Wednesday, October 10, 2012

Low And Middle Income, Not The Wealthy, Benefit The Most, In Dollars And Percent Of Income, From Tax Deductions, Exemptions And Preferences

From Bloomberg, "The Real Reason Romney’s Tax Math Doesn't Add Up" by Josh Barro:
The tax preferences that exist today overwhelmingly benefit people with lower and middle incomes, not the wealthy. While tax rate cuts reduce income tax burdens proportionally, as TPC notes, there aren't enough tax preferences for wealthy people to offset Romney's cuts at the top.

To understand this, we can look at the IRS Statistics of Income report for 2009, the most recent year available. Tax returns reporting less than $200,000 of adjusted gross income (AGI) accounted for a total AGI of $5.86 trillion, and taxable income of $3.24 trillion. That is, deductions and exemptions amounted to 45 percent of adjusted gross income for people making under $200,000.

Tax returns with more than $200,000 of AGI (the highest-earning 2.8 percent of filers) had a total of $1.96 trillion in AGI and $1.62 trillion in taxable income. For this high-income group, deductions and exemptions were just 18 percent of adjusted gross income.

Put another way, filers with over $200,000 of income earned 26 percent of all personal income in 2009, but received only 12 percent of tax exemptions and deductions.

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