The chart above shows the percentage of adjusted gross income (AGI) that different income groups of Americans pay in federal income tax. We chose the top categories ($500,000 to $1,000,000, and over $1,000,000) and matched them up with the some middle class numbers ($30,000 to $40,000, and $50,000 to $60,000). The data in these sets comes from IRS Publication 1304.

As you can see, there are two major points: one, the overall percentage both groups pay in federal income taxes has fallen over the last twenty years or so, and two, when Congress makes a major income tax policy change, it affects the top earners much more than other groups.

Adjusted gross income is defined as income minus adjustments, meaning after deductions. Of course in addition to federal income taxes there are employee contributions to Social Security, which are usually 6.2% of earnings (but are 4.2% in 2011 because of the payroll tax deduction) up to $106,800, which subsequently has a greater effect on the income below that limit than above. There's also Medicare withholding, which is 1.45% of earnings, and since both are set rates, they by nature have greater effect the less you earn.

Income taxes are also progressive in nature, meaning that as earners move up the ladder, they pay a higher rate on larger amounts of income, but only the income that reaches the next bracket. So for the 2011 tax year, a single person who has an AGI of $8,500, the limit of the bottom bracket, pays 10% on their taxable earnings. The person who makes $10,000 pays 10% on their taxable income up to that first bracket limit ($8,500) and then 15% on the income in the second $1,500, and so on. The highest rate is 35% on income above $379,150. 

On point one, progressives have long pointed out the drop in taxes paid by upper income earners: in 1986 those making more than $1,000,000 paid 40.2% of their AGI in income tax, and in 2009 that percentage was 24.2, after hitting a low of 22.1% in 2006. The drop after the Tax Reform Act of 1986 is evident, then growth after the Budget Act of 1990 and the broken promise of "no new taxes," the slight continued increase after the Budget Act of 1993 under President Clinton, then a gradual drop in the 1990s until the more pronounced fall after the Bush tax cuts.

The taxpayers in the middle class rungs though, saw a steady decline over that time period. Those in the $50-$60k category went from paying 15.5% of their AGI to federal income taxes in 1986 to paying 6.3% in 2009, and earners who made $30-$40k went from 12.2% in 1986 to 4% in 2009. Simply, many Americans are paying less in taxes over this time period. 

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The second point here is that as you can see from the numbers, when Congress makes a major change in income tax policy, most adjustments are going to affect the top earners. And not just in a narrative that fits around tax cuts for the rich at the expense of all other taxpayers: the chart also shows increases in the percentage of AGI paid by those with high incomes in times of recession, like in 1990 and 1993 (when taxes were raised) and even after 2007-2008. The obvious exception here is the early 2000s recession, when the Bush tax cuts went into effect, and AGI paid in taxes by the rich plunged as government surpluses disappeared. 

Of course, the current (2006-2009) slim increase in AGI paid by high earners could also mean that those in the higher income tax brackets are seeing more money come in, and subsequently have to pay more out in taxes, versus the middle class payers who have seen wages stagnate in the last few years and therefore had to pay less. The Congressional Budget Office has been documenting the rising inequality gap, and this could provide some secondary proof of that trend. 

And of course, this chart and analysis is about federal income taxes paid on wages, and for the high end earners, there are many more forms of typical income.

220 more tax facts that will make your head explode

http://www.businessinsider.com/20-more-tax-facts-that-will-make-your-head-explode-2010-4

Gus Lubin and Gregory White

If your head didn't explode from Reason's awesome tax video, then take a look at the new list.
Pundits talk a lot about the growing tax share of the rich, and the 47% of Americans who don't pay income tax. These arguments are somewhat unfair because they ignore the growing wealth disparity.
But they're just two of many ridiculous facts that emerge in the bureaucratic mess of taxing the world's biggest economy.
Most people are having a bad day. Thanks to inefficiency, everyone in America faces a rotten future.

Read more: http://www.businessinsider.com/20-more-tax-facts-that-will-make-your-head-explode-2010-4#ixzz1OhLu0vGx

There are 21 slides, and I just cannot post them all here.  Be sure to check out that link!!

