Why Doesn’t Anyone Feel Remorse When it Comes to High Earners and Income Taxes?

//Why Doesn’t Anyone Feel Remorse When it Comes to High Earners and Income Taxes?

Why Doesn’t Anyone Feel Remorse When it Comes to High Earners and Income Taxes?

A bad ass blogger, Financial Samurai, made a comment on my blog today that really got to me.  His comment was in response to my post Listing Most of Obama’s Proposed Taxes.  Sam, as his random blogger buddies who live across the country call him, said,

It’s one of those things where one should recognize that if they are paying $100,000 a year in taxes, they are probably doing OK for themselves.

Am I nuts because I believe that just because someone is making money does not mean they should be taxed to death?  I guess the definition of ‘to death’ is probably what is really at heart of this whole subject.

Who Pays the Income Taxes in the United States?

It shouldn’t surprise most that what most would consider high earners pay way more than their share of the income tax collected by the United States government.  Luckily I don’t have to do any work, The Tax Foundation does it for me:

I get that we have a progressive system, and I am not entirely sure that is wrong, but how long can you sustain a system where the top 1% of tax payers supports the bottom 95%?

Percentage of People who Don’t Pay Any Income Taxes

The Tax Policy Foundation also provides us with the percentage of people who don’t even pay any income taxes.

2000129,373,50032,555,89725.2%
2001130,255,23735,491,70727.2%
2002130,076,44339,112,54730.1%
2003130,423,62641,501,72231.8%
2004132,226,04243,124,10832.6%
2005134,372,67843,802,11432.6%
2006138,394,75445,681,04733.0%
2007143,030,46146,655,76032.6%

Approximately one-third of tax payers have a negative or zero tax liability.  I am not blind to the fact that some of this may have to do with tax shelters and fraud, but one-third?

So we have a system that is highly progressive…and you should get how how I feel about it, but forget me (just for this post) how do you feel about the situation? Do you think the system can sustain itself at current levels?

Do you feel no remorse for high earners? Just because, they make more than you?  Don’t you strive to be that high earner, if so, will you just bitch when you get there?

By | 2016-03-07T22:26:27+00:00 January 20th, 2010|Taxes|17 Comments

About the Author:

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

17 Comments

  1. Financial Samurai January 21, 2010 at 1:56 pm - Reply

    Howdy E-dog, that’s a great chart you highlighted! Thanks! Must highlight it in the next Katana for sure.

    I don’t feel “remorse” for high earners, I just feel high earners should just feel fortunate to be a high earner and not complain too much.

    My beef is with the convoluted system, which results in too much brain power wasted. A flat tax is the BEST way, and the fairest way for anybody above the poverty line.

    If you only make $50,000 a year, you only pay $7,500/yr in tax at a 15% rate. Take out ALL deducations and keep it simple.

    You WILL get more frustrated the higher the marginal tax bracket you earn, but you’ll also realize how fortunate you are. Just don’t look at the tax bill TOO MUCH, and you’ll be OK 🙂

  2. Evan January 21, 2010 at 3:17 pm - Reply

    For YEARS I tried to get people to call me E-Dog! I MEAN YEARS. Instead they rocked out less polite nick names.

    I would love a flat tax (of course, I am not sure I’d still have a job with no estate taxes and all, but I’ll survive). But I still disagree with your high earners feeling fortunate.

    Yeah, if you got blessed with ridiculous strength and speed and are playing for my fav. team the Falcons OR if they are playing through the US Open (I was at the last year’s finals NUTS) – then you should thank your maker. But, I don’t believe those are the same as someone who is running their own business working 90 hour work weeks and making $150K/yr.

    • Financial Samurai January 23, 2010 at 11:16 pm - Reply

      That is pretty hilarious about calling you by the one name you’ve always been dreamed of calling btw! How did I know? I donno. What other names did they end up calling you??

      • Evan January 24, 2010 at 2:08 pm - Reply

        I have one buddy that calls me E-Wiggidy but that came after a long night of drinking. When I was much younger (wrestling high school days) I was called goat, but I think that had more to do with me being Greek and all lol.

        In th ened its either Evan or Ev…no real nick name my name is too short

  3. Carrie January 21, 2010 at 4:24 pm - Reply

    Agreed w/ Financial Samuri. A flat tax is the best way to go. People are always whining about equality, but did they forget about taxes? Tax rates are far from equal and punish people for striving to make more money. If a flat 10% tithe is good enough for God, I think a flat income tax should be good enough for everyone. (Yeah, I went there.)

    • Evan January 21, 2010 at 9:42 pm - Reply

      Wow went there! Shocking it took this long for someone in the PF world to mention God on this blog.

  4. Don January 21, 2010 at 7:39 pm - Reply

    I think we should have a flat tax, but no income tax for anybody up to the poverty level for a family of four (and of course that amount would adjust yearly to account for inflation, and down for deflation…).

    Part of the perceived increase in the taxation of the upper 1% isn’t the tax system (Bush W, actually reduced taxes across the board), it’s because the top 1% now make more then they did in the past. Back 30 years ago, unions were stronger and the CEO and entrepreneurs didn’t make as much. Now that has changed. So, I’m with Financial Samurai on that point too… Those that make the real big bucks (annual income of $500,000 and up), should stop complaining and be very happy that they are rich!

