There is no better time than an election year to "spin" some income tax statistics. Getting the facts from reliable sources will help you decide which candidates are telling the truth and hopefully help you decide how to cast your vote.
Who are these "1%" people anyway? What percentile do I fall in?
According to the Tax Foundation and based on 2009 income tax returns, taxpayers were categorized according to their federal tax return Adjusted Gross Income (AGI) as follows:
- Top 1%: $344,000+
- Top 5%: $172,000+
- Top 10%: $112,000+
- Top 25%: $66,000+
- Top 50%: $32,000+
What proportion of total personal income taxes does each group pay?
- The top 1% of taxpayers pay about 37% of the total of all personal income taxes.
- The top 5% pay almost 60%.
- The top 10% pay about 70%.
- The top 25% pay about 87%.
- The top 50% pay about 98%.
- The bottom 50% pay about 2%.
Nonetheless, no matter how you spin it, our tax system is relatively proportional and somewhat progressive (progressive in that higher income people pay a higher percentage of their income in taxes).
According to the Institute on Taxation and Economic Policy, the share of total taxes paid (including federal, state and local taxes, sales taxes, and excise taxes) roughly matches the share of total income for each income group.
- The lowest income group paid 2.1% of taxes and earned 3.4% of total income.
- The top 1% income group paid about 22% of total taxes and earned 21% of total income.
Clearly, there are many different ways to analyze tax policies and spin the statistics. One thing is for sure; it isn't as simple and clear cut as the politicians want to make it sound. Know the facts and vote accordingly!
About Bruce J. Berno, CFP®
Bruce J. Berno, CFP®is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com/.