From the comments:

Slide 6 is factually wrong:
54% of your federal income tax goes to the military

54% of the "Discretionary" Federal budget goes to the Military. The total Federal Budget, this is less than a Quarter, once you factor in Non-Discretionary spending, such as Social Security, Medicare, Medicaid.

Read more: http://www.businessinsider.com/20-more-tax-facts-that-will-make-your-head-explode-2010-4#ixzz1OhLEmh8B

http://www.nytimes.com/interactive/2010/02/01/us/budget.html

Are Taxes in the U.S. High or Low?; NYT

May 31, 2011, 6:00 am

Are Taxes in the U.S. High or Low?

By BRUCE BARTLETT

Bruce Bartlett has served as an economic adviser in the White House, the Treasury Department and Congress. 

Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

Just last week, House Republicans released a new plan to reduce unemployment. Its principal provision would reduce the top statutory income tax rate on businesses and individuals to 25 percent from 35 percent. No evidence was offered for the Republican argument that cutting taxes for the well-to-do and big corporations would reduce unemployment; it was simply asserted as self-evident.

One would not know from the Republican document that corporate taxes are expected to raise just 1.3 percent of G.D.P. in revenue this year, about a third of what it was in the 1950s.

The G.O.P. says global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.

 
Revenue Statistics of O.E.C.D. Member Countries, 2010

If taxes are low historically and in comparison with our global competitors, how are Republicans able to maintain that taxes are excessively high? They do so by ignoring the effective tax rate and concentrating solely on the statutory tax rate, which is often manipulated to make it appear that rates are much higher than they really are.

For example, Stephen Moore of The Wall Street Journal recently asserted that Democrats were trying to raise the top income tax rate to 62 percent from 35 percent. But most of the difference between these two rates is the payroll tax and state taxes that are already in existence. The rest consists largely of assuming tax increases that no one has formally proposed and that would be politically impossible to enact at the present time.

Ryan Chittum, in Columbia Journalism Review, responded with a commentary that called the Moore analysis “deeply disingenuous.”

Nevertheless, one routinely hears variations of the Moore argument from conservative commentators. By contrast, one almost never hears that total revenues are at their lowest level in two or three generations as a share of G.D.P. or that corporate tax revenues as a share of G.D.P. are the lowest among all major countries. One hears only that the statutory corporate tax rate in the United States is high compared with other countries, which is true but not necessarily relevant.

The economic importance of statutory tax rates is blown far out of proportion by Republicans looking for ways to make taxes look high when they are quite low. And they almost never note that the statutory tax rate applies only to the last dollar earned or that the effective tax rate is substantially lower even for the richest taxpayers and largest corporations because of tax exclusions, deductions, credits and the 15 percent top rate on dividends and capital gains.

The many adjustments to income permitted by the tax code, plus alternative tax rates on the largest sources of income of the wealthy, explain why the average federal income tax rate on the 400 richest people in America was 18.11 percent in 2008, according to the Internal Revenue Service, down from 26.38 percent when these data were first calculated in 1992. Among the top 400, 7.5 percent had an average tax rate of less than 10 percent, 25 percent paid between 10 and 15 percent, and 28 percent paid between 15 and 20 percent.

The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.

Who doesn't pay income taxes .. ?

By Frances Symes

"I hear that almost half of all Americans don’t pay income taxes, is that true?"

