Posts Tagged ‘Income taxes’

In total, how much do Americans pay in taxes? For what? To whom?.

January 26, 2017

Since tax reform is on the front burner, it’s time for some tax facts.

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Americans pay a tad over $5 trillion in taxes to the Feds, States and Local Governments.

Technical note: In government parlance, the taxes are called “revenue”.

By taxing authority

Drilling down, the $5 trillion is split roughly 50%-30%-20% to the Feds, States and Locals, respectively

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By type of tax

Roughly 1/3 of the $5 trillion is income taxes individual and corporate)

about 1/4 is ad valorem taxes (think sales and property taxes)

just under 1/5 are social insurance (i.e. Social Security, Medicare, Medicaid)

… slightly more than 1/5 are fees and charges (think tolls, business licenses)

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* * * * *

Income taxes

Roughly 1/3 of the $5 trillion – about $1.8 trillion — is income taxes

…  83.4% are individual income taxes; only 16.6% are corporate income taxes

… about 80% of income taxes go to the Feds; around 20% goes to the States & Locals

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* * * * *

Ad-valorem taxes

Roughly 1/4 of the $5 trillion in total taxes paid – about $1.2 trillion – is ad-valorem taxes – taxes paid based on the value of something bought or owned.

…  about 40% of ad-valorem taxes are Local property taxes

…  about 1/3 are Sales Taxes …  going mostly to the States

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* * * * *

Social Insurance

Roughly 1/5 of the $5 trillion in total taxes paid – about $961 billion – is social insurance – with about 80% going to the Feds

…  roughly 60% of the social insurance payments going to the Feds is for Social Security

…  almost 1/4 of the social insurance payments going to the Feds is for Medicare.

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* * * * *

Pulling it all together Ken’s Rosetta Stone of Taxes

All the details — now much? to whom? for what?

Click for a PDF: Ken’s Rosetta Stone of Taxes

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PDF          Data Source

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In total, how much do Americans pay in taxes? For what? To whom?.

September 11, 2012

Americans pay a tad over $5 trillion in taxes to the Feds, States and Local Governments.

Technical note: In government parlance, the taxes are called “revenue”.

By taxing authority

Drilling down, the $5 trillion is split roughly 50%-30%-20% to the Feds, States and Locals, respectively

image

* * * * *

By type of tax

Roughly 1/3 of the $5 trillion is income taxes individual and corporate)

about 1/4 is ad valorem taxes (think sales and property taxes)

just under 1/5 are social insurance (i.e. Social Security, Medicare, Medicaid)

… slightly more than 1/5 are fees and charges (think tolls, business licenses)

image

* * * * *

Income taxes

Roughly 1/3 of the $5 trillion – about $1.8 trillion — is income taxes

…  83.4% are individual income taxes; only 16.6% are corporate income taxes

… about 80% of income taxes go to the Feds; around 20% goes to the States & Locals

image

* * * * *

Ad-valorem taxes

Roughly 1/4 of the $5 trillion in total taxes paid – about $1.2 trillion – is ad-valorem taxes – taxes paid based on the value of something bought or owned.

…  about 40% of ad-valorem taxes are Local property taxes

…  about 1/3 are Sales Taxes …  going mostly to the States

image

* * * * *

Social Insurance

Roughly 1/5 of the $5 trillion in total taxes paid – about $961 billion – is social insurance – with about 80% going to the Feds

…  roughly 60% of the social insurance payments going to the Feds is for Social Security

…  almost 1/4 of the social insurance payments going to the Feds is for Medicare.

image

* * * * *

Pulling it all together Ken’s Rosetta Stone of Taxes

All the details — now much? to whom? for what?

Click for a PDF: Ken’s Rosetta Stone of Taxes

image

PDF          Data Source

>> Latest Posts

Interesting twist: Is the U.S. tax system progressive or regressive?

August 23, 2012

A couple of years ago – in the HomaFiles most read post – I tried to answer the question: “Is the U.S. tax system progressive or regressive?

My conclusion: progressive … for sure.

TIME even picked up the post and said I was “fair minded” and “undeniably right”.

Case closed, right?

Well – in the spirit of fair mindedness – I’ve done some analyses that indicate some degree of regressiveness.

Oh my …

* * * * *

Oft-reported are the facts that — except for anomalies — higher income folks pay higher average income tax rates.

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So, why does Warren Buffett whine that his taxes aren’t high enough and middle income people feel so squeezed.

Well, here’s a partial answer.

A couple of weeks ago the Fed released a report that caught my eye.

The Fed’s Survey of Consumer Finances reported a substantial drop in Americans’ net worth … especially for those in the middle income ranges.

