Tuesday, February 15, 2011

More Tax Arithmetic.

Let us expand our discussion of income and tax demographics and discern what is realistic in dealing with budgets approaching critical mass. The following is the distribution of 2008 adjusted gross incomes and their accompanying federal income taxes:

Income Percentile Income Threshold ($K) Number of Returns (M)AGI ($T) AGI - Fraction of Total Federal Tax Paid ($B) Tax - Fraction of Total

So, given the President's $3.7T budget for 2012, we see that even confiscating all of the income of the top 5% of the country's earners won't pay for it. (Note that although payroll taxes are not included in this estimate, including them still leads to a rapacious level of taxation for this group.)

If we take a bogey of $300B deficit reduction - because any amount below this level is an obscenity - and require all of it be paid by income tax increases, then a 50% increase in the income tax levied on the top 5% would be needed. Constraining this increase to be consistent with the President's pledge to nail only the top 2% of earners would require a 67% increase in income taxes for the elite 2%.

To summarize: it ain't about low taxes, it's about skyrocketing spending.

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