the top 1% in income pay 39% of income taxes....

Now that I have your attention...

Before I get to my question, I need to preface my post with quick background. I am a career-changer and in school full-time as an accounting major. Fortunately, I am close to being done. Tonight was my second class in Tax and the professor has already pounded into our brains that corporations are over taxed in the US. I've been able to ignore this but tonight he put up on the board the following: (On edit: this data has nothing to do with corporations, he wasn't talking about corprations at this point, just about individuals... I segued clumsily and didn't make that clear)

(these numbers are just guestimations by the prof. he couldn't remember the EXACT figures)
Income level      Share of entire income taxes collected in US
----------------  -------------------------------------------
1% ($450,000+)   39%
10% xxxxxx         xx%
50% xxxxxx         3%


So, he said that the top 1% in income pay 39% of all the income taxes collected. There were audible gasps thru the room and I even heard murmurs of 'that's really high'. Of course he went on to preach that the rich already pay an onerous amount of tax as is demonstrated by this data.

But, I was sitting there thinking that this comparison is irrelevant and misleading. I mean, wouldn't it make more sense to compare the percentage of the revenue pie that the top 1% make to the percentage of the tax pie that they pay?

For example: what if the top 1% made 60% of the total revenue of the nation? Then comparing that 60% to the 39% of the total taxes paid seems more relevant and unbiased. I want to argue my point but I think I need real data to support myself and to make sure my thinking is correct.

Am I missing something? If not, anyone know where I can find data on how much the top 1% made collectively?

Thanks!

"The top 1 percent received 21.8 percent of all reported income in 2005"

This is a very interesting article:

http://www.nytimes.com/2007/03/29/business/29tax.html?ex=1332907200&en=7a75e549037fb358&ei=5124&partner=permalink&exprod=permalink

that's the kind of info I'm looking for. Then, wouldn't it make more sense to compare the 22% to the 39%??? It is misleading when you compare the 1% to the 39%. It doesn't make any sense to do that. In my financial accounting courses, they stress the importance of information being relevant, unbiased, etc. This does not meet those standards.

Nation's wealth, though I'll have to find some links for that.

investment income. (not loopholes, outright fraud). I believe that the top 1% controls at least 50% of the wealth.

their actual yearly income doesn't reflect accurately the amount of the wealth that they possess

If you want capitalism, the super-rich pay a lot.

Unregulated capitalism is self-destroying.

Take some history classes in addition to your math classes.

Look at the tax systems in other countries as part of your education.

I responded to that.

Maybe you need remedial reading comprehension as well.

understand what the hell it is.

"I got this terrible email from a friend!"

"Our professor told us ..."

"I'm concerned about..."

:boring::boring::boring::boring::boring::boring::boring:

I still don't know what your beef is or what the hell you are talking about.

got a clarification? because I don't think you understood the point of my post.

I can't believe a room full of college students had not learned that already. You claim they gasped in disbelief when informed that the rich pay higher taxes! Maybe your fellow students aren't that bright. What kind of college are you attending, anyway? One with some not too bright students, apparently.

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i think, perhaps, it's you that needs remedial reading lessons.

People, please consider what this poster is posting.

I'm not saying they're true or not true; I have no idea. But I would like a source for his claim.

They enjoy a challenge. Ask him for a reference for his statistics and then suggest he supply the statistics you would like to see. What you are experiencing is the brainwashing that business schools perform on undergrads.

Money IS unionized and you are attending the rally.

are from Tax Federation... or something... for the year 2005. However, he couldn't recall the income levels... just made guestimations.... I'll have to try to find his source

if I interpret your statistics correctly, is that the bottom 50% pay only 3% of the federal tax. What are the implications of that statistic in our democracy?

And congratulations on working so hard for a second career. It's not easy when you're older. Wish the best for you.

<http://www.taxfoundation.org/news/show/250.html>
Not sure of the objectivity/neutrality of this operation. They may be clean..founded 1937, FWIW
My guess is that the top 1/2% is a better indicator of the imbalance.

i think he said the Tax Foundation now that you jarred my memory. Thanks!

table 1 is where he got the data from...

top 1% accounted for 39.8% of total income taxes.... but he conveniently left out that the chart shows that they also accounted for 21.2% of the total adjusted gross income. THAT is what he should be comparing.

And, corporations are currently paying the lowest rates of income (franchise) tax since the 30s.

You deserve a better teacher.

kind of my fault... the data i posted has nothing to do with corp. tax. I didn't make that clear. I ignored his comments on corp. tax but then he went on to complain about individual tax also and illustrated it with his 'data'. By the way, he wrote the text that we're using... lol

First of all, the very top tax rate for individuals in the US is 35% by law, not 39%.

And the 35% only applies to income OVER 350k - not the ENTIRE 350k, only the amount AFTER 350k.

For EVERYONE, the tax rate applied to the first approx 8k is 10%.

Then, for every dollar between 8k - 32k, every citizens pays 15%, and so on and so on.

Unscrupulous people try to manipulate the numbers to make it appear the very wealthy pay 35% of every dollar in tax which is blatantly false.

what he is saying that out of ALL of the income taxes collected in the US, the top 1% contribute 39% of that total.

For example, an income tax bill of $1,000 means something totally different to a person making 10k than it does to a person making 100k. (Were it not adjusted for progressive taxation rates)

We expect that if your total dollar income is higher, the total dollars you pay in taxes is higher too. There is a finite amount of dollars collected, so progressively the highest income earners would have a bigger slice of that pie.

