Skip to main content

Tax Burden: Who Pays What?

Image
By
The info below provides a good summary from the Kiplinger Tax Letter on who pays taxes in the US and to what extent.

---
(From Kiplinger Tax Letter)

Do the rich pay taxes?  New IRS statistics show the burden on taxpayers.

The top 1% of all filers paid 37.4% of all federal income taxes in 2010, the most recent year IRS has analyzed.  That's up from 36.3% the previous year. They reported 18.9% of total adjusted gross income, also higher than the year before.  However, the average tax rate paid by the top 1% fell slightly to 23.4% of their AGI.  Filers needed to have AGI of at least $369,691 to qualify for the top 1% of earners.

The highest 5% paid 59.1% of total income tax and accounted for 33.8% of all adjusted gross income.  They each had AGI of at least $161,579.  The top 10% of filers, those with AGIs of $116,623 or more, bore 70.6% of the total tax burden while bringing in slightly more than 45% of the total adjusted gross income.

The bottom 50% of filers paid 2.36% of the total federal income tax take, mainly because of the refundable tax credits.   Their average tax rate was 2.4% of their AGI.

Two things to note about the data: The average tax rates would be higher if the IRS expressed them as a percentage of taxable income instead of AGI.  Also, the Service excluded returns filed by dependents from the calculations this year.

---

Best Regards,

Kevin Kroskey, CFP, MBA
Labels:

Popular posts from this blog

Don't File Your Taxes Too Soon

By
I'd like to remind everyone to not be too anxious to file your taxes. Many taxpayers rush to file their tax returns as quickly as possible. Ordinarily, that’s fine. But if you own mutual funds, don’t file your tax return before March 1. In past years, revised 1099s were often issued, reclassifying distributions and/or their amounts. This was a huge headache for the investors who had already filed tax returns based on the original documentation. These hapless consumers found themselves forced to redo their returns and file amended tax returns, adjusting the amount they owed or were due in refunds - and paying their tax preparer additional fees to do the extra work. It looks like 2010 may be the same. Therefore, if you own mutual funds, do not file your tax return before March 1. By then, any amended IRS forms are likely to arrive, potentially helping you avoid the hassle and costs of filing an amended return. Kevin Kroskey, CFP, MBA
Read more

Bangladesh Butter Production Predicts U.S. Stock Returns

By
After reading the title of this post, my hope is that a look of disbelief is cast on your face. Of course butter production in Bangladesh has nothing to do with prediction of US stock market returns. However, through data mining all sorts of 'relationships' can be demonstrated. Many mutual funds, ETFs, and trading strategies are built upon these data mining strategies--most often to the harm of investors that utilize them. As Jason Zweig describes in a recent article in the Wall Street Journal, entitled Data Mining Isn't a Good Bet For Stock-Market Predictions , "The stock market generates such vast quantities of information that, if you plow through enough of it for long enough, you can always find some relationship that appears to generate spectacular returns -- by coincidence alone . This sham is known as data mining." I recall in from my business statistics course in grad school, how I was able to show that ice cream consumption was correlated to the murder ra
Read more

Paying for College and Getting Your Money's Worth

By
According to the Student Loan Marketing Association (more commonly known as Sallie Mae Bank), the average tuition, room and board at a private college comes to $43,921. Public tuition for in-state students at state colleges amounted to $19,548 (about half of which is room and board), with out-of-state students paying an average of $34,031. How are parents and students finding the cash to afford this expense? Sallie Mae breaks it down as follows: 34% from scholarships and grants that don’t have to be paid back, coming from the college itself or the state or federal government, often based on need and academic performance. Parents typically pay 29% of the total bill (an average of $7,000) out of savings or income, and other family members (think: grandparents) are paying another 5%. The students themselves are paying for 12% of the cost, on average. The rest, roughly 20% of the total, is made up of loans.  The federal government’s loan program offers up to $5,500 a year fo
Read more