The Income Tax is More Skewed Than Ever

President Obama announced that in his State of the Union Message he would propose  to raise income taxes on The Rich. This announcement came in the same week that the IRS published new data for 2012 that show that income taxes are more skewed than ever before. Now we know facts and analysis are not the President's strong suit, but wasn't there anyone on his staff who could read charts for him? Or maybe it's the same staff that told him that Obamacare would reduce healthcare costs by $2500 per year? Or (more likely) the President just doesn't care much about the truth.

Half the Country Doesn't Pay Income Tax-- Again

The Internal Revenue Service just released new 2011 data on individual income taxes. 

Once again, half the people in this country pay 97% of the income taxes, while the other half essentially pays nothing ( which Mitt Romney was pilloried for saying last year). Is it any wonder, then, that half the country thinks of government spending as a Free Lunch?

And just 5% of us pay over half the total tax bill. I can't recall . . . did the President bring that up in his rant about "income inequality"? 

Table 1. Summary of Federal Income Tax Data, 2011
	Number of Returns*	AGI ($ millions)	Income Taxes Paid ($ millions)	Group's Share of Total AGI (IRS)	Group's Share of Income Taxes	Income Split Point	Average Tax Rate
All Taxpayers	136,585,712	8,317,188	1,042,571	100%	100.0%
Top 1%	1,365,857	1,555,701	365,518	18.7%	35.1%	> $388,905	23.5%
1-5%	5,463,429	1,263,178	223,449	15.2%	21.4%		17.7%
Top 5%	6,829,286	2,818,879	588,967	33.9%	56.5%	> $167,728	20.9%
5-10%	6,829,285	956,099	122,696	11.5%	11.8%		12.8%
Top 10%	13,658,571	3,774,978	711,663	45.4%	68.3%	> $120,136	18.9%
10-25%	20,487,857	1,865,607	180,953	22.4%	17.4%		9.7%
Top 25%	34,146,428	5,640,585	892,616	67.8%	85.6%	> $70,492	15.8%
25-50%	34,146,428	1,716,042	119,844	20.6%	11.5%		7.0%
Top 50%	68,292,856	7,356,627	1,012,460	88.5%	97.1%	> $34,823	13.8%
Bottom 50%	68,292,856	960,561	30,109	11.55%	2.89%	< $34,823	3.13%
*Does not include dependent filers.

The Price of Milk

Nolan Finley, in his Detroit News column, wonders what would happen if milk were priced on the same basis as the federal government uses to structure income taxes.

The average price of milk is $2.49/gallon, so everyone (ignoring for a moment the 47 million people on Food Stamps) now pays $2.49. But if the government applied it's unique way of thinking here, 40 percent of the public wouldn't pay a dime for it. In fact, the government would actually PAY them $1 for every gallon of milk they took home. At the other extreme, 1 percent of the public would be charged $109.81 per gallon for milk. Of course, these people would buy a lot less milk at that price, and most of the scheme would need to be financed by issuing milk bonds to China.

The current tax system is, indeed, unfair, but not because the wealthy don't pay enough.The Rich are paying more for their government milk than it's worth so that most others can pay less. Instead of saying thank you, we're trying to milk them dry.

Time for Olympic Medal Redistribution?

The distribution of medals in the last Olympics looks remarkably like the distribution of income in the United States. There's been endless clamor about how "unfair" the latter is. Maybe the Olympic Committee needs to step in and take medals from the top performing countries like the US and China and redistribute them to countries like India and Indonesia that deserve more? Are the disparities in economic economic achievement totally different than the disparities in athletic achievement?

Capitalism is a Dirty Word (ask Kim)

Capitalism produces income inequality. It simply enriches the privileged few at the expense of the rest of the population. Ask any Korean.