The Realities of Tax Reform

The top 1% of individual taxpayers, those reporting taxable income in excess of $350,000 or so annually, pay almost 40% of all income taxes at a marginal tax rate of 35%. These taxpayers generally have few deductions other than charitable gifts.

The top 5% of taxpayers, those reporting taxable income above $150,000 or so annually, pay 60% of all income taxes primarily at a marginal rate of 28%. Those taxpayers generally have most of the tax deductions at risk under tax reform.

The top 10% of taxpayers, those reporting taxable income above $100,000 or so annually, pay 80% of all income taxes primarily at a marginal rate of 25%. Those taxpayers generally have sufficient tax deductions that are at risk under tax reform to itemize their deductions.

The bottom 50% of taxpayers only pay 3% of the tax bill and 47% pay no income taxes at all or get refunded money they did not pay.

Fact: Any “flat” tax rate that comes in under 35% will shift a significant portion of the income tax liability from the top 1% to the next 52%, and the lower that new flat rate, the larger the shift.

Please understand that tax reform as currently proposed will increase taxes on most taxpayers.

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