11	109.7MM
Top 1%	1,350	1,517,146	354,810	18.87	37.38	23.39	369,691
Top 5%	6,752	2,716,199	560,649	33.78	59.07	20.64	161,579
Top 10%	13,503	3,631,364	670,319	45.17	70.62	18.46	116,623
Top 25%	33,758	5,430,952	826,796	67.55	87.11	15.22	69,126
Top 50%	67,517	7,095,680	926,782	88.26	97.64	13.06	34,338
Bottom 50%	67,517	944,099	22,363	16.74	2.36	* 2.37	(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/PUP/taxstats/indtaxstats/10in01etr.xls

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, using the old methodology, the 2009 data shows that the top 1% of income earners paid 2.2 times their share of tax, based on income, while under the new methodology, that group of 2009 taxpayers appears to have paid 2.1 times their share. In other words, the changes are largely insignificant.

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 US income earned. In fact, the top 1% of income earners pay almost exactly double their share in taxes, based on their share of income earned. Just divide 37.38% by 18.87%. That's double their share. Compare that with the bottom 50% of income earners, who earned 16.74% of the income, but paid only 2.36% of the taxes collected. In other words, they paid just 14.1% 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. They'll be saddled with a $16 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. In just the last year, we've heard of two major expatriations - Facebook co-founder, Eduardo Saverin and songwriter, Denise Rich. You might even remember Denise Rich as the ex-wife of Marc Rich, the billionaire who fled to Switzerland to avoid tax evasion charges and who Bill Clinton ultimately pardoned (it pays to have unethical friends in high places). But even so, we only heard of them because of special circumstance. Saverin's expatriation made news because of his Facebook connection and Rich went public, stating that her move was very much motivated by tax planning.

But for every formal expatriation that we hear of, 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 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, they don't seem to be particularly concerned. Furthermore, there are millions of them.

Remember too, that as detailed in the "The Rich Don't Pay Tax! …Or Do They?", 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 to reason that most of that 3 million people are at least upper middle class.

Worse yet, as recorded in the Federal Register (Examiner.com), formal expatriations have skyrocketed to unprecedented levels, since Obama took office and began his "Soak the Rich" campaign. The expatriation level for 2011 (the last complete year reported) is almost eight times what is was in 2008, before Obama took office and more than double the record high, prior to 2008. It's a safe bet that few, if any of those expats are poor.

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. But 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 far more than the wealthy. 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 was aimed. This works for the wealthy, concerning taxes, as well. The wealthy have the means to simply avoid any attack from our tax-hungry government and, as these numbers so strongly indicate, many are already doing so.

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.

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