Resilient Tax Actions


With the releases of  a candidate’s state tax record apparently purloined, the issue has become who pays federal income taxes.  For me this is an interesting subject because in my work-a-day existence federal income taxes have always been the reality.  One just assumes everyone pays them.

I am not particularly offended by Mr. Trump’s apparent tax reduction as reported by CNN, The New York Times and others, but I am very concerned about the big, cumulative picture:  How many Americans pay federal income taxes at all?

In October, 2015, the Tax Policy Center released an analysis that disclosed 45.3% of all Americans pay no federal income taxes at all.  This release was a year ago; hopefully new, more current information will be released soon so we can see if we are gaining or losing.

In April of 2016, the email site Market Watch delved with some detail into this matter.  Quoting Robertson Williams, a senior fellow for the Tax Policy Center, they explained  “roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability . . .”

Market Watch continued to cite the Tax Policy Center specifying that the richest 20% pay around 86.8% of all federal income taxes.  By contrast, the lowest 20% pay less than 1% of the total federal income tax.

Exactly how much do the top 20% make?  An article in Financial Samurai based on the Internal Revenue Service’s 2010-2014 data base outlined the following categories:

  • The top 10% make $113,799
  • The top 25% make $67,280
  • The top 50% make more than $33,048

I recommend that the reader review each of these articles.  They provide a great amount of  useful information.  The question is how can the Republic sustain if it does not have a broader segment of its citizens carrying the cost of government?  There are other tax sources that many pay into, but federal income tax is the major revenue that supports federal actions.   The Center on Budget and Policy Priorities specified in a March, 2016 report that federal income tax was 47% of federal tax revenues in 2015.

Since the late 1960s the burden of federal government initiatives has increasingly focused for many functions.  For example, in a different realm, the Selective Service system was changed from a complicated system of mandatory service and deferments including all male Americans within an age-frame to a lottery.  Then the draft was ended and the volunteer military protects our country.  Now there is no broad mixing of American youth in common endeavor. Over a similar period, the proportion of taxes paid by the lower income groups has declined.  NBC News in their story, quoting the Congressional Budget Office specifies this is primarily because of an increasing amount of wealth at higher incomes.

The charts below are subjects for study.  It tells the federal income tax  story  without dwelling on a complicated narrative.  For various reasons, individual income tax is a larger proportional revenue source and the highest quintile of income, pays a greater proportion of taxes.  Also, the amount of revenue has vastly increased.

Changing Tax Mix

These are some facts which drive the point that some portions of the populations financially support the government much more than others.  As Donald Trump may demonstrate this is not just a rich and poor thing.  The facts should lead us to an action plan for the goal to develop resilient American federal institutions through increasing the common ground with public financial support.

The resilient action in this matter would be to broaden participation in the federal tax system.  This article does not disclose exactly how this may be achieved but it does hint at a process. It could come from some flattening of the system, but federal efforts to prevent the concentration of wealth among the Nation’s most affluent must also be considered.  These goals appear on their face contradictory if we are to retain the level of revenue necessary to support the federal government.  How can we flatten the system and make it more progressive at the same time?  My expectations there are additional variables we have not discussed and there may be alternative approaches to collecting money to support the federal government.  There needs to be a national discussion about this and we need to move away from the dueling talking points.

Personally, I am very concerned about our sustainability if we do not have a broad participation in paying federal income taxes.  All Americans should have some skin in the game regarding paying the general cost of government and also serving our nation.  That we do not have the nationally beneficial institution of universal national service is another subject and one that will be addressed in the future in