Failed Empire

Chronicling the collapse of a failed society

Wealthiest Americans Enjoy Steep Decline in Tax Rate

It’s always a joy to read such heart-warming stories during tax season:

The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

Before going any further, it’s worth pointing out a few obvious facts.  First of all, citing a 9.3 to 9.9 percent tax rate as a national average is highly misleading.  Yes, the actual federal income tax rate might come to that amount, but in reality ordinary Americans are paying far more.  I am not a tax expert, but during my time working in the States (I’ve worked abroad since 2004), I was routinely paying what amounted to a 20-25% tax rate, once all deductions had been made.  Federal programs like Social Security are structured in such a way that blue collar and middle class Americans bear the brunt of the cost, in terms of percentages of salary deducted.  As a result, less affluent Americans typically end up paying a much higher rate than what has been suggested here by the extremely corporatist AP.

Second, it is a known fact that many of the largest corporations in America pay a tax rate approaching 0% — in some cases even worse, as corporations such as GE and Exxon Mobile claim generous tax rebates in spite of putting nothing into the national coffers.  As we all know corporations are considered human in the eyes of the law, it is highly misleading for the AP to suggest that the wealthiest 400 Americans pay, on average, a 17% federal tax rate.

Third, the figure of a 17% tax rate for the wealthiest 400 Americans is dubious for reasons beyond that mentioned above.  Even if the final figure approaches 17%, it is worth pointing out, as I did above, that the percentage of a wealthy person’s salary deducted for programs like Social Security and Medicare is far lower than the equivalent rate for a working class or middle class American.  After all deductions are made, that figure of 17% might raise a point or two for the wealthiest Americans, but for ordinary Americans it is raised by a good 10-15%.

But again, the figure of a 17% federal income tax for the wealthiest Americans seems highly unlikely, knowing what we know about the tax code.  After all, how can we explain situations like this one, described in the very same AP article:

Shoenberg, who now teaches a business class at Columbia University, said his income is usually “north of half a million a year.” But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

I simply point out to people, ‘Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?‘” Schoenberg said.

To most Americans, the answer is obvious.  To corporate America and the wealthy elite, the mentality is quite different.  The corrupt American tax code is filled with loopholes to allow the richest among us to avoid paying income taxes.  Loopholes undoubtedly exist that would allow ordinary Americans to pay less taxes, but the complexity of the tax code virtually guarantees that it is only the very wealthy who are able to fully exploit those loopholes.  It would be incredibly naive to assume that those who have the means to realize these loopholes – i.e., through the hiring of professional tax accountants – would choose not to do so.

So the reality, as more and more Americans are starting to realize, is that the richest among us – including massive, multi-billion dollar corporations – pay a significantly lower tax rate.  And the higher tax rate that ordinary Americans do pay offers nothing in return, since our tax dollars are used largely to fund the military industrial complex, and other forms of corporate welfare.

Both Republicans and Democrats support this system, so it is foolish to expect real solutions from either party.

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One response to “Wealthiest Americans Enjoy Steep Decline in Tax Rate

  1. MichaelEdits April 24, 2011 at 9:51 pm

    Gimme gimme gimme, that’s all I ever hear
    Ain’t got no money to buy me a beer

    I joke because being serious hurts too much.

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