Tax Data...Fun!

[stats45]

A lot of people seem to be interested in 'who pays what' with tax data, so I thought I'd share one of my favorite data sources.

The IRS SOI (Statistics of Income) data help to show tax liability by income groups and what types of deductions and credits people in each income group receive.

Here is the link to the figures for 2003 - 2008.

www.irs.gov/taxstats/indtaxstats/article/0,,id=154955,00.html

[stats45]

Here are some highlights from 2007, the last full non-recession year. I'm using federal tax liability rather than just income tax. It is a small difference, but a bit more accurate when thinking about filing federal taxes.

Total Returns by Income Group:

Under $15,000: 12,480,776

$15,000 to $30,000: 18,056,732

$30,000 to $50,000: 21,735,817

$50,000 to $100,000: 30,169,669

$100,000 to $200,000: 13,413,869

$200,000 to $250,000: 1,498,828

Above $250,000: 2,996,359

[stats45]

Total Adjusted Gross Income by Income Group - Wages Earned:

Under $15,000: $186 billion

$15,000 to $30,000: $670 billion

$30,000 to $50,000: $1.015 trillion

$50,000 to $100,000: $2.216 trillion

$100,000 to $200,000: $1.794 trillion

$200,000 to $250,000: $333 billion

Above $250,000: $2.317 trillion

[stats45]

Total Tax Liability by Income Group:

Under $15,000: $5.5 billion

$15,000 to $30,000: $25.3 billion

$30,000 to $50,000: $66.5 billion

$50,000 to $100,000: $203 billion

$100,000 to $200,000: $240 billion

$200,000 to $250,000: $59.3 billion

Above $250,000: $539 billion

[stats45]

Precent of Adjusted Gross Income Collected in Federal Income Tax Liability by Income Group:

Under $15,000: 2.96%

$15,000 to $30,000: 3.78%

$30,000 to $50,000: 6.55%

$50,000 to $100,000: 9.16%

$100,000 to $200,000: 13.38%

$200,000 to $250,000: 17.8%

Above $250,000: 23.26%

[commentator]

AGI does not, of course, reflect total income for any of those groups. In particular, the very wealthy will disproportionately earn tax exempt interest, which is not a part of AGI, on state and local bonds.

In addition, the very wealthy will disproportionately hold assets which will appreciate in value and pass at death, with zero income taxes paid, to the children of the decedent. Under current estate tax law, a married couple can pass $10,000,000 of assets to their children (or anyone else) with zero estate tax liability.

[Deleted]

Can you also do the % of AGI income each group had... if you are also going to do the % of taxes... thanks...

[commentator]

This message has been deleted.

[stats45]

Commentator, that is true, but AGI is still one of the best measures for income for which we we have good information.

Oped, it finally stopped raining, so I'm going outside to play! I'll post more stuff from this later. There is really interesting information on which groups claim which deductions, receive tax credits, etc.

[commentator]

stats, I presume by "good" you mean reliable or verifiable. It does not meet my definition of "good" because it excludes much information I believe is relevant for making policy decisions.

[stats45]

Yes. That is exactly what I mean by good. Without comprehensive data or data collected according to strict sampling criteria, it is impossible to know exactly (for example) how much the things you describe impact total income earned.

Your point is important though. What would your educated guess be about how much income per year is missed by using AGI? In 2007, AGI captures about 8.7 trillion of income.

[formerexpat]

Your point is importart though. What would your educated guess be about how much income per year is missed by using AGI? In 2007, AGI captures about 8.7 billion of income.

I think you mean trillion.

I think you might already know this and are seeing if posters are using this data, but when you look at page 105, it shows the dollar amount by line item.

Total income [line 22] is $8,810 billion while AGI [line 37] is $8,688 billion. It would appear that $123 billion is "missed" by using AGI instead of total income for sampling purposes.

As for the point about non-taxable interest, the amount on the returns was $79.4 billion for 2007. Then again, if we start taxing this, we'll have to raise interest rates because investors won't be interested in taking such a low return and then being taxed on it. This, in the end, will affect the many middle and low class citizens since counties, states and the federal government use these bonds more for the middle and lower class than for the rich.

Be careful not to cut off your nose to spite your face.

This is very interesting information - thanks for sharing it, Stats.

[stats45]

formerexpat, thanks for the correction! I changed the post.

About total income vs. AGI, this is what I thought, but I'm not an accountant or tax professional so I didn't want to assume that was correct.

[stats45]

Oped, here is what you requested. Just to clarify, Post #4 does not show the percentage contribution of each income bracket to total tax payments but simply how high each group's tax payments are as a percentage of their AGI.

Percent of Total Adjusted Gross Income by Income Group -

Less than $15,000: 2.14%

$15,000 to $30,000: 7.71%

$30,000 to $50,000: 11.7%

$50,000 to $100,000: 25.5%

$100,000 to $200,000: 20.65%

$200,000 to $250,000: 3.83%

Above $250,000: 26.67%

[formerexpat]

From page 105. line 20a - SS benefits $382.3 billion. taxable [line 20b] $167.2 billion.

The government is currently taxing 43.7% of SS benefits that it pays. We can expect this number will increase in years to come.

On page 119 - line 22 of schedule A - $6.486 billion dollars spent on tax preparation. Simplify the tax code.

[formerexpat]

By taking the two percentages you gave for those making over $250k [they make 26.67% of AGI and pay 23.26% in taxes] along with the overall AGI of $8.688 trillion, the income that the over $250k crowd has remaining after paying federal taxes only [remember, they also pay state, property and other] is roughly $1.778 trillion dollars.

So, the US government would have to tax the over $250k earners at nearly 100% of their entire AGI to cover the 2011 deficit, expected to be $1.645 trillion dollars.

[stats45]

That is a good point to make about the tax increases and higher earners. It looks to me like the battle between tax increases and spending cuts will most directly impact those making between $50k and $200k. That is where the majority of potentially taxable income is located.

What I liked about this data is that is allows us to kind of make assumptions about effective income tax rates for people in different brackets. I've seen quite a few posts where people are surprised about their effective tax rate given the bracket where their last dollar earned falls. This is stepping away from the data a bit, but this suggests (for example) that the average effective income tax rate of households making $100,000 to $200,000 is around 11% - 15%.