Statistics showing that an estimated 47 percent of American households did not pay income tax in 2009 have found their way into the talking points of many Republicans — and even some Democrats — over the past few months.
The estimate comes from a study by the nonpartisan Tax Policy Center, which is operated by the Urban Institute and the Brookings Institution.
The center found that while 47 percent paid no federal income taxes in 2009, most households did pay Medicare and Social Security payroll taxes. Only about 14 percent paid neither income or payroll taxes. Most of those people are elderly, though about 6 percent of non-elderly Americans pay neither income nor payroll taxes.
The vast majority of those with no tax liability are elderly or are low-income families.
Tax Policy Center experts have pointed out that this number is also connected with the recession. The combination of lower incomes and the extension of certain tax credits and tax cuts enacted through the 2009 stimulus helped to decrease the number of people paying federal income taxes.
The large number of people not paying federal income taxes is also related, they say, to the fact that policy makers of both parties have long made conscious decisions aimed at removing low-income working families from the income tax rolls.
One of the ways they have done this is through the Earned Income Tax Credit. The EITC, which was first put in place in 1975 and has been expanded by administrations of both parties since, is designed to encourage and reward work as well as offset payroll and income taxes for low- and moderate-income working people.
Approximately 25 million families benefit from the federal credit, which is available for working families with children that have annual incomes below about $35,000 to $48,000.

Policy makers use the income tax code to encourage or subsidize several behaviors deemed beneficial to society and the economy. The resulting loss of income from deductions and credits and other subsidies are called tax expenditures.
"What are tax expenditures?"
In his press conference last week, House Speaker John Boehner said that, in order to lower the corporate tax rate, a goal for Republicans, “we have to look at the tax expenditure side – the deductions, credits, and other gimmicks that may be in the tax code that have accumulated over the last 30 years – as a way of finding a way, finding which of those are appropriate, which aren’t, and using those savings in order to lower the corporate tax rate.”
Tax expenditures are revenue losses attributable to provisions of tax law that allow for special exclusion, exemption, or deduction or provide for a special credit or deferral of tax liability. The associated loss in revenue totals is estimated as equaling around $1 trillion each year.
Almost everyone benefits from these provisions. They include the mortgage interest deduction, deductions for nonbusiness state and local taxes and charitable contributions, and the exclusion of employer contributions to medical insurance premiums and medical care and contributions to retirement plans.
While some of these tax provisions, such as the mortgage interest deduction, primarily benefit higher-income taxpayers, others, such as the earned income tax credit and the child tax credit provide greater benefit to lower-income taxpayers.
There are indeed dozens of these expenditures benefiting both individuals and corporations covering a variety of policy areas, from education and training to housing and transportation.
— Frances Symes, Congress.org

Taxing times: Americans pay less in taxes than many other industrialized nations

 By Thomas Hargrove of Scripps Howard News Service 

Posted April 16, 2011 at 8 p.m.

WASHINGTON — Americans pay much less in taxes than most other people in the industrialized world.

Surprised?

According to the latest estimates from the Organization for Economic Cooperation and Development (OECD) — a Paris consortium that tracks financial conditions in 34 nations — the United States pays 24 percent of its total economy (as measured by gross domestic product) to taxes collected by all levels of government.

That’s a bargain compared to most nations.

Australians pay 27 percent; the Japanese pony up 28 percent; Canadians, 31 percent; British, 34 percent; Germans, 37 percent; French, 42 percent; and Swedes, 46 percent. Danes lead the world by forking over 48 percent to their government.

Economic experts agree that America holds a tremendous international advantage because it has the world’s largest national economy and also enjoys one of the world’s most modest tax burdens.

Among nations tracked by the OECD, only Turkey, Chile and Mexico generally have lower tax rates, slightly below what Americans pay.

“The lighter tax burden on individual Americans is certainly a benefit not only to us but also to the rest of the world,” Mickey Kantor, commerce secretary in the administration of President Bill Clinton, said in an interview. “It means we can consume more and invest more. And we certainly have more foreign investments outside the United States than do other nations.”

Kantor, who also was Clinton’s U.S. trade representative, from 1993 to 1997, said Americans pay less in taxes but also have a much smaller “social net” of government benefits — such as free health care, government-operated pensions and individual retirement accounts and free college tuition — than most European nations.

Yet Americans can be forgiven if they think their taxes are burdensome. The United States leads most of the world in aggressive taxation on income, both personal and corporate, as the primary means of raising government revenue.

