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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Are Taxes Progressive in the US?

Jan 21, 2013

Every once in a while we read an article on either how progressive or non-progressive our tax system is in the US. We ran across this article while browsing the Internet and the first thing that struck me is how the word progressive is denoted in these articles as being equal to percentage.

In the article, the author strives to indicate that the richest 1% barely pays more tax than those in the lower income brackets since their overall percentage of income paid to taxes is not much more than lower income earners. They state that even though the federal income tax structure is progressive, all of the other taxes such as payroll taxes, excise, sales, property and other taxes are clearly regressive (in their opinion).

For example, the article states that the lowest 20% of taxpayers pay on average about 19% to taxes. The highest 1% only pay about 29% and the overall average is about 28%.

What the article fails to point out is the amount of overall taxes paid by each bracket. For example, the lowest 20% bracket pays about $2,262 of total taxes, while the upper 1% pays almost $400,000 or about 200 times higher than the lower 20%. The average for the "bottom 99%" is about $16,000 which again is about 25 times lower than the 1%.

As with most of these articles, it is very easy to take a statistic and slant it one way or another using percentage in one case and actual dollars in another. The point is to understand both sides of the spectrum so you can make a more informed decision.

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