Using readily accessible data from the Internal Revenue Service (NOT some biased special interest group) for the 10 years ending with 2005, we find irrefutable proof that (1) the “rich” are getting hosed and (2) tax cuts increase revenue.

From 1996 to 2005, taxpayers with less than $30,000 Adjusted Gross Income:

  • Saw a Federal income tax decrease of 46.06% from $741.01 to $399.72 per taxpayer. (above)
  • Saw their share of Federal income taxes decrease by 64.85% from 8.11% to 2.85%.
  • Saw their effective tax rate (income taxes as a percentage of their AGI) decrease 46.6% from 5.98% to 3.19%.
  • While their number of filers (also) decreased 17% from 59.83% to 49.59%, roughly half

Table Under $30,000 AGI

For the same time period, taxpayers with more than $30,000 Adjusted Gross Incomes (the other half):

  • Saw a Federal income tax INCREASE of 7.17% from $12,511.07 to $13,407.85 per taxpayer.
  • Saw their share of Federal income taxes INCREASE by 5.72% from 91.89%% to 97.15%
  • Saw their effective tax rate decrease 16.96% from 16.60% to 13.78%
  • While their number of filers INCREASED 25.48%% from 40.17%% to 50.41%.

Table Over $30,000 AGI

Share of Taxes Over $30,000 AGI

And finally those with Adjusted Gross Incomes of over $1,000,000:

  • Saw a Federal income tax decrease of 11.27% from a “paltry” $874,171.03 to an “embarrassing” $775,676.02 per taxpayer.
  • Saw their share of Federal income taxes INCREASE by 71.15% from 14.73% to 25.21%.
  • Saw their effective tax decrease 25.52% from 30.84% to 22.97%.
  • While their number of filers INCREASED 145% from 0.09% to 0.23%.

Table Over $1,000,000 AGI

Share of Taxes Over $1,000,000 AGI

Currently, (2005), half of the taxpayers (who are also under $30,000 AGI):

  • paid 2.85% of the Federal income taxes.
  • or about $399.72 per filer.
  • at an effective tax rate of 3.19%.

While the other half of the taxpayers:

  • paid 97.15% of the Federal income taxes.
  • or $13,407.85 per filer (or 33.54 times more than the other half).
  • at an effective tax rate of 13.78%.

It is abundantly clear that over the last 10 years, lower tax rates have resulted in greater revenues from at least half of the taxpayers with most of the additional revenue coming from the “richest” who were beneficiaries of the greatest reduction in tax rates. But wait a minute! What about the other half? They got tax cuts also, right? Why didn’t they also generate greater revenues? Is it not painfully obvious? When half the citizenry pays an insignificant amount of the revenues the effect any rate decrease will be….you guessed it…insignificant! Also, taking less from the movers and shakers, (the “rich”) frees capital that creates economic activity and therefore revenue…capital that the less fortunate do not possess.

I don’t get paid enough to carry this argument any further but I surmise that the disparity in tax burden between the “rich” and “poor” would be even more pronounced if:

  • We were to adjust the data for inflation.
  • We were to consider that the less fortunate are also the greater consumers of public disbursements.
  • We were to consider that the “rich” because they spend more, also pay more in Excise taxes.
  • We consider that the “rich”, by being rich, certainly carry a heavier burden of estate and gift taxes.

Many argue that tax cuts don’t work as proven by our perpetual deficit and our insurmountable Federal debt of $9 trillion; $30,000 per man woman and child; $120,000 per family of 4; $67,000 per taxpayer (debt clock). A stronger argument can easily be made that the problem lies more with unscrupulous power-hungry politicians elected by a majority that have no interest (financial or other) in the integrity of government but rather are more interested in having someone else pay for their interests under force of law.

Certainly the wealthy have an obligation to help the less fortunate, but does that mean that half the country pay 33 times more in income taxes than the other half just because they have the money?

References:

IRS SOI Tax Stats – Individual Statistical Tables by Size of Adjusted Gross Income
1996
1997 1998 1999 2000 2001 2002 2003 2004 2005

Chuck is self-employed in agri-business in Virginia. He can be contacted at chuckangier@gmail.com

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