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A colleage recently shared some statistics provided by the Wall Street Journal which showed the percentage of federal income tax paid by the nation's top earners. The graphic shows the top 1% of earners paying nearly 40% of all taxes, and the top 5% paying over 50% of the total tax. While this is probably true, it can be slightly misleading. The superwealthy (top .1%) and wealthy (top 1%) also have the lions share of national income as shown here:
Based on 2007 Data (Compiled by Tax Foundation):
Top .1% of Earners (About 140k people) earn 11.93% of nationwide income
Top 1% of Earners (About 1.4 million) earn 22.83% of income (the highest income since at least 1980)
Top 10% of Earners (About 14 million) earn 46.44% of income (the highest income since at least 1980).
The bottom 50% of Earners make 12.26% of nationwide income.
Interestingly, the top .1% have an average tax rate of 21.46% while the folks between the top .1% and 1% have an average rate of 23.54% (ten percent higher!). From there, the average income tax rate drops to 12.66% with the top 50% averaging 14.03% and the bottom 50% paying only 2.99%.
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Aaron Blau, E.A. is the Vice President of the Central Arizona Chapter of Enrolled Agents and a member of the Government Relations Committee of the National Association of Enrolled Agents. The opinions and ideas expressed here are in no way representative of the official position of the National Association of Enrolled Agents, Arizona Society of Enrolled Agents or the Central Arizona Chapter of Enrolled Agents.
For official comments, please e-mail NAEA Director of Communications at mlockwood@naea.org or Arizona Society president stefaniecampbell@aztaxpros.org.
IRS CIRCULAR 230 DISCLOSURE:
"To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment). In addition, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS. This communication is intended solely for the person to whom it is addressed; no one else should rely on the tax advice provided herein. The person to whom this advice is addressed is under no obligation to keep the advice or matters related to the advice confidential."
For official comments, please e-mail NAEA Director of Communications at mlockwood@naea.org or Arizona Society president stefaniecampbell@aztaxpros.org.
IRS CIRCULAR 230 DISCLOSURE:
"To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment). In addition, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS. This communication is intended solely for the person to whom it is addressed; no one else should rely on the tax advice provided herein. The person to whom this advice is addressed is under no obligation to keep the advice or matters related to the advice confidential."
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