The Palmetto Insider

The blog of the South Carolina Policy Council

$32,000 Per Year Considered Wealthy Says New IRS Report

with 2 comments

Citizens protest what they see as excessive government spending during the Tax Day Tea Party Protest at the Statehouse, April 15, 2009.

Citizens protest what they see as excessive government spending during the Tax Day Tea Party Protest at the Statehouse, April 15, 2009.

Citizens earning more than $32,879 rank among the top half of U.S. taxpayers and paid more than 97 percent of all income taxes in 2007, according to new IRS data released this past week.

The data also shows the top 1 percent of U.S. taxpayers paid more than 40 percent of all income taxes in 2007 while earning less than 23 percent of national income. This data comes while the government debates raising taxes on America’s elite earners even further to finance universal healthcare and other federal spending.

Proponents of taxing the wealthy often claim these citizens do not pay their fair share, but those claims are not supported by the IRS data. Taxpayers with income above $410,096 paid an effective tax rate of 22.45 percent. That is nearly double the 12.68 percent effective tax rate paid by the average citizen. For comparison, the bottom 50 percent of taxpayers with an income below $32,261 paid an effective tax rate of 2.99 percent.

This data shows America’s top earners did not just pay their share of taxes, but in fact paid an effective tax rate nearly ten times higher than that imposed on half the population.

In South Carolina, similar results are seen from the most-recent state income tax data. More than 30 percent of South Carolinians paid no tax in 2007 — the last year for which the Department of Revenue released statistics. The bottom half of taxpayers earned 12 percent of state income and paid 2.2 percent of income taxes.

The top 1 percent of state earners, with reported income more than $340,000, paid nearly one-quarter of all income taxes while earning 22 percent of state income.

In South Carolina, a citizen earning $30,000 is wealthier than 3 out of 4 state taxpayers. This includes public school teachers earning the state average salary. A plumber or registered nurse earning $64,000 per year ranks amongst the top 10 percent of taxpayers. This small number of citizens was responsible for 60 percent of the income taxes collected.

Proposals to reduce the state income tax are commonly characterized as tax breaks for the rich at the expense of ordinary South Carolinians, but these examples illustrate many citizens that consider themselves ordinary are actually the wealthy taxpayers being discussed when tax policy is debated.

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Written by SCPC

August 6, 2009 at 12:29 pm

2 Responses

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  1. We don’t just need to reduce the state income tax – we need to eliminate it! Dr. Art Laffer has documented to 1500 businesses each day leave high income tax states and relocate to zero and low income tax states. Wealthy retirees, who buy houses, hire contractors and stimulate the local economy, are also seeking zero income tax states.

    John Steinberger

    August 7, 2009 at 3:11 pm

  2. […] Then, again, the IRS apparently also considers anyone who earns more than $32,000 to be “wealthy.” Such earners rank among the top half of U.S. taxpayers and paid more than 97 percent of all income taxes in 2007, according to an IRS report issued last year. […]


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