Who Pays the Most in Income Taxes?

The following guest column in Florida Today was written by a friend:

Don Gilleland: Income tax time

Despite common myth, rich pay the most

8:37 AM, Feb. 2, 2012

| Many hardworking Americans think our wealthiest people don't pay enough income taxes. They think the middle class is overtaxed and underappreciated and rich folks have so many tax shelters they pay no income taxes at all.

According to the U.S. Treasury Department, nothing could be further from the truth. The Office of Tax Analysis says the U.S. individual income tax is so “highly progressive” that a small group of higher-income taxpayers shell out most of the individual income taxes collected each year.

According to the Congressional Budget Office, in 2006, the latest year for which data is available, the top 20 percent of income earners paid 86.3 percent of all income taxes collected. The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes.

Conversely, the bottom 50 percent of wage earners paid 3.97 percent of all the income taxes collected. That means the top 1 percent is paying nearly 10 times more federal income taxes than the bottom 50 percent.

Treasury Department analysts credit President George W. Bush's tax cuts with shifting a larger share of individual income taxes paid to higher-income taxpayers. In 2005, says a Treasury Department fact sheet, when most of the tax cut provisions were fully in effect, the projected tax share for lower-income taxpayers fell, while the tax share for higher-income taxpayers rose.

Nearly 50 percent of our citizens pay no federal income tax. The bottom 40 percent of income earners paid a negative share of federal income taxes in 2006. That is, they collected a refund check bigger than their tax liability.

We?re already soaking the rich and giving our middle-class citizens a huge break at tax time. Unfortunately, some folks will never be satisfied so long as they have to pay any income taxes. They think rich folks should pay for everything.

However, according to CNN.com, even if we taxed rich people 100 percent, taking all earnings above $250,000 a year, it would yield $1.4 trillion. That would keep the government running for 141 days.

Republican candidates advocate a range of tax reforms: zero taxes (Ron Paul) a two-tiered system with two rates, 10 or 28 percent (Rick Santorum), a 15 percent flat tax (Newt Gingrich), and maintain marginal rates at current levels and lower rates on savings and investments (Mitt Romney).

President Barack Obama's tax policies would cause federal income taxes paid by the top 20 percent to increase and the shares of the remaining 80 percent to decrease further.

It's going to be really interesting to see how this subject is addressed in the November election.

Gilleland is a former corporate director of public affairs for General Dynamics Corp. He lives in Suntree.