Who really pays the Income Taxes?

With all the talkof the rich are not paying their fair share of taxes and the tax cuts earlierthis decade only went to the rich, here are some facts to contemplate and youas the reader can make up your own opinion.

• The statement above could be true when you look at it from a pure dollar point of view.? Someone who makes $500,000 versus someone who makes $50,000, if they each get a 5% tax cut, the first one pays $25,000 less in taxes, where the second one only pays $2,500 less in taxes.

• I believe if you want to make an argument who pays more in taxes, you should look at a percentage of income paid and not the dollar figure.

Let’s look at somefacts here from the latest statistics from the IRS that can be found on theirwebsite:

• The top 25 percent of income earners pay 86% of all personal, federal income taxes. That is up from 84 percent in 2002.
• The top 50 percent of income earners pay 97% of all personal, federal income taxes, which also means that the lower half of all income earners in this country pay 3% of all personal, federal income taxes.? The medium in 2006 was just over $48,200.
• What is amazing is that the top 1 percent of income earners pay 39% of all personal, federal income taxes, which is up almost 6 percent since 2002.
• 20 years ago, the top 1% paid a little over 27 percent of all personal, federal income taxes, and the top 50 percent paid about 94 percent.

All the talk aboutthe lower income bracket not getting enough of a tax cut has a mathematicalproblem.? How can you cut taxes forsomeone who already pays very little or nothing?? That was actually answered during the taxcuts in 2003 by cutting the lowest bracket from 15% to 10%.? So the people who pay most of their taxes inthe lower of two lowest brackets received a 30% tax cut. This obviously is nota large dollar figure, but a nice percentage cut.? In addition tax credits were increased.

?Anyway, the issuewe have at hand is that the taxes are paid by a smaller and smaller part of thepopulation. This results in several problems:

• There is a large part of the population that is no longer contributing, even if it is a small amount.? Any tax law changes do not affect them and therefore they don't care.?

• The smaller the pot from where the taxes come from, any changes in the economy or the behavior of people will have a much bigger impact on the amount of money received by the treasury.

The problem iseven worse than people not paying any taxes, you can actually get money backeven if you don't owe any.? There are twothat come to mind, the Child Tax Credit and the Earned Income Credit. I thinkthe second one is a good thing as it is an incentive to work, and the more youwork, the more you get and it is capped at a low income and favors people withchildren.? There is nothing wrong withthe Child Tax Credit, but I don't see why someone actually needs to get arefund beyond their overpayment.

The tax laws arealso screwed once you make too much money in the government's point of viewregarding credits and deductions.? Anyonemaking more than $100,000 is rich in the government point of view.? I would certainly disagree on that, ask a momor dad with two or three kids making in the low $100s if they feel rich.? Anyway, once you reach that level, many ofthe deductions like tuition are being phased out, the child credit disappearsjust to mention a few.? You will not geta dollar for dollar deduction anymore for your mortgage, charity, state taxesetc.? I could go on and on.? In some circumstances, because of the phaseouts, the effective tax rate for a certain income range (like the income from$110K to $115K, which is just an example as it depends on the situation), is inthe confiscatory category where literately a huge chunk of extra earned money goesto the government.? This is offsetsomewhat by not having to pay social security taxes anymore, but that is storyfor a different day.

I think what weneed is a flatter tax with less deductions.?All of us should pay something, because once you have some moneyinvested, you might actually have some interest how it is spend.? We need to be generous to the ones in needand the unfortunate, but that is not almost half the population that pays only3 percent of the taxes.? We should bemore generous with families than with single people, nevertheless they shouldall pay the same rate, just the dollar figure when you start taxing should bedifferent.