Election 2012 - Issue 7: Taxes

How much do Americans pay in income taxes?

The amount of income tax collected from individuals and corporations has changed over the years due to factors like the economy, tax laws, and population size.

Percent Change in Income Taxes
and Federal Tax Rates

In 2011, the government collected $1.1T in income taxes, a 27% increase since 2002.

Sources: #1 #2

Your tax rate is what percentage of
your income you have to pay to meet
your tax obligation.

Based on income, here are the
rates for 2012:

Single* Married (Joint Filing)
Married (Separate Filing)
Head of Household**

* Unmarried, Divorced, or Legally Separated

** Unmarried With at Least One Dependent and Responsible for 50% or More of Household Expenses

Sources: #1

There are different types of income tax
that we pay:

PAYROLL TAX:

Employers withhold the payroll tax
on behalf of their employees, and both
state and federal authorities collect it in
some form, such as Medicare and Social
Security taxes.
INDIVIDUAL INCOME TAX:

Also known as a personal tax, income taxes apply to all earnings: salary, gains on the sale of stock, interest on bank accounts and retirement plan distributions.
CORPORATE TAX:

Levied on the profit earned by a
business, with different rates for
different levels of profits.
ESTATE TAX:

Levied on an heir’s inherited portion of an estate if the value of the estate exceeds a value of $5 million.

Sources: #1

Which type of taxes provided the most revenue in 2012?*

Payroll Taxes Individual Income Taxes
Corporate Income Taxes Other**

* includes; excise taxes (3%), estate and gift taxes (0.4%), customs duties (1%), miscellaneous (4%)

** 2012 estimated total revenues

Sources: #1 #2

Is There a Difference Between Taxes for the Rich and the Poor?

The types of federal taxes individuals pay (and in what proportion) differs greatly based on income level.

Under $17K $17–$33K $33–$59K
$59–$103K $103–$533K Top 1%

Sources: #1

To get a snapshot of total tax burden of income groups, it’s important to also factor in state and local taxes, which can vary widely across the country. What’s the total average tax burden that Americans pay?

Total Tax Bill Percentage
(Local, State & Federal) by Income Group

Sources: #1 #2

Globally, taxes are used to fund government services, including healthcare, defense, pensions, and more. Each country’s services are different, as are the tax rates needed to pay for them.

Single* Married Couple** % of GDP***

*Average Income Tax Rate, With No Dependents

**Average Income Tax Rate, With Two Children (Two-Earner Married Couple: One at 100% Average Earnings and the Other at 67% Average Earnings)

***Taxes As % of Gdp, 2010

Sources: #1

Who is the “47%”? Who is the “1%”?

Recently, Americans who don’t pay income tax have received a lot of attention after Romney’s now infamous remarks about the “47%.” Here’s how the “47%” breaks down.

Low Income Elderly
Working Poor & Children
Other Benefits

Americans who earn too low of an income, have children, or are elderly can receive benefits that lower their tax owed to zero.

Sources: #1 #2

The top 1% of Americans had an average minimum adjusted gross income
of $343,927, with the top 1% of them
making $960,000.

1.4 million households qualify to
be in the 1%
Collectively, their adjusted gross
income was $1.3 trillion
The top 1% earned 17% of the
national income

Sources: #1 #2

The Candidates on Tax Reform:

Obama

Romney

Obama’s 2011 Buffett Rule proposed a minimum 30% tax rate on those making $1M a year, affecting 0.3% of the population.

“If you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent
of American families, your taxes shouldn’t
go up.”

The Buffett Rule is not a comprehensive tax reform and would not substantially affect the nation’s debt.
Opponents Say… Obama Says…
As part of “insourcing,” Obama wants to give tax cuts to companies that hire and manufacture in America.

“It’s time to stop rewarding businesses
that ship jobs overseas, and start rewarding companies that create jobs right here
in America.”

The tax breaks and other incentives that Obama is offering pale next to the expense of domestic manufacturing.
Opponents Say… Obama Says…

Romney wants to cut all income tax rates by an additional 20 percent, repeal the Alternative Minimum Tax (which hits primarily upper-income taxpayers), and repeal the estate tax.

“But in order for us not to… have the government run out of money, I [will] also lower deductions and credits and exemptions, so that we keep taking in the same money when you also account
for growth.”

Romney’s promise to cut individual income tax rates without either favoring the wealthy or losing revenue isn’t mathematically possible.
Opponents Say… Romney Says…
Romney wants to cut corporate tax rates, because he believes the high rate of corporate tax also hurts
U.S. wages.

“It’s not just Donald Trump you’re taxing. It’s all those businesses that employ one-quarter of the workers in America; these small businesses that are taxed as individuals. You raise taxes and you kill jobs.”

Cutting the corporate tax rate and not corporate taxes overall will have little or effect on economic growth. It wouldn’t prevent a tax increase on middle-
income taxpayers.
Opponents Say… Romney Says…

Sources: #1 #2 #3 #4 #5 #6 #7

Oops…

It’s time to really
consider the issues.

Issue 7:
Taxes

How much do Americans pay in income taxes?

Is There a Difference Between Taxes for the Rich and the Poor?

Who is the “47%”? Who is the “1%”?

Next Issue:
Innovation Oct 31