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With New Tax Laws, Wealthy May Actually Pay More

May 7, 2018

According to the latest IRS taxpayer data, which is from 2015, 142 million taxpayers reported a total of $10.14 trillion in adjusted gross income (AGI) and paid $1.45 trillion in taxes.


That equates to a collective average tax rate of 14.3 percent.


But as we all know, averages can be deceiving. And this tax one certainly is, because most people paid below 14.3 percent – and a small number paid way more.


The lower half of the 142 million tax filers had an AGI of $1.1 trillion, which is 11.1 percent of all income. This group paid $41 billion in taxes (2.8 percent of all taxes), for an average tax rate of 3.5 percent.


Consider also that some people don’t pay taxes. Add them to the 142 million and you have over half of the U.S. population paying little or no taxes.


But context is important here too. The average AGI for this whole group is $16,211 per year.


Conversely, the top 10 percent of income earners pay 70 percent of all taxes. And the top 50 percent of income earners pay 97 percent of all taxes.


Put together, the bottom half of earners take home 11 percent of the income and pay 2.8 percent of the taxes, while the top half pays 97.2 percent of all taxes, but also earns 89 percent of the income.


By design, the wealthy pay more, which is what the public wants. The data prove the system is operating as intended.


Recent tax legislation, which supposedly benefits the wealthy, actually has them paying a higher percentage of the overall tax. As the Wall Street Journal notes, the wealthy are paying 5 percent more of the overall tax burden. So they’re not getting off easy.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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