fbpx

47% Of Americans Pay No Income Taxes

It’s pretty interesting to look at who pays income tax in America and who does not.  That is until you realize you might just be in the top 1% of all wage earners in America and the differential in the percentage of taxes you pay relative to overall adjusted gross income does not match at all when you add up the numbers.  What’s truly amazing about the data below is that the top 1% of wage earners is about $380,354 and the top 5% of wage earners is about $159,619, but the top 5% account for 58.72% of the taxes. When compared to their share of adjusted gross income, the top 1% are almost double the income taxes against their actual AGI contributed into the mix.

Federal Income Tax data

WHO ARE THE 47% WHO PAY NO FEDERAL INCOME TAXES?
(this excerpt was taking from www.financialsamurai.com)

The Tax Policy Center’s Donald Marron said they fall into three main groups:

  1. The working poor. The earned income tax credit and the child credit can help families making $50,000 or more pay no taxes or get money back. About 60% of those not paying income taxes do contribute to payroll taxes, meaning they must have some source of earned income.
  2. The elderly. An increased standard deduction for those over 65, and an exemption on part of Social Security earnings, means that many older Americans pay no income taxes. Please remember though that the elderly have paid their dues through decades worth of federal taxation during their careers.
  3. The low-income. A family of four claiming only the standard deduction and personal exemptions pays no federal income tax on its first $27,000 of income.

Whether you think this is fair or not is up to you.  But you should start to ask yourself how it will be possible to actually pay off $18 trillion dollars in debt when basically half of America doesn’t pay into the system at all currently.

It’s likely that taxes on the wealthy will only continue to go up and I won’t be surprised to see more takeaways including even potentially disqualifying yourself from social security benefits if you make too much money in retirement.   It will be important under the current tax code that you do your best to not only plan on the most tax efficient way to accumulate your assets, but also get really clear about how you will distribute your assets in the most tax efficient manner down the road or the tax man just might keep stalking you for many years to come.

Written by: Ted Jenkin
Request a FREE consultation: www.oxygenfinancial.net

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

4 Comments

  • Avatar
    Nancie
    May 31, 2015

    I have an idea. How about discontinuing the carried interest deduction and not abolishing the estate tax! Not impressed with this blog getting political in such a passive aggressive way.

  • Ted Jenkin @ Your Smart Money Moves
    June 8, 2015

    Nancie—I wasn’t getting political or it wasn’t intended to be that way. Just an observation. Keep the comments coming

  • Avatar
    Kris
    September 20, 2016

    If you look at the criteria for that 47% of people who aren’t paying into the tax system it doesn’t really seem fair to expect them to start or for their contributions to do much to alleviate the debt. Unless of course we were to do something to enable them to earn in the first place.

  • Ted Jenkin @ Your Smart Money Moves
    September 25, 2016

    True, but you know you can’t get blood from a stone. Unfortunately, we have both a revenue and an expense problem in America.

Leave a Comment