Was this news to anyone? It's simple multiplication, but it sounds like he was trying to make it something more profound than it actually is.

he also said that he did taxes for a dr. that made $800,000 but had $200,000 of taxes withheld. He stressed the $200,000. That's alot of money if looked at by itself but you have to look at the amount of income generated. I mean, hell, I'm no math genius (just ask tabasco) but that's only 25%! $200,000 is a lot to me and most but to someone who makes $800,00?!!?

income from the interest they collect on the money the Fed provides?

to include all federal taxes, especially the FICA. Most workers, as against most "coupon-cashers,"
pay more in FICA tax than income tax. So breaking out just the income tax piece is not a fair picture
of the tax burden on the bottom 90% or 95% or 99%. May be hard to find the breakdown. When adding in
state and local taxes (sales, real estate, payroll...) you can be sure the rich are far better off
than just comparing share of the income tax. IMHO, that is...

This is very relevant and always overlooked.

How many states don't charge income taxes (that would be: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) and what percentage of the top live in those states?

Also, this is an old article but interesting when looking at percentages:

"A mere 1% owns just a bit under half of all such wealth in the United States!"

http://www.commondreams.org/views06/0114-26.htm

(the author has his own website at http://www.garalperovitz.com )

I don't even know that those stats are accurate, however, I have heard other statistics that 2/3rd of corporations pay no taxes, and is this top one percent including corporations, or is it only individuals? Seems like corporations would be the ones making all the money, not individuals.
Another thing to consider is that (poor and middle class)individuals pay 40% or their gross income in taxes = federal, state, local, social security, property, sales, etc.
What is that statistic that the average person works the first 4 or 5 months of the year just to pay their taxes?

My tax cut plan: increase the individual tax exemption to $40,000. Seems fair to me, the millionaire gets his first 40 thousand tax free. The kid who makes minimum wage pays no taxes. If the statistics are true that the lowest 50% pay only 3%, my tax cut plan will not hurt the government's tax income, and will also give poor people more money to spend, stimulating the economy :)

not corporations. I didn't make that clear in my OP... but I have made a clarification on edit.

This should be brought into the conversation.

Corporations use the goods and services that taxes pay for in our country. They should not be excluded from this dialog, don't you agree? They can make campaign contributions, why not figure them into the equation? :)

(because they make so little, comparatively) amounts to 3% of the whole. (And I'm just accepting the prof's numbers -- who knows whether they're correct? Not me!).

apples and oranges.

Sure, their combined taxes may add up to 39% -- but their incomes, as you say, far exceed that.

What percent of their incomes does that 39% represent -- there's the question.

I think he was attempting to lead people to believe that the top 1% people PAY 39% income tax, and that's just not the case.

Good for you! And congrats on almost being done.

they pay in all taxes. Those in the top 1% may be paying 39% of the income tax, but what percent are they paying in Social Security? In 2007 any of earning less than $97,500 paid a 6.2% tax for SS (+1.45% for Medicare which does not have any income cap). On an income of $97,500 this comes to total $6,045 paid.

On an income of $450,000 it also comes to $6,045 paid, but that only equals 1.34% of income.

Warren Buffet has pointed out these inequities many times.

Reminds me of the old joke about the average income in a bar is $500M if Bill Gates is having a drink.

Just think about how much money they had to make to pay that much in taxes. Also, the lower earners will pay FICA (Soc Sec tax) on all their earnings while the high earners only on the first $95K or so. Also, think about the potential for the high earners to invest in tax shelters that reduce their tax bills. Just a few of these types of mental exercises will help you to understand the complexity of our economy and tax systems. This should also help you to understand how quoting a few simple statistics to "prove" a point verges on propaganda and says a lot about your teacher's mindset.

Don't recommend you go too far to challenge this authority figure in class (you are trying to change your career), but do try to use the questions and class work to educate yourself to the point of being able to reason through such broad concepts and you'll do just fine.

But I know it has cost my relatives their lives and that this is not a joking matter.

defense. It's like paying insurance, the more you want to insure the more you have to pay in insurance.

That 39% meme is one of the arguments for the "fair" tax. It is propaganda so people like you will vote against your own best interests. Do the wealthy plead with congress to provide a middle class tax cut? No they want to pay less and you pay more, that's what will happen with a one size fits all tax bracket. Say the "fair" tax was 25% of your income and 25% of their income. The government needs to raise taxes so the rate us upped to 27%, your after tax income will buy less of the necessities you need and the wealthy just cut back on a few less diamonds.

:evilgrin:

The truth is the orginal income tax only taxed the wealthy, and the expansion to the lower income taxes only came about for expansive foreign wars. The lower class does not reap financial advantage from these wars, so they not only lose more lives fighting so the wealthy can become more profitable, they get to pay taxes to boot. Ask what the top 1% pays as a portion of their income to Social Security or Medicare compared to the middle or lower class?

The problem with your professor is he is not informing you of the history of the tax system in terms of corporate and upper echelon taxes. Currently, the rates are almost the lowest they've ever been for corps or the top 1%. The problem is we also have a huge collective years of deficits as a result of the upper levels failure to "sacrifice" and pay their taxes to provide for the same foregin war they're profiting from.

The income tax was set up so that those who reaped the greatest monetary benefit from our society would pay bear the burdens of the financial needs of that society. In the same way that the biggest breadwinner in a family provides the greatest financial support for the family rather than hoarding ti for him/herself.