Despite the hoopla about tax cuts, not much has changed about what we pay
Taxes are unpleasant, we all know this. The only thing about taxes that all Americans can agree on is that someone else should pay them.
Perhaps we can learn something by examining how much we pay in taxes, who pays them, and how our tax payments have changed in the last 20 years or so. We can do this pretty easily, thanks to one of our tax-supported government agencies, the Internal Revenue Service. Every year it examines all the returns that are filed and analyzes changes in the patterns of tax payments. The latest year for which the data is complete is 2005. The basic data is available in the imaginatively titled work, "Individual Income Tax Rates and Shares, 2005." Here are the key lessons from that data:
Historically, it's basically the same old, same-old. In 2005 those who paid income taxes collectively paid 13.6 percent of income, not exactly overwhelming.
In fact, for all the drama about the Bush tax cuts, the reality is that our tax burden is about the same today as it was before Bill Clinton was president. In the seven years before B.C., our average tax rate was 13.9 percent. In 1992 we paid taxes at an average rate of 13.7 percent.
During the eight years Clinton was in office, the average tax rate rose from 14.1 percent (1993) to 16.1 percent (2000). In the Bush years since then, the average tax rate has declined from 15.2 percent to 13.6 percent.
Do you see high drama here? Do you see gigantic change?
Today, fewer people pay income taxes. In 1986 Americans filed 103 million federal income tax returns. Of those, 84 million had to pay some taxes. That's 81.5 percent of all returns. By the time Clinton took office, the percentage of filers paying taxes had declined to 75 percent. During the Bush years, the percentage of filers who paid taxes continued to decline. It fell to just 67.4 percent in 2005.
This is not a minor number. In 2005 some 134 million American households filed tax returns. Only 90 million of them paid any taxes. While the number of households filing returns rose by 5 million, the number of households actually paying income taxes fell 6 million. Basically, 11 million lower-income households don't have to pay income taxes that would have had to pay taxes before the Bush tax cuts.
Today, the rich pay more; the poor pay less. Bush tax rate cuts notwithstanding, those with high incomes continue to pay at much higher rates than those with lower incomes. They also pay much more of the total tax bill. Just 953,000 taxpayers - about 1 percent of the total who paid taxes - paid at the top 35 percent tax rate in 2005, paying $315.4 billion in taxes on $1.094 trillion in income.
What does this all mean?
Simple. When political talk turns to tax "fairness," none of the candidates mentions what constitutes a high income. So I thought you might want to know. You were in the top 25 percent of taxpayers in 2005 if your taxable income exceeded $61,055.
Scott Burns is a syndicated columnist. He can be reached at scott@scottburns.com.
