Endangered Species: Taxpayer Americanus

The purpose of this essay is to examine the personal income tax statistics of the United States for the years 1996 and 2008.  All tax statistics are from the IRS.  You can access this information at www.irs.gov  We have also included, for perspective purposes, the total workforce and total GDP statistics for the country for the same periods.  And, we have added arrows to the right of the 2008 statistics to display trend significance compared with the 1996 statistics.              

                                                                  2008                              1996

Total Returns Filed                              142,450,569 ↑                 120,351,208

Total Adj Gross Inc.                            $7.583 trillion ↑↑              $4.342 trillion

Total Taxable Returns:                          90,659,909 ↓                   90,906,919
Up to $100K                                           72,561,726 ↓↓                 84,778,318
$100 – 500K                                          17,201,185 ↑↑                   5,803,227
Over $500K                                                896,998 ↑↑                      325,374

Total Taxable Income                         $5.488 trillion ↑↑              $3.071 trillion
Up to $100K                                       $2.097 trillion ↑                $1.896 trillion
$100 – 500K                                      $2.125 trillion ↑↑↑                 .764 trillion
Over $500K                                       $1.266 trillion ↑↑↑                 .411 trillion

Total Tax Paid                                    $1.032 trillion ↑                 $ .658 billion
Up to $100K                                           .263 billion ↓                 $ .320 billion
$100 – 500K                                          .426 billion ↑↑                   .197 billion
Over $500K                                           .343 billion ↑↑                   .141 billion

US GDP                                           $14.369 trillion ↑↑               $7.784 trillion

US Civilian Workforce                         154,000,000 ↑                   134,000,000

Taxable Inc % of GDP                                  38.2% ↓                            39.5 %

Tax Paid % of GDP                                        7.2% ↓                              8.4 %

Taxable Returns %
of Workforce                                                63.6% ↓↓                           75.5%

Now let’s do some basic analysis. The workforce of the country grew by 20 million people from 1996 to 2008 and, believe it or not, the taxpaying citizens of the country declined by 200,000. Workforce grows, population grows and taxpayers decline. We've highlighted some of the statistics in red to draw your attention to this situation.  That is neither sensible nor readily explainable unless there is a belief that you can run a growing country with a declining taxpaying citizenry. The decline in taxpayers earning up to $100,000 per year is dramatic; dropping from 85 million in 1996 to 73 million in 2008 and equally dramatic is the growth of taxpayers in the $100-500,000 category and the $500,000+ category. Obviously it is good that there is a movement to higher wage categories but with a growing population there should also be growth in the up to $100,000 category. Instead there is a dramatic decline.

In 1996, about half of all personal income taxes were paid by people making under $100,000 and the other half by people making more. Twelve years later the group making more than $100,000 was paying 75%. That 75% of all personal taxes was paid by 18,100,000 citizens out of a total population of 304,000,000 in 2008. That means that 6% of the population is responsible for 75% of all federal personal taxes paid. We would like to repeat that fact: 6% of the all citizens are paying 75% of the personal income taxes! Not only unbelievable but an incredible imbalance in the scheme of things. As we wrote last week, you can add to the tax burden on the rich and we showed you the numbers. But we don’t have a tax the rich problem; we have a disappearing taxpayer problem in the United States.

What has happened to the taxpayers in the up to $100,000 category? They exist. They vote. They most certainly are recipients of government spending and government programs. We know that they are out there because the total returns filed grew by 22,000,000; a bit higher than the workforce itself. So, they are working and earning money. Adjusted gross income grew from $4.3 trillion to $7.6 trillion. GDP almost doubled. But the taxpayers declined. Taxpayers in the up to $100,000 category are becoming an endangered species.   And there are politicians who glorify this situation.

The larger perspective statistics are also quite disconcerting. Taxable income as a % of GDP declined from 39.5% to 38.2% and the actual tax paid as a % of GDP declined from 8.4% to 7.2%! How can we tolerate declining tax percentages when our government spending is skyrocketing; health care costs are skyrocketing; claims against social security funds are skyrocketing? Yet, inexplicably, fewer people are paying taxes. Twelve years ago the country relied on the large group of up to $100,000 earners for half the tax revenues. We need them to pull their fair share. Where are these disappearing Americans? And where are the endangered species bureaucrats when we need them?