I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
IMHO, a "fair share" of federal income tax is 25% of gross income from all sources above 138% of the federal poverty line for a 4 person household.
$1,000,000 - $34,638 X .25 = $241,341
A federal income tax return does not get much simpler than that (above).
I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
Thanks for the very precise response. But why do you agree with politicians clamoring for higher tax rates on such taxpayers because most taxpayers earning $1 million per year pay more than that in taxes.
I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
I disagree because of deductions, credits, exclusions and the source of income (e.g. capital gains) may reduce that $1M down to $600K (or less) of AGI.
According to the Tax Foundation only the top 1% (as of 2016) paid an effective rate (tax paid relative to total gross income) of over 25%. The top 5% (where your $1M annual income falls) paid 18.9% according to the follwing link.
https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/
If a person makes $1 million from wages then they are paying in excess of 25% federal income tax. If someone is earning $1 million from tax exempt interest, capital gains, and/or dividends then I agree they won't likely be paying 25% federal income tax.
We can dig a bit deeper looking at some hard data. In 2016, the latest year we have data available at the moment, there were 192,849 returns filed with AGI between $1m and $1.5m. Now, AGI doesn't necessarily equate to economic income but let's set that aside for the moment. Those taxpayers reported aggregate AGI of $232.6 billion. Those taxpayer reported tax liability after credits of $63.7 billion. That equates to an effective tax rate of 27.4%. Now, back to the question of AGI versus economic income. We can look at the detailed data and compute these taxpayers economic income. Those taxpayers reported total income of $237 billion. The difference between the AGI and total income was $3 billion in tax-exempt interest, $0.2b in exempt social security benefits, $0.2b in foreign-earned income exclusions, and deductions for things like self-employment tax, retirement contributions and alimony payments. So if we take that $63.7 billion amount and dividend by their total income of $237 billion then we get 26.9%.
Now we can run this analysis all the way up the AGI scale but what the cold hard data shows is people with incomes of $1m to $1.5m pay >25% in federal tax on their income. Of course, that doesn't include state and local taxes they pay also.
I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
I disagree because of deductions, credits, exclusions and the source of income (e.g. capital gains) may reduce that $1M down to $600K (or less) of AGI.
According to the Tax Foundation only the top 1% (as of 2016) paid an effective rate (tax paid relative to total gross income) of over 25%. The top 5% (where your $1M annual income falls) paid 18.9% according to the follwing link.
https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/
You have not addressed capital gains or carried interest, much less things like depreciation or the myriad of other accounting tricks used to reduce gross income to AGI. The bottom line is that once you leave the reality of gross income and enter the world of AGI then pretty much anything is possible.
The question posed was what I considered a "fair share". IMHO, that must address total gross income from all sources just as is stated in the 16A. The concept that income taxation should consider either the source of the income differently or how, or upon who, that income was later spent is fundamentally wrong.
Once you start lopping off amounts paid in state/local taxes, donated to charity or spent on mortagage interest than you have entered into the fictional income territory known as AGI.
If a person makes $1 million from wages then they are paying in excess of 25% federal income tax. If someone is earning $1 million from tax exempt interest, capital gains, and/or dividends then I agree they won't likely be paying 25% federal income tax.
We can dig a bit deeper looking at some hard data. In 2016, the latest year we have data available at the moment, there were 192,849 returns filed with AGI between $1m and $1.5m. Now, AGI doesn't necessarily equate to economic income but let's set that aside for the moment. Those taxpayers reported aggregate AGI of $232.6 billion. Those taxpayer reported tax liability after credits of $63.7 billion. That equates to an effective tax rate of 27.4%. Now, back to the question of AGI versus economic income. We can look at the detailed data and compute these taxpayers economic income. Those taxpayers reported total income of $237 billion. The difference between the AGI and total income was $3 billion in tax-exempt interest, $0.2b in exempt social security benefits, $0.2b in foreign-earned income exclusions, and deductions for things like self-employment tax, retirement contributions and alimony payments. So if we take that $63.7 billion amount and dividend by their total income of $237 billion then we get 26.9%.
Now we can run this analysis all the way up the AGI scale but what the cold hard data shows is people with incomes of $1m to $1.5m pay >25% in federal tax on their income. Of course, that doesn't include state and local taxes they pay also.
I've addressed all of those in the data I'm using. The data is directly from the IRS Statistics of Income site. Capital gains and carried interest amounts are all included in total income and adjusted gross income. And total income and adjusted gross income is computed before taking into account itemized deductions such as charitable deductions, mortgage interest, etc. And the tax liability amounts I quoted incorporate the lower tax rates on those items and reflect the benefit of itemized deductions. It's all taken into account in the numbers I quoted.
IMHO, a "fair share" of federal income tax is 25% of gross income from all sources above 138% of the federal poverty line for a 4 person household.
($1,000,000 - $34,638) X .25 = $241,341
A federal income tax return does not get much simpler than that (above).
In my view fair share should mean defining budget requirements and dividing that number by total population. Anything else is some sort of wealth redistribution.
i find it hard to understand how someone who pays no taxes can make the claim that someone else is not paying enough.
IIRC, you listed $237B adjusted down to $232B as the total change between gross income and adjusted gross income which seemed awfully low for that change. In any event, my figure (of about 24%) was easily within about 10% of your stated current effective taxation rates (of about 27%).
I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
That is simply ridiculous because it has nothing to do with the 16A.
I've seen many politicians call for high income earners to "pay their fair share" as they call for higher taxes on such earners. However, I've never seen any of these politicians or their supporters articulate precisely what that fair share amount should be. I realize fair share may be dependent on income so let's take someone who makes $1 million per year. If you agree with these politicians who think the current level of taxation is not sufficient then how much tax should someone making $1 million per year being paying in taxes? I'd like a specific amount or at least a range.
It isn't quite true that half pay none. Anyone who works pays at least 7.65% of their income in Social Security and Medicare taxes. True, that is not the "income tax" per se, but it is still a tax on income. But to the larger point that a minority of Americans pay a majority of federal taxes, that is true.The question was what is a fair share? As it stands now 9% pay half and half pay none, and the none half are busy trying to figure out how to get more out of the 9%.
That has nothing to do with the 16th.
In my view fair share should mean defining budget requirements and dividing that number by total population. Anything else is some sort of wealth redistribution.
i find it hard to understand how someone who pays no taxes can make the claim that someone else is not paying enough.
When they discuss things like people paying their fair share typically means getting money from those who are wealthier than the multi-millionaire's that are many members of the Democrat party. Just go ahead and put in a liberal politicians name and google their net worth.
It isn't quite true that half pay none. Anyone who works pays at least 7.65% of their income in Social Security and Medicare taxes. True, that is not the "income tax" per se, but it is still a tax on income. But to the larger point that a minority of Americans pay a majority of federal taxes, that is true.
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