As you are most likely aware, this conundrum arises in reference to the amount of tax that people and corporations pay. Disregarding the corporation component (for the sake of this argument), I'd like to focus your attention on the personal income tax component.
So, what is the fair share of taxes that someone should pay? There was a recent article on Yahoo! Finance regarding the "Top Five Facts About the Top 1%" or something to that effect. I can't find the article now, so unless you read it yourself, you'll have to take my word for it. Anyways, one of the bulletpoints in the article was that the top 1% earns 24% of the national income. The article neglected to mention how much of the national taxes that 1% pays.
Here's a bit of background info. For Tax Year 2008 (TY08), the IRS classified the top 1% of earners as those with income of $380,354 or more. The top 10% were those with income of at least $113,799. To contrast, the bottom 10% of earners made less than $5,942. I don't have the numbers for TY09 on hand, but I'd presume they are much the same.
So how much should each income bracket pay in taxes to be considered fair? Would it be considered fair for the top 1%, which brings in 24% of the income, to pay 24% of the income tax? Would it be fair for each income bracket to pay the same percentage of the income tax as the percentage of the income they bring in?
With that 1:1 ratio in mind, let's look at the stats for TY09. Here's a modified spreadsheet from the IRS (I've added the two columns on the right. From left to right, you've got a column with the income brackets, a column showing how many tax returns were filed for those income brackets, the total taxable income for each bracket, the modified taxable income, and the income tax generated by each bracket. Then you've got another column that shows what percentage of the total modified taxable income each bracket earned, and then the percentage of the total income tax that each bracket paid.
Size of adjusted gross income | Number of returns | Taxable income | Modified taxable income | Tax generated at all rates | Percent of total modified taxable income | Percent of total tax paid | |
Total | 104,164,970 | 5,088,382,848 | 5,091,769,819 | 953,407,786 | 100.0000% | 100.0000% | |
Under $2,000 | 181,356 | 75,075 | 77,733 | 4,524 | 0.0015% | 0.0005% | |
$2,000 under $4,000 | 190,888 | 230,239 | 230,715 | 19,831 | 0.0045% | 0.0021% | |
$4,000 under $6,000 | 308,951 | 268,516 | 278,086 | 28,075 | 0.0055% | 0.0029% | |
$6,000 under $8,000 | 963,247 | 1,336,270 | 1,341,903 | 135,492 | 0.0264% | 0.0142% | |
$8,000 under $10,000 | 1,189,777 | 2,441,332 | 2,444,341 | 250,784 | 0.0480% | 0.0263% | |
$10,000 under $12,000 | 2,382,086 | 5,186,297 | 5,185,635 | 515,072 | 0.1018% | 0.0540% | |
$12,000 under $14,000 | 2,585,795 | 9,241,543 | 9,257,844 | 912,967 | 0.1818% | 0.0958% | |
$14,000 under $16,000 | 2,577,008 | 13,218,905 | 13,234,727 | 1,302,551 | 0.2599% | 0.1366% | |
$16,000 under $18,000 | 2,940,938 | 17,928,879 | 17,949,972 | 1,794,176 | 0.3525% | 0.1882% | |
$18,000 under $20,000 | 3,033,397 | 22,253,926 | 22,277,907 | 2,321,501 | 0.4375% | 0.2435% | |
$20,000 under $25,000 | 8,136,648 | 72,337,063 | 72,410,672 | 8,114,059 | 1.4221% | 0.8511% | |
$25,000 under $30,000 | 7,850,131 | 96,902,694 | 97,042,104 | 11,367,853 | 1.9059% | 1.1923% | |
$30,000 under $40,000 | 13,831,865 | 249,325,246 | 249,529,074 | 30,417,297 | 4.9006% | 3.1904% | |
$40,000 under $50,000 | 10,614,939 | 275,258,806 | 275,440,359 | 35,370,888 | 5.4095% | 3.7099% | |
$50,000 under $75,000 | 18,548,852 | 720,889,704 | 721,562,064 | 102,122,545 | 14.1711% | 10.7113% | |
$75,000 under $100,000 | 11,423,685 | 669,533,805 | 670,059,124 | 99,114,419 | 13.1597% | 10.3958% | |
$100,000 under $200,000 | 13,492,427 | 1,306,332,425 | 1,307,382,876 | 230,634,470 | 25.6764% | 24.1905% | |
$200,000 under $500,000 | 3,186,977 | 718,620,471 | 719,705,758 | 167,171,797 | 14.1347% | 17.5341% | |
$500,000 under $1,000,000 | 490,338 | 280,537,174 | 280,826,943 | 79,439,735 | 5.5153% | 8.3322% | |
$1,000,000 under $1,500,000 | 107,529 | 111,652,589 | 111,663,222 | 33,239,025 | 2.1930% | 3.4863% | |
$1,500,000 under $2,000,000 | 44,060 | 65,749,557 | 65,708,338 | 19,831,986 | 1.2905% | 2.0801% | |
$2,000,000 under $5,000,000 | 61,602 | 158,702,289 | 158,544,959 | 48,168,647 | 3.1137% | 5.0523% | |
$5,000,000 under $10,000,000 | 14,249 | 84,805,917 | 84,578,708 | 25,254,588 | 1.6611% | 2.6489% | |
$10,000,000 or more | 8,225 | 205,554,127 | 205,036,755 | 55,875,503 | 4.0268% | 5.8606% |
Going by the 1:1 "fair" ratio described above, it appears that if you make below $200,000, you pay less than your fair share. And those who make more than $200,000 pay a good deal more than their fair share.
So, if 1:1 is fair, should it then be everyone who makes less than $200,00 who should pay more taxes in order to pay their fair share?
If the 1:1 ratio is not a proper indication of a fair share, what is?
