Skip to comments.Tax Facts
Posted on 01/18/2003 11:03:38 AM PST by conservativecorner
The intensifying tax-cut debate needs a reality check.
When critics allege that the Bush plan is a tax cut for the rich, they conveniently neglect to say that three-quarters of all federal income taxes are paid by fewer than one-seventh of the nations households. About 19.5 million tax-return filers in 2000 had adjusted gross incomes of $75,000 or more and earned 63% of total U.S. taxable personal income. Even though these taxpayers accounted for just 15% of all tax returns, they paid 75% of total federal income taxes.
The class-warfare warriors further fail to mention that fewer than 240,000 households making $1 million or more pay almost one-quarter of all federal income tax. Bushs opponents never explain that one-quarter of U.S. earners pay no federal income taxes at all. And the beggar-thy-neighbor supporters of double taxation ignore the fact that more than one-third of all dividends recipients make less than $40,000 a year in adjusted gross income.
The charges being leveled at the Bush plan, in actuality, say more about the progressivity of the federal income tax system especially after the 1993 tax hikes than they do about the proposed tax cuts themselves. Progressivity is the reason higher-income earners would benefit substantially from tax cuts because they pay most of the taxes.
Thus, saying that the Bush plan is a tax cut for the rich makes about as much sense as decrying antibiotics as medicine only for the sick.
Here are some additional tax facts extrapolated from Individual Income Tax Returns, 2000 in the Fall 2002 issue of the IRSs Statistics of Income Bulletin:
Nearly 33 million households that filed tax returns in 2000, or 25% of the total, paid no federal income tax.
Almost 110 million households making under $75,000 represented 85% of all filers of tax returns and earned 37% of taxable income nationwide in 2000, yet they paid just 25% of total federal income taxes.
Roughly 9 million households (or 7% of all federal tax returns) earned $75,000 to $99,999 in 2000, grossing 12% of national taxable income but paying only 10% of total federal income taxes.
About 11 million households (or 8% of total tax returns) earned $100,000 or more in 2000, representing 51% of total taxable income and 65% of federal income-tax receipts.
Some 3 million households (or 2% of tax-return filers) had incomes of $200,000 or more in 2000 and many of them were taxed at the then-top marginal rate of 39.6%, which kicked in at $288,350. They earned 33% of national taxable income but paid 46% of all federal income taxes.
Nearly 636,000 households (or 0.5% of tax returns) earned $500,000 or more. They accounted for 22% of total taxable income yet supplied 31% of federal income tax revenues.
Around 240,000 households (or 0.2% of tax returns) had $1 million or more in income, representing 16% of the national total, and paid more than 23% of all federal income taxes in 2000.
As for dividend earners, one-quarter had adjusted gross incomes of less than $25,000 in 2000, and one-sixth earned less than $15,000. Nearly 12% of dividend earners had incomes of less than $10,000 and 7% had incomes below $5,000. Matter of fact, more than 2.4 million tax-return filers with no adjusted gross income or incomes below $5,000 received $2.7 billion in dividends in 2000.
About two-thirds of all dividends recipients had incomes below $75,000 and only 7% had incomes of $200,000 or more.
Dividends are an important source of income for many low-income (and presumably elderly) households. More than 2 million households with adjusted gross incomes of $1 to $4,999 were paid over $1.1 billion in dividends in 2000, with dividends representing 49% of their total taxable income.
There were 1.6 million households with incomes of $5,000 to $9,999 that received $1.9 billion in dividends, providing 14% of their taxable incomes, and another 1.6 million households with incomes of $10,000 to $14,999 were paid $2.7 billion in dividends, representing 7% of their taxable income.
Dividends play a less important role for middle-to-upper-income earners. Those with incomes of $20,000 to $74,999 received more than $31 billion in dividends in 2000 but the payments made up just 2% of taxable income. Earners making between $75,000 and $199,999 had total dividends of $29 billion, representing less than 3% of taxable income. Households with incomes of $200,000 and above received $92.6 billion in dividends in 2000, representing 4% of their taxable income.
