How Are Tax Revenues Distributed Among The Different Demographics In The USA?

April 10, 2012 by  Filed under: Taxes 

There is a lot of talk today about the distribution of wealth and who pays what in income taxes. The distribution of income taxes in the United States has always been what one would consider progressive, meaning that the more you make, the higher percentage you pay in. What is going on with the political scene today is that more and more Americans feel the wealthiest 1 percent are not doing their part in tax payments. But is this the reality? To understand the answer to that question, there are a variety of factors of importance. First of all, what does an individual make compared to their basic needs and living expenses? Secondly, how are ones monies distributed within their network of wealth? Thirdly, what services are being neglected as a result of inability to pay? One must understand all these questions to have a firm grasp on the concept of who’s paying more and doing their part. With that said, tax revenues are distributed among the different U.S. demographics in the following ways:

The lowest income bracket

There is a swing of about 23 percent, according to 2009 numbers, in what a low income and high income person pay in. Low income persons paid at around -11 percent, while high income earners paid a little more than 13 percent. Tax loopholes exist within the system to make these numbers possible for both groups. But the one thing the distribution numbers fail to reveal is this: sales tax. No American can get out of paying sales tax, which exists on everything from food to gas. While richer Americans are able to swallow the food and gas costs with minimal effect on their ability to provide for themselves and fulfill basic human needs, lower income groups may be unable to get by. Consider a family of four trying to get by on just $30,000 per year. By the rough numbers listed above, they may not seem to “pay their fare share,” but the sales tax rates, which are often around 10 percent nationally, mean they pay much more in than they can afford to, while the wealthy are largely unaffected.

Federal Revenue Sources

As far as federal revenue sources are concerned, around 44 percent comes from individual income taxes, while 42 percent comes from payroll taxes. That means for every $1 billion in federal revenue, $440 million is derived from individual income taxes. Unfortunately, the group that gets the most heavily squeezed when it comes to the percentage of actual income earned and the financial obligations they have, is the middle class, which is rapidly disappearing. So while the wealthiest Americans are technically paying a higher amount in tax revenue, the cost of living against earnings puts poorer Americans at an extreme disadvantage.

Consult a firm of Pittsburgh Accountants with over 20 years of experience. Services include business consulting and tax compliance help to corporations, individuals, partnerships, limited liability companies, estates, trusts, and not-for-profits. The Firm is also a 2008 SBA Award Winning CPA Pittsburgh PA.

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