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Given the net worth numbers, I tried a different twist on income tax rates … rather than the usual income taxes as a percentage of income, I calc’d another ratio: income taxes as a percentage of net worth.

Gets interesting …

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The lowest half still pays nothing or gets a credit. … that doesn’t change no matter how you cut it.

But, the mid-income ranges pay the highest % of net worth.

While only a point or two, suddenly progressive rates becomes regressive.

Hmmm …

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TAX WARNING to DINKs: The marriage penalty is coming back …

July 31, 2012

One of the provisions of the Bush tax plan was to eliminate the so-called marriage penalty … the tax rules and rates that had a husband & wife pay more income taxes if they were married than if they stayed single.

I’ve been bemused that in all of the chatter about Obama’s obsession with jacking rates, I haven’t heard anything about the resurrection of the marriage penalty …  at least for evil rich people.

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Here’s the rub: Obama’s tax hikes apply to individuals earning more than $200,000 and families earning more than $250,000.

Let’s do a simple example: Sally and Bob – single and living together – each earn $200,000.

So, Obama doesn’t touch their wallets.

But, if Sally & Bob get married … then BAM !

Their income taxes go up about $6,000.

Huh?

Of their $400,000 combined income, the first $250,000 is immunized from Obama’s tax hikes.

But, the $150,000 over the $250,000 ceiling on fair earnings … gets hit with the roughly 4% increase in the upper bracket marginal tax rates (from 35% to 39.6%).

Simple arithmetic: $150,000 times 4% = $6,000.

Back to the key point: tying the knot costs Bob & Sally about $6,000 annually in added taxes.

On average, that accumulates to about $250,000 in added taxes over their expected lifetimes … just because they got married.

Is that fair?

Note: polls consistently say that singles lean more towards Obama than do married folks.

It’s called economic rationality.

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Buffett, Romney & the Give Back to Society Rate

January 30, 2012

The cameo by Buffett’s secretary at last night’s SOTU address, and Mitt’s released tax returns have re-elevated the issue “coddling the rich” with low tax rates (compared to their secretaries).

Last fall, when we dissected Buffett’s taxes, we coined a  measure: the GBSR™ – “Give Back to Society Rate

We defined the GBSR™ as the sum of taxes paid plus charitable contributions – since those are all money that’s supposed to be going to the common good, albeit administered by different organizations – divided by AGI.

We crunched the numbers and concluded that Buffett pays about $7 million in Federal taxes, about $3 million in state taxes, and about $20 million to charities … for a total of $30 million … which dived by his $63 million AGI … gives a GBSR™ of almost 50% (47.6% to be precise).

We concluded that Buffett may not be the piker that he claims to be.  And, maybe he should stop causing trouble for other folks by constantly whining about the tax code.

In Romney’s case, his release says that he made $21 million … paid $3 million in taxes … and donated $3.7 million to charities.  So, his tax rate may sound meager @ 14%, but his GBSR™ is almost 32% – and that’s not counting state & local income taxes.  My bet: add S&L taxes in and Mitt ‘s GBSR™ is way over 40%, too.

So, it just may be that the tax code is leading fat cats to do the right thing – it’s just that they’re giving much of their dough to private charities instead of the Feds.

Do you blame them?

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Here’s the original HomaFIles post:

Squeezing Buffett’s numbers … Part 5 (and done !)
Homa Files 10/21/2011

OK, today should about do it.

After a recap, I’ll drop my conclusion on you … my very surprising conclusion

First. a recap to get everybody on the same page.

In Part 1, we looked hard at Buffett’s effective income tax rate (17.4%), and showed how he could get to that low rate by offsetting practically all of his ordinary income with $23 million in deductions.

This conclusion debunks the popular pundit point that he gets to the rate by having practically all of his income in capital gains and dividends.

In Part 2, we showed that about $20 million of the deductions are probably charitable contributions – a device that rich folks use to (1) do good things and (2) to manage down their tax liabilities.

Better to give to a cause that you believe in, right? Why give it to the government and have it waste the money?

In Part 3, we agreed that Buffett’s tax rate as a percentage of his taxable income is probably less than his secretary’s – partially due to his capital gains being taxed at a comparatively low rate, but mostly because he shelters his ordinary income with charitable deductions.

And, we showed how ordinary earners can get to a rate lower than Warren’s … just by donating a huge chunk of their income to charity. Not realistic, but mathematically possible.

In Part 4, we showed that Buffett’s tax rate as a percentage of AGI is only 11% …. about half of the estimated rate for our hypothetical secretary surrogates.