    My biggest fear was that the taxation of the rich was going to get worse with the current government looking at that wealth segment with knives… Hurray for Massachusetts voters!

    • Evan January 21, 2010 at 9:51 pm - Reply

      I am pumped about Mass! At the very least it will break up a super majority which is never good regardless of who has it.

  5. Financial Samurai January 21, 2010 at 10:58 pm - Reply

    If you guys are pro FLAT TAX, then maybe you guys can help defend me here: http://www.financialsamurai.com/2009/10/09/were-idiots-please-tell-us-a-flat-tax-is-not-fair/

    There’s like 100+ comments, and I’m too tired to defend my stance anymore and need reinforcements!!!

  6. Kevin M January 22, 2010 at 11:50 am - Reply

    OK, flat taxers. You can take out all the deductions, different tax rates, tax credits, AMT, etc. but that doesn’t solve the problem. The problem then becomes (and partly already is) – what is income?

    The Internal Revenue Code has hundreds of sections devoted to defining “income” already. That will only increase if “income” becomes the only interpretable line on a tax return.

  7. Investor Junkie January 22, 2010 at 9:20 pm - Reply

    I’ve more and more liking the flat tax idea. I’ve succumb to the “dark side”. 🙂

    Though, I don’t see this happening anytime in our lifetime. Too many political favors and jobs tied to the existing system. Can you imagine what would happen to of the accountants do with no income taxes to do? They would be staring at their abacus.

    I also think it would become obvious to the people in the US how our government wastes our money. You took in X, but yet spent 10 times more. The people that pay little or not taxes currently would be more concerned how their tax dollars are being spent.

    I can dream this would happen can’t I? 🙂

    • Kevin M January 24, 2010 at 7:09 pm - Reply

      Tell me again how a “flat tax” is not an “income tax”. (Full disclosure, I’m a CPA.)

      Say we do have a flat tax, starting 1/1/2011. What the tax base (i.e. taxable income you multiply your flat tax rate with to come up with your tax?)

      • Investor Junkie January 24, 2010 at 7:15 pm - Reply

        Hi Kevin,

        Hmm I never said a flat tax isn’t an income tax. I said they (CPAs) wouldn’t have much work to do with a flat tax. Meaning it’s just 15% off your income and your a done.

        As far as idea of wanting a flat tax, you’ll have to as Financial Samurai as it wasn’t my idea. I’m just saying I think I’m beginning to agree with that statement.

  8. Financial Samurai January 22, 2010 at 9:41 pm - Reply

    IJ – You think the flat tax is “the dark side”? You’d be the last person I’d think who would be against equality!

    • Investor Junkie January 23, 2010 at 3:53 pm - Reply

      The thing with a flat tax is you could potentially pay more taxes than our current progressive tax system. I have nothing wrong with it per se. I guess it comes down to would it be an increase for my family and not the other guys. Something tells me I would be paying less taxes with a flat tax.

  9. Monevator January 30, 2010 at 5:42 am - Reply

    The benefits of a flat tax are it’s efficient and transparent. The reason you rarely see it is politicians like to tweak with the system to make various parts of the electorate feel they’re doing them a big favour. You can’t do that with a flat tax!

    I don’t like to see 33% of people not paying taxes. There’s an argument that everyone should pay *something* in tax, so they feel like part of the system, not a passive recipient.

  10. The Amateur Financier February 11, 2010 at 10:13 am - Reply

    I think that you’ve making a common mistake, assuming that because high income earners pay a larger portion of the total tax bill, they are being taxed at higher rates than those with moderate income. There’s been research to indicate that, to the contrary, the tax burden on those who aren’t in the lowest income quintiles is effectively flat: http://www.ctj.org/pdf/taxday2009.pdf (Check out the first table, about one screen down; it shows the average income, average taxes, and the percentages of each total that are allocated to each quintile. The average total tax rate hovers around 27-33% for everyone above the bottom two quintiles.)

    Why, then, does the highest 1% of earners pay more of the overall taxes in this country than the lowest 95% of earners? Simply because they earn (much, much) more. Even with a flat tax system, the rich are still going to paying far more into the system than the less well off, simply because they have more.

    On the table, you can the see the median income for the top one percentage is ten times that of the ‘Next 5%’ (the ninety-first through ninety-fifth tax brackets; the top earners of the ‘other 95%’ referenced in your graph). Even if they pay identical rates, say ten percent, the top one percent is going to pay more, simply because $144,500 times one percent of the population is more than $14,400
    times five percent of the population.

    All of which is to say, no, I don’t really feel remorse for the tax burden faced by the rich, mainly because it’s about the same as mine, when calculated as a percentage of their income.

    As for the percentage of people who pay no taxes, that does frustrate me a bit. Of course, I’d guess that many, if not most of those people fall beneath the federal poverty line, and thus, by almost any standards, shouldn’t have to pay taxes, anyway. (Going back to the linked table, the median income of the bottom quintile is just about the poverty line for a single person ($10,830) and the median income in the second lowest quintile is below the poverty line for a family of five ($25,790). Given these facts, I’d say there’s probably a good chance that many of the tax payers are literally too poor to be taxed.)

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