Tax Burden: Who Pays What?

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

Diversification: Disciplinarian of Disciplinarians

Disciplined diversification works when you do and even when you don't want it to. Diversification in effect forces you to sell the thing that has been doing so well in your portfolio and to buy the thing that hasn't. While this makes rational sense, it is emotionally difficult to execute. Think back to the tail end of 2008--were you selling bonds and cash to buy stocks? Most likely you weren't unless your advisor or some sort of automatic trigger did it for you. Carl Richards of www.behaviorgap.com provided a good reminder of how diversification works in a recent NY Times blog post. The diversification he discusses here is more so related to equity asset-class diversification but also touches on the three basic building blocks--equities, bonds, and cash. He doesn't discuss alternative asset classes -- an asset class that doesn't fit neatly into the three basic categories -- being used to further diversification, but that's a detailed topic for another day.

The Value of Double-Checking & Monitoring Your Retirement Strategy

Motivational speaker Denis Waitley once remarked, “You must stick to your conviction, but be ready to abandon your assumptions.” That statement certainly applies to retirement planning. Your effort must not waver, yet you must also examine it from time to time. 1 Perhaps you may realize that you under-estimated your health insurance costs and will need more retirement income than previously assumed. Or perhaps, with today's low interest rates you are not getting the level of investment returns you counted on. With those factors and others in mind, here are some signs that you may need to double-check your retirement strategy. Your portfolio lacks significant diversification. Many baby boomers are approaching retirement with portfolios heavily weighted in U.S. equities. As many of them will have long retirements and a sustained need for growth investing, you could argue that this is entirely appropriate. Yet, U.S. equities by some measures may be over-valued by

65-80 Year Olds … A New and Exciting Demography

Should today’s 70-year-old American be considered “old?” How do you define that term these days? Statistically, your average 70-year-old has just a 2% chance of dying within a year. The estimated upper limits of average life expectancy is now 97, and a rapidly growing number of 70-year-olds will live past age 100. Perhaps more importantly, today’s 70-year-olds are in much better shape than their grandparents were at the same age. In most developed countries, healthy life expectancy from age 50 is growing faster than life expectancy itself, suggesting that the period of diminished vigor and ill health towards the end of life is being compressed. A recent series of articles in the Economist magazine suggest that we need a new term for people age 65 to 80, who are generally healthy and hearty, capable of knowledge-based work on an equal footing with 25-year-olds, and who are increasingly being shunted out of the workforce as if they were invalids or, well, “old.” Indeed, the a

Kevin Kroskey's Money & Mind

Search This Blog