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Now, my first reaction when I stared at the taxes to AGI rate was “Wow, Buffett’s right – he’s nothing but a coddled piker.”

But now, I’m not so sure.

On one hand, his paying a rate (to taxable income) that’s 5 points less than his secretary doesn’t seem fair. Especially since he gets to the rate by exploiting some dreaded tax loopholes, aka. “deductions”.

The situation seems even worse when you consider his taxes to AGI rate – a mere 11% – less than half of his secretary’s rate (I suspect).

Gotta jack up taxes, right?

Not so fast.

Let’s construct another measure: the GBSR™ – “Give Back to Society Rate

Since I’m coining the measure, I’ll define the GBSR™ as the sum of taxes paid plus charitable contributions – since those are all money that’s supposed to be going to the common good, albeit administered by different organizations – divided by AGI.

OK, so what’s Buffett’s GBSR?

Well, based on my estimates, Buffett pays about $7 million in Federal taxes, about $3 million in state taxes, and about $20 million to charities … for a total of $30 million … which dived by his $63 million AGI … gives a GBSR™ rate of almost 50% (47.6% to be precise).

Now, let’s pretend that Buffett’s secretary profiles like our $100,000 ordinary earner above. Her charitable deductions would be at most $5,700. Otherwise she wouldn’t be taking the standard deduction, she’d itemize.

So, her GBSR™ @ $100,000 AGI is 27.5% ($5,700 + $21,709 = 27,409 / $100,0000 = 27.5%).

That means that Buffett’s GBSR™ is almost twice his secretary’s.

Hmmm.

Maybe he’s not such a bad guy and I should stop ranting about him.

And, maybe he should stop causing trouble for other folks by constantly whining about the tax code.

It just may be that the tax code is leading to the right answer.

Just have to look around the trees to see the forest.

AMEN

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Let’s see HER tax returns !

January 26, 2012

Obama seems determined to structure the U.S. income tax code around Warren Buffett and his secretary.

There she was … in Michelle’s box for the SOUTU address.

Well, seems that cameo appearance is sparking some scrutiny.

Is she, in fact,  a tax-abused waif living from paycheck to paycheck?

According to Forbes: Warren Buffett’s Secretary Likely Makes Between $200,000 And $500,000/Year

Warren Buffet’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the President’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss.

Bosanek’s prominent role in Obama’s “fairness” campaign has finally  piqued curiosity.

How much does her boss pay this downtrodden woman?

So far, no one has volunteered this information.

We can get an approximate answer by consulting IRS data on tax rates by adjusted gross income, which would approximate her salary, assuming she does not have significant dividend, interest or capital-gains income (like her boss).

I assume the tax rate Obama refers to is from her own earnings.

Insofar as Buffet (like Mitt Romney) earns income primarily from capital gains, which are taxed at 15 percent (and according to Obama need to be raised for reasons of fairness), we need to determine how much income a taxpayer like Bosanek must earn in order to pay an average tax rate above fifteen percent. This is easy to do.

The IRS publishes detailed tax tables by income level.

The latest results are for 2009. They show that taxpayers earning an adjusted gross income between $100,000 and $200,000 pay an average rate of twelve percent.

12% is below Buffet’s rate; so she must earn more than that.

Taxpayers earning adjusted gross incomes of $200,000 to $500,000, pay an average tax rate of nineteen percent.

Therefore Buffet must pay Debbie Bosanke a salary above two hundred thousand.

At that level of income, she is scarcely the symbol of injustice that Obama wishes her to project.

While we’re at it, how about a peek at Buffett’s returns?

After all, if we’re going to revamp the entire tax code off of 2 data points, let’s at least have all the data that the points have to offer.

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Fair share revisited…

October 11, 2011

Obama’s tax plans don’t really impact , so this issue is strictly philosophical.

I’m still struggling with his “fair share” riff.

Out of 140 million tax filers, there 1,470 millionaires who pay no taxes of them.

Doesn’t sound like they’re paying their fair share, but there aren’t many of them … and, I bet each has an interesting story.

More generally, according to the IRS, folks making:
• More than $1 million pay 24% of income in taxes
•  $200,000 to $300,000 pay 17.5%
•  $100,000 to $125,000 pay 9.9%
•  $50,000 to $60,000 pay 6.3%
•  $20,000 to $30,000 pay 2.5%

And, the IRS reports that – as a % of income tax revenues:
• The top 1% pays 39%
• The top 5% pays 60%
• The top 10% pays 72%
• The bottom half pays 3%

So, what’s “fair share”?

Neither Obama nor his frontmen seem comfortable saying/

Wouldn’t you like to know?

Hmmm.

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