Super Rich See Federal Taxes Drop Dramatically

wealthyStill scrambling to file your taxes? You'll probably take little consolation in hearing that the super rich pay a lot less taxes than they did a couple of decades ago. And nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.

The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.

President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.

In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.

More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.

Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."

Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.

Schoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

"I simply point out to people, 'Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.

"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.

Schoenberg said Hatch's suggestion misses the point.

"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"

The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.

The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.

The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.

In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.

About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.

"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."

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PARRILLI7

oil will drop to $70 by july1 get out now!!!

April 21 2011 at 3:12 PM Report abuse rate up rate down Reply
centralkustom

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April 20 2011 at 1:22 AM Report abuse +1 rate up rate down Reply
muenft

It is much more popular to go around giving other peoples money away than telling folks to get up and get to work., thus the political situation we are in now. Hav you ever heard obama talk about people geting off their %$# and doing something for themselves? No , its always ...some folks have done well, they need to share with those that has done nothing to help themselves.

April 19 2011 at 8:52 AM Report abuse -2 rate up rate down Reply
trucking4crete

very misleading title the real problem is corporations do not pay thier taxes the wealthy use loop holes to lower taxes the politians bend the law to avoid paying taxes. the middle class has the tax burden in this country. the only truth here is goverment spends to much people depend on goverment to much and debt must be cut

April 19 2011 at 8:09 AM Report abuse rate up rate down Reply
cceinsurance

The reason the Rich pay 40% of the taxes is because they make 80% of the income you Jack. You probably think it's alright for GE not to pay any taxes too. hese are the ones with there hand in your pocket. You need to wise up

April 18 2011 at 10:53 PM Report abuse rate up rate down Reply
mpendlelaw

The super rich deserve a tax break. This article understates the FACTS. The top 1% pay 40% of taxes and the top 10% pay 71% of the taxes and the welfare slugs pay NOTHING and the bottom 50% pay a pathetic 3%. What are you LAZY MARXIST MORONS TALKING ABOUT.

HEY ENVIOUS SOCIALISTS LISTEN AND LEARN. Dept of Energy was created by Carter, a racist Obamacommie clone, in 1977 to lessen our dependence on foreign oil and now, 32 years later, the budget for this bloated government boondoggle is more than $28 billion a year with more than 16,000 federal employees and approximately 100,000 contract employees, and unbelievably, we are more dependent than ever on foreign oil. Unfortunately, the government is full of these bloated and bankrupt agencies.

If Obamination would like a start, here it is. Odumbocare needs to be eliminated along with the EPA, DOE, DOL, DOC, funding for Planned Barrenhood and numerous other wasteful tax devouring government boondoogle agencies and programs. These alone would create savings in excess of 200 billion PER YEAR. Meanwhile, we have Odumbo, the grossly inexperienced community organizer, running car companies, monstrous deficits, major financial companies and attempting to take over a third of our economy with Obamacare. Just what we need, another pathetic attempt by government to take over something it is monumentally incapable of accomplishing and has no Constitutional business attempting. GET YOUR WELFARE LOVING HAND OUT OF MY POCKET AND CLOSE DOWN THE ANTI-CONSTITUTIONAL PONZI SCHEME GOVERNMENT AGENCIES. NOW!!!!!!!!!!!!!!!!!!

April 18 2011 at 9:19 PM Report abuse +3 rate up rate down Reply
1 reply to mpendlelaw's comment
informedtroll

you're an idiot

April 19 2011 at 5:46 AM Report abuse -1 rate up rate down Reply
Darrell & Donna

There is those who have and the have nots;Those who have ;got it by screwing the have nots;;I hope the found a way to take it with them when they leave this world;; A lot of people gan not afford to put gas in their cars and others who dont have cars;;why the super rich and the government still screw them;;GREED GREED GREED::

April 18 2011 at 7:41 PM Report abuse +1 rate up rate down Reply
bootjack

It’s a pretty good rule of thumb that, in Washington, whatever the Establishment is focusing on is a distraction from the real issue.

Over the next few months, Washington will be all bent out of shape about raising the debt limit. Let’s be clear, the big danger to our nation is not whether we raise the debt limit this year. It is whether we listen to this alarm bell and get our nation back on track.

If Democrats in Washington had their way, we would raise the debt limit and continue the status quo – no transformational changes, just whistling past America’s graveyard.

The debt limit is the federal government’s legal authority to borrow. It currently stands at $14.3 trillion dollars. If we raise it by another trillion dollars, we will be in the exact same situation we are today in less than a year.

If, as many political consultants argue, we raise it by more than $2 trillion, we would get past the 2012 elections. None of this matters. If we raised the debt limit by $10 trillion, we would still eventually find ourselves in the same situation we are today.

The crisis in America is not about our debt limit. It is about our out-of-control spending. It is about a bleak fiscal future and a nation on the decline if we do not take bold action soon.

Senator Chuck Schumer (D-NY) is one establishment politician who is focused on political messaging, as opposed to confronting the real issue. He should know better, though. Senator Schumer, who represents Wall Street and received 15 percent of all 2009 Senate contributions made by the financial services sector, knows that America is on a path towards fiscal calamity.

Yet, Senator Schumer claims conservative attempts to confront the oncoming crisis by coupling much needed fiscal reforms with any increase in the debt limit is “playing with fire.” He says we risk “a recession or worse” if we don’t pay our debts.

His premise is flawed and disingenuous, though, because nobody is suggesting America not pay its debts. More to the point, that will not happen even if we reach our debt limit, which would merely prevent the United States government from borrowing any more money until the limit is raised. According to President Obama’s budget, the United States government will pay $208 billion in interest payments on our debt this year. Revenue, however, is far more than that figure: $2.2 trillion. That’s more than 10 times more revenue than interest payments.

Senator Schumer is intentionally using scare tactics to divert attention from a far more important conversation: America’s pattern of reckless spending.

April 18 2011 at 7:29 PM Report abuse rate up rate down Reply
cbstrike

My taxes have more then doubled over the last five years. I've worked my tail off. Got through this economy despite Oboma and the rest of the parasites. Consequently, they want more money because they have mismanged what they already get and buy votes with the rest. And you wonder why there is a Tea Party.

April 18 2011 at 6:47 PM Report abuse -1 rate up rate down Reply
dianefeb29

bose3 I know of way to many RICH conservatives----unfornatuatley our country is full of LIER'S, CHEATS AND THIEVES. Many times the RICHEST people are the worst, if it was up to the Republicans, the standard of the average American would go back 100 years. PROFIT OVER PEOPLE!!!!
Their would be no public schools, volunteer fireman, etc. Privatization is killing our country! We live in a small town in the southwest, some crazy lady in Washington wants to have a hot dog stand etc.at the state park. Local business partly depend on tourism--JOBS.
It's political corruption all over that's ruining our country. I have no time for either party. I vote for the person doing the least amount damage!
I am in remission fromr Cancer, and we lost our Health Insurance, worked all our adult life, hope you or no love one every loses your savings for getting sick.
It's not the everyday civil service employee your should pick on ----just POLITICANS!!!!

April 18 2011 at 6:35 PM Report abuse +2 rate up rate down Reply