Wednesday, March 11, 2020

IRS data show progressive plans require huge middle-class tax hikes

Last week, the IRS released its annual Statistics of Income. This much-anticipated document is exactly what it sounds like: a thorough analysis of taxpayers’ incomes and payments to the IRS, this time for 2018.
Each year, these numbers are illuminating for a number of reasons. For one thing, they show the progression of tax payments over time. For example, revenues have continued to rise since the Tax Cuts and Jobs Act lowered income tax rates for everyone. And the number of filers taking the mortgage interest deduction plummeted from 33 million in 2017 to just 13 million in 2018, as more taxpayers took advantage of the new and far more generous standard deduction.
There are also important lessons about income classes. Out of 147 million IRS tax filers in 2018, just 0.3% (about 500,000) had incomes above $1 million. These earners and families made 17% of all taxable income in 2018 (just shy of $1.5 trillion) and paid 28.6% of all income taxes. That is significantly more than they would pay in a strictly proportional system, and of course, it doesn’t count state or local income taxes or the business taxes that high earners often pay.
Meanwhile, the 85 million filers at the bottom of the pay scale faced a justly and reasonably lower tax bill. Those reporting incomes of $50,000 or less (more than half of all filers) shouldered just 5.5% of the nation’s total income tax bill.
This goes to show that the United States has a tax system that favors those with lower incomes and demands a fair share, by any reasonable definition, from millionaires and billionaires.
But it demonstrates much more than that. It also shows, once again, that there is no way, through merely raising taxes on the richest of the rich, that anyone could ever hope to fund a massive government medical system or an environmental transformation of the economy. This remains true even if you extend punitive taxation to mere quarter-million-dollar earners — the top 3.64% of filers, who reported making more than $250,000 in income in 2018. This group also paid an outsized amount in taxes — 54.71% of all income, capital gains, dividends, and self-employment taxes collected by Uncle Sam. But even this larger group made only $3.24 trillion in taxable income.
Read the rest of the story HERE.

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