As you all know, income taxes are the federal government’s single biggest revenue source. In the fiscal year-end September 30, 2018, individual income taxes are expected to bring in approximately $1.7 trillion, or about half of all federal revenues according to the Congressional Budget Office. A couple of KEY IMPORTANT STATISTICS from the Internal Revenue Service’s 2016 income tax data:

Of the $1.44 trillion of income tax revenues collected by the government in 2016, 140.9 million taxpayers reporting a total of $10.2 trillion in adjusted gross income paid this amount in federal income taxes

The top 1% paid a greater share of individual income taxes (37.3%) than the bottom 90% combined (30.5%)

The top 50% of all taxpayers paid 97% of total individual income taxes

The bottom 50% paid 3% Which small percentile of tax payers also paid 3% or more? Satirically, the top 0.001%, or about 1,400 taxpayers. This group alone paid 3.25% of all income taxes. In 2001, the bottom 50% paid nearly 5% whereas the top 0.001% of filers paid 2.3% of income taxes.

The individual income tax system is designed to be progressive – those with higher incomes pay at higher rates. While the impression, or reduction in the steepness of the “progressivity” curve, is visible at the highest levels. The average tax rates paid for the very wealthiest has fallen in recent years from a peak of 24.1% in 2013 to 22.9 on 2016 and was a full four percentage points below the 26.9% that the tope 1% paid on average. To put these numbers in perspective, the top 0.001% of taxpayers consists of 1,409 returns, the top 1% equals 1.4 million returns and the top 50% is half of the total 140.9 million returns. In 2016, the bottom 50% of income tax filers earned about 11.6% of total U.S. income. The top 1% received 19.7% of overall income while the 1,409 people among the top 0.001% had an aggregate income of $205 billion or 2% of the U.S. total.

In 2018, President Donald J. Trump implemented and signed into law the most extensive rewrite of the U.S. tax code in more than 30 years. Individuals may start to feel the effects of this tax overhaul when they file their 2018 income tax returns in April of 2019.

In closing, the richest 1,409 taxpayers pay more income tax than the bottom 70 million. And for those who believe these tax cuts implemented in 2018 benefit the rich, I ask you to call our office for a free consultation and we would be happy to show you just how the middle class stand to benefit significantly from the 2018 corporate and individual income tax cuts.

 

Sincerely,

CHRIS RUSSO, CPA, MBA

Chris Russo, CPA, MBA

President