Who is Paying Their “Fair Share?” By Peter Muffoletto, CPA

By Peter Muffoletto, CPA

Despite what your politicians are prone to telling you, that the “rich” should be paying their “fair” share, based on recently published IRS data, they are paying far more than their fair share, in fact 66% of the total amount of taxes paid.

Most of the government’s federal income tax revenue comes from the nation’s top income earners.

The top 5% of earners, those with incomes of $252,840 and above, collectively paid over $1.4 trillion in income taxes, or about 66% of the national total.

• In 2021, taxpayers filed 153.6 million tax returns, reported earning more than $14.7 trillion in adjusted gross income (AGI), and paid nearly $2.2 trillion in individual income taxes.

• The average income tax rate in 2021 was 14.9 percent.

• The top one percent of taxpayers paid a 25.9 percent average rate, nearly eight times higher than the 3.3 percent average rate paid by the bottom half of taxpayers.

• The top 1 percent’s income share rose from 22.2 percent in 2020 to 26.3 percent in 2021 and its share of federal income taxes paid rose from 42.3 percent to 45.8 percent.

• The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent.

• Capital gains realizations exceeded $2 trillion to reach a 40-year high, driving income growth and taxes paid for high-income groups.

Reported Income and Taxes Paid Increased in Tax Year 2021

Taxpayers reported more than $14.7 trillion in AGI on 153.5 million tax returns in 2021, an increase of nearly $2.2 trillion in AGI and a decrease of 3.9 million in returns compared to 2020.

Total income taxes paid rose by $485 billion to nearly $2.2 trillion, a 28 percent increase above 2020. The average individual income tax rate increased up from 13.6 percent in 2020 to 14.9 percent in 2021.

The IRS does not include refundable tax credits allowed to the lower income earners in tax share figures. The result overstates the tax burden of the bottom half of taxpayers.

What?  No Audits?

In other unrelated news from the U.S. Treasury, the IRS has given up, for the most part, auditing the upper income taxpayers as they have found for the most part, tax compliance is actually quite high among those taxpayers. In a separate news item, the IRS also continues to fail to audit or look into tax credit fraud in the lower income levels where fraudulent tax credit claims are rampant and where IRS estimates that fraudulent credit claims are in the billions annually. The IRS’ failure to do so is attributed to political pressures.

Remember, it is always easier for politicians to speak to the masses and let them think somehow that they are being overburdened by taxes when, in fact, those who they appeal to are paying the least. As they say, rob Peter to pay Paul, and Paul will always support that idea and vote for those who tell them that. But let’s never allow the facts to get in the way of a good political lie.