“We are the only major country that does not have a broad-based value-added tax. And, in many ways, that means we have a most unfortunate system of taxation,” said Gary Hufbauer of the Peterson Institute for International Economics, a research organization in Washington, D.C.

The value-added tax, often called VAT, is a consumption tax on the estimated market value added to a product or material at each stage of its manufacture or distribution. It is much simpler and broader than U.S. sales taxes, paid only by a product’s final consumer or buyer.

The tax can dramatically increase the cost of goods. The least-expensive version of Apple’s iPad costs $499 plus sales tax in the United States. The digital device costs $621 in Japan, $693 in Britain, $712 in Spain and $742 in Germany and France.

“Obviously, we pay a lot of taxes on products, especially luxury products. Things like alcohol, cigarettes or beauty products,” said public-relations executive Ulrika “Ulli” Wippel, 36, from her home in Uppsala, Sweden. “The tax might be 12 percent on groceries, but 25 percent on some of those other products.”

Since taxes already are counted in the list prices of goods, people in Sweden rarely notice they are being heavily taxed. Sweden’s consumption taxes raise almost as much revenue as its general income tax, which is lower than the federal income tax in the United States.

“We never talked about the taxes we’d pay,” said Ulrika Wippel’s American-born husband, Jim Wippel. “I think there is a misconception on income taxes here, that it is so much higher than it is. When I go back to the States and tell them what I actually pay in income tax, jaws drop. Everyone thinks we are paying 40 or 50 percent, but it is so not true.”

Editor's note

This is the final of three stories about the tax burden we face in the United States and Florida. Click below for the other stories or pick up a copy of the Daily News on Sunday.
Part one: Tax burden five to six times higher in some states than others
Part two: Florida’s better, but families struggle to deal with tax burden

The OECD estimates Swedes pay an average of 25 percent of their income to a federal income tax, although the rate is progressively smaller for low-income earners.

The United States relies on personal income taxes to provide 36 percent of all tax revenue, according to the latest OECD estimates. American businesses pony up another 12 percent in levies on their incomes. Most other nations collect no more than a third — and often much less — of their revenues from a general levy on income.

Personal income taxes — filed by nearly 139 million Americans in 2010 — are probably the most invasive kind of levy, because people must tally their earnings, calculate often-complicated exemptions and then estimate what share must be given to the federal government and to the 41 states that also tax income.

“The United States has a system of taxation by confession,” quipped former U.S. Supreme Court Justice Hugo Black during a complex tax ruling in 1953.

The VAT and other levies on consumption are the primary method of raising revenue in most of the nations monitored by the OECD. Experts agree it’s a less invasive tax than direct levies against income. And foreign governments are using their reliance on the VAT to influence international trade.

“They are imposing those value-added taxes on our imports and exempting them on their exports,” Hufbauer said. “It has the effect of making their products more attractive. U.S. firms don’t have that advantage.”

Perhaps that’s why a growing number of economists, both liberal and conservative, are calling for a cut in the current rate of corporate income taxes, something President Barack Obama endorsed in this year’s State of the Union address to Congress.

“American corporations are being taxed more than those in other developed nations,” Kantor said. “That hurts our companies by making them less competitive.”

America also faces another tax challenge, because its reliance on income taxes has made the nation more vulnerable to startling revenue reductions that have created trillion-dollar deficits at the federal level and billion-dollar shortfalls for most state governments.

The OECD finding that taxes represented 24 percent of America’s gross domestic product in 2009 was actually down from nearly 28 percent of GDP in 2007, before the recession struck.

Canada, Britain, France and most other developed countries reported less than a 2-percentage-point drop in tax revenues as a percentage of the economy during the recession.

“I suspect that a large part of the difference is in the way the U.S. collects taxes,” said University of California, San Diego, economist Valerie Ramey.

An OECD study has found that the United States has one of the world’s most progressive tax systems, she said.

“As a confirming example, California has one of the most progressive income-tax systems in the country. In particular, it taxes capital gains as normal income,” Ramey said. “As a result, its tax revenues decline more during recessions and rise more during booms than other states.”