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.
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:
- 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.
- 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.
- 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.