The rich man, poor man critics of the Bush tax plan are taking a leaf out of Bill Clintons book. The Clinton tax hike of 1993 transferred much of the federal tax burden to upper-middle and upper income earners, representing about one-seventh of American earners. This helps to explain why the public outrage over the largest tax hike in U.S. history was so muted only a relatively small fraction of earners were adversely affected.
Most important, of course, is the Bush plans effect on the economy. Economic growth is based on the availability of finance to underwrite business creation and fund capital spending on productivity-boosting equipment and technology. Productivity gains, in turn, result in lower prices, higher incomes, and improved living standards.
To the extent that income taxes reduce personal disposable income, both consumption and investment suffer. And since the propensity to save rises with income, a progressive tax that especially penalizes higher incomes undercuts new investment.
High marginal tax rates, particularly on those who save more than they spend, impair the dynamics of economic growth, leaving us all the poorer.
William P. Kucewicz is editor of GeoInvestor.com and a former editorial board member of The Wall Street Journal
FreeRepublic , LLC
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These taxes didn't just happen overnight. The Clinton/Democrat tax increase was 10 yrs ago.(After that they would be Republican tax increases) A whole bunch of people made a whole bunch of money in the meantime in spite of it... So: 1) How did they manage to get where they are and the economy where it was even while paying those taxes? 2)If taxes are the factor for savings, why aren't the ones paying the least in taxes the ones saving "more than they spend"?(relatively speaking)
Income tax cuts should be across the board. If there are further tax cuts for a personal increase in savings/investments for everyone at every level of income so be it...and if a company, no matter how large or small, rich or poor, "creates jobs" then THEY not the so called "job creating" rich should get the tax breaks.
Being Kennedy rich does not mean YOU create jobs, at least not American jobs.
Job creating capital is borrowed. The cost for borrowing money is at a 40 yr low. ..no one sits around accumulating money by saving it to "create jobs" for someone else...Money doesn't create jobs. You don't think the Bill Gates household waited to save their money before he started Microsoft do you?...not to mention "job creation" wasn't even his goal.
Your words: Capital is only acquired by saving---Corporations do not "save"
"Job creation" and business expansion are synonymous, so unless you contradicted yourself you might explain just where corporations or any businesses for that matter, get the money for "job creation".
Individuals or "households" create jobs, not companies
How many jobs did your household create?
does this mean you agree with President Bush regarding the removal of the harmful dividend tax
Absolutely, unless he's going to target a higher tax break on only the wealthiest tax payers...then no.
Where does everone get the notion corporations have "job creation" in mind.
Bill Gates borrowed money, but he borrowed it from someone who had saved it first. Gates may not have wanted to ceate jobs, but as Adam Smith rightly pointed out when we act in our own economic self-interests we do good for others as well as for ourselves.
Money doesn't create jobs. No, it just provides the payroll, because few people work for free. Entrepreneurship is the driving force, but without land, labor and capital it is a pipe dream. So, unless there are savings no jobs will be created.
"Job creation" and business expansion are synonymous, so unless you contradicted yourself you might explain just where corporations or any businesses for that matter, get the money for "job creation". From households (a nice economic way of saying "individuals"), because households own every business in this country. Corporations may be legal entities, but they are all owned by individuals in the form of shares.
No one "saves" money for the sake of saving money and no one has said that they did. The foregoing of consumption is a pain in the rear. People do it for various reasons, including interest and returns on investment.
How many jobs did your household create? None of your business, but my savings which were invested helped corporations invest so that jobs could be created. Even if my savings had been placed in a savings account, that money would have been lent out to others. And the banking system uses a system which requires that it only keep a small percentage of deposits; it's called the "fractional reserve system." Yes, I did help create jobs last year.
Where does everone get the notion corporations have "job creation" in mind. Because the job of a corporation is to maximize return on investments for its shareholders either in the form of dividends or in corporate growth which increases the value of the shares held. Creating jobs is usually a necessity to make the best use of invested capital.
This is really pretty simple stuff. You simply need to understand that individuals are the real force in our economy and that businesses are the tools by which we work. So yes, people (households) create jobs by savings money and then using that as a capital investment. Hint: It's why we call it "capitalism."