Some Thoughts on Taxes

Here's an interested way to think about who pays what in taxes.  what I might have posted regarding taxes.  Tax increases of some sort are coming.  It's just a matter of who and how much.  In that regards here's some interesting numbers on who pays what.  {Hint:  The "rich" pay a large amount of the aggregate tax bill already.}  Statistics and commentary are from Ed Yardini's May 4th post.   Highlights Mine.

The total number of all the tycoons...including everyone with adjusted gross income (AGI) exceeding $500,000 a year, was 1.65 million taxpayers in 2018, exactly 1.1% of the 153.8 million taxpayers who filed individual income tax returns that year..... Adjusted gross income is income from all sources before subtracting deductions and exemptions. 

Adjusted gross income. During 2018, AGI in the US totaled $11.6 trillion. The AGI of the One Percent was $2.5 trillion during 2018, accounting for 21.7% of the total, up from 13.9% during 2009 and exceeding the previous high of 21.7% during 2007 (Fig. 2 and Fig. 3). Over that same period, the share of taxpayers reporting less than $100,000 in AGI fell from 50.7% to 36.6% of total AGI.

Collectively, during 2018, the One Percent paid $639 billion in income taxes, or 25.3% of their AGI....That amount represented a record 41.5% of the $1.54 trillion in federal income taxes paid by all taxpayers. That’s up from 29.8% in 2009. Meanwhile, the rest of us working stiffs, the “Ninety-Nine Percent,” picked up only 58.5% of the total tax bill during 2018. 

Three cheers for the Five Percent! These numbers suggest that the biggest winners {of the Trump tax cuts} were in the $200,000-$500,000 AGI group, accounting for 4.5% of all tax returns in 2018. They aren’t in the One Percent. They are in the “Five Percent,” the upper middle class with many of them owning their own businesses, which tend to employ lots of people. Arguably, their tax break provided them with more cash to expand their businesses, which certainly explains why the labor market was so strong in 2018 and 2019. 

The Biden administration has pledged that the tax increases it intends to enact will only hit taxpayers earning more than $400,000 per year. The problem is that lots of these people tend to have their own businesses. The latest data available show there were just under 32 million pass-through businesses in 2013, almost 20 times the number of C corporations. There are surely many more such proprietorships today. An increase in their tax bills reduces the cash that they have to invest in growing their businesses. One way or another, a tax increase on them will hurt the wages and employment opportunities of lots of people earning much less than $400,000. Tax increases on the rich inevitably trickle down to the rest of us. 

But at least there will surely be more income equality.