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It is a commonly held belief that the rich don't pay their fair share, or that they pay no income taxes at all because of tax breaks.

What share of all federal tax breaks are given to the top income quintile? (top 1%?)

  • What do tax breaks have to do with the poll or the quote? – user4012 Jul 7 '13 at 14:56
  • OK, I'll edit it out. And post a correct answer explaining why tax breaks have nothing to do with whether rich pay fair share or not. – user4012 Jul 8 '13 at 0:39
  • did you even bother reading ANYTHING I wrote other than the fact I disagree with you? I edited out the taxes paid poll, which had nothing to do with your question. It had a direct relation to the original question, which was about the topic the poll was on (effective taxes paid, NOT tax breaks). I didn't edit out "fair share" from EITHER of the questions, and still maintain that your DV on the original question for merely mentioning the term is invalid and unfair (no pun intended), and am demonstrating it by NOT downvoting this question which also has the same term. – user4012 Jul 8 '13 at 1:55
  • In user's question, the quote was directly related to the question - the question was about how much taxes ARE paid, the poll was about perception of whether those numbers are "fair" or "enough". You're welcome to add in an example poll discussing tax breaks - I would consider it equally valid to your question, and think it would improve it significantly (as right now it's an obvious attempt to act as a smartass and prove a point instead of geniune curiosity, sorry for rudeness). – user4012 Jul 8 '13 at 2:53
  • This question is a bad extension of comments from another question designed to raise a besides the point argument – SoylentGray Jul 8 '13 at 14:47
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The CBO estimates that the top quintile receives 51% (Top 1%: 17%) of the 10 selected major federal tax breaks. This estimate makes several assumptions, among the primary one is the concept of "preferential tax rates." ($161 billion) The CBO assumes that since long-term capital gains (0%-20%) are taxed at a lower percentage than an individual's marginal progressive income tax rate (10%-39.6%), that they are giving a tax break or creating a "tax expenditure" for those individuals that benefit from the lower rate. This assumes that the current progressive income taxes are the "correct" rates. A previous CBO report found that the average federal tax rate was 17.4%. If you don't assume that the progressive rates are the "correct" rate, does that mean that anyone getting taxed less than 17.4% is receiving a tax break, and anyone taxed more than 17.4% is receiving a tax punishment?

Even if we accept their assumption that the progressive tax is the "correct" rate, their estimate didn't include two large omissions, the Standard Deduction and Personal Exemption. The possible reason for this exclusion is that the Joint Commitee on Taxation does not consider those as deductions, but instead as defining a "zero-rate" tax bracket. If you include the Standard Deduction ($114 billion) and the Personal Exemption ($196 billion) in the total of all 10 (page 10, Table 1) tax breaks ($926 billion), the real share of tax breaks for the top quintile is about 42% (Top 1%: 13%). (calculation below)

Federal distribution of Major Tac Expenditures

The Standard Deduction in 2009 was a $747.8 billon tax break, while itemized deductions were $1,203.8 billion. About 65% of households claim the Standard Deduction, but the vast majority are in the bottom four quintiles.

The Tax Policy Center breaks down the total tax break by AGI in the 2009 Individual Income Tax (page 4). In 2009, the 80th percentile begins at $103,783 (Top 1%: $525,773). That means that the 80%-100% quintile received a $27 billion tax break (Top 1%: less than $0.26 billion) from the Standard Deduction, with the remaining $720 billion divided between the bottom ($260 billion), 20-40th ($213 billion), 40-60th ($155 billion), and 60-80th ($93 billion) percentile. If you use the 2009 Individual Income Tax: AGI, Deductions, etc. by Marital Status you can estimate the total dollar amount deducted for each income group, and how many actual tax dollars were saved. The TaxBreak$1k used the bottom AGI division to determine what marginal tax bracket the household fell into. This resulted in a Standard Deduction for the Top Quintile of $7.5 billion (Top 1%:$0.09 billion), and Personal Exemptions of $53 billion (Top 1%:$2.7 billion).

                     |           | --Standard Deduction--                | -- Personal Exemption --|
Size of AGI          |#of Returns|#of Return| %. |Amount $1k |TaxBreak$1k|Amount $1k   |TaxBreak$1k|
All returns, total   |140,494,127|92,268,979|65.7|747,779,539|114,043,392|1,029,070,478|195,808,881|
No AGI               |  2,511,925|         0| 0  |          0|          0|   13,742,768|          0|
     $1 under  $5,000| 10,447,635|10,005,431|95.8| 53,661,106|  5,286,974|   33,915,413|  3,799,068|
 $5,000 under $10,000| 12,220,335|11,586,408|94.8| 80,020,270|  7,905,356|   58,080,799|  5,730,030|
$10,000 under $15,000| 12,444,512|11,517,694|92.6| 86,662,093| 11,807,964|   79,669,121| 11,182,305|
$15,000 under $20,000| 11,400,228|10,229,448|89.7| 79,150,629| 10,597,789|   76,860,603| 11,354,847|
$20,000 under $25,000| 10,033,887| 8,713,252|86.8| 69,979,510| 10,344,857|   73,010,021| 10,749,976|
$25,000 under $30,000|  8,662,392| 7,128,185|82.3| 58,434,144|  8,645,432|   63,627,911|  9,341,770|
$30,000 under $40,000| 14,371,647|10,750,692|74.8| 90,781,999| 13,406,406|  106,542,591| 20,292,747|
$40,000 under $50,000| 10,796,412| 6,800,862|63.0| 61,120,290| 10,696,751|   81,504,834| 15,347,662|
$50,000 under $75,000| 18,694,893| 9,422,368|50.4| 96,630,436| 16,675,944|  157,300,277| 28,132,285|
$75,000 under $100k  | 11,463,725| 3,880,724|33.9| 44,763,537| 11,156,210|  109,058,971| 26,938,981|
  $100k under $200k  | 13,522,048| 2,067,568|15.3| 24,670,361|  6,891,772|  139,854,272| 38,892,911|
  $200k under $500k  |  3,195,039|   143,092| 4.5|  1,641,137|    536,661|   30,562,232| 11,276,205|
  $500k under  $1 mil|    492,567|    16,720| 3.4|    194,039|     67,214|    3,638,830|  1,892,813|
 $1 mil under $1.5 mi|    108,096|     3,525| 3.3|     38,826|     24,063|      780,188|    877,281|
$1.5 mil under $2 mil|     44,273|     1,248| 2.8|     13,070|           |      319,551|           |
 $2 mil under  $5 mil|     61,918|     1,395| 2.3|     14,516|           |      442,446|           |
 $5 mil under $10 mil|     14,322|       241| 1.7|      2,448|           |      101,357|           |
$10 mil or more      |      8,274|       126| 1.5|      1,128|           |       58,294|           |
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