Hi Everyone,

The IRS has published the latest statistics on who pays how much in income taxes in the United States. The numbers are for 2006, but here are some interesting facts next time you hear a politician talking about increasing the taxes.

• The bottom 95% of earners paid just under 40% of all the taxes on just over 63% of all the income earned. That means that the top 5% paid 60% of all income taxes.

• The bottom 50% paid 3% of all the taxes and had a 12% income share.

• On the other hand, the top 1% of all income earners, which was $388,806 in adjusted gross, they paid 40% off all taxes on 22% of all income earned

The percentage of income tax paid by the top 1% earners has almost doubled since the late 70s, even tough the income tax rates have come down considerably. With the tax decreases under the Bush administration, the percentage paid by the top 1% has increased by almost six percent.

One could argue that the income distribution is uneven, but we do live in a capitalist system. The burden of paying income taxes is equally one sided, with a smaller and smaller part of the population actually carrying the income tax burden.

It looks to me that the wealthy might be paying less as a percentage now, but they sure are shouldering the burden in taxes paid. Another interesting fact is that the amount of people declaring a million dollar in income almost doubled between 2003 and 2006, as did the amount of taxes double that were collected from them. The tax cuts have been anything but a giveaway by the government to the rich as it is often proclaimed.

Given the fact that the lower half pays almost no income taxes, it is very difficult to give them an additional break. The main taxes on that income group are Social Security and Medicare.

Changing the tax rate on the high income earners will change behavior. In the past few years it has been in the governments favor. That would also go the other way if taxes increase, and I would argue that revenue to the government would likely decrease, as the wealthy have many options on how to direct their income and use more tax shelters, as these become more attractive with higher tax rates.

I hope our future leaders will look at the facts long and hard before proposing future tax increases, as they will only harm the economy and the treasury.

Please feel free to comment.

Cheers,

Patrick