Paying your "fair share" of taxes

I was originally going to post this as a response in another thread, but since it would bring the discussion pretty far off topic, I decided to start a new post.



There has been a lot of noise during the past election about whether the wealthy and/or corporations pay their "fair share" of taxes. I thought I'd share some data on exactly who pays how much in taxes:

Individual Income Tax
(Data from 2006 tax year)

Adj. Gross Income...Effective Rate...Share of Total Income...Share of Total Tax Paid
>$200,000................21.8%...................33.6%......................53.2%
$100,000-$200,000.....13.1%...................21.5%......................20.4%
$75,000-$100,000.......9.5%....................12.7%......................8.8%
$50,000-$75,000.........8.6%....................14.8%......................9.2%
$40,000-$50,000.........7.8%....................5.6%........................3.2%
$30,000-$40,000.........7.0%....................5.2%........................2.7%
$25,000-$30,000.........6.5%....................2.1%........................1.0%
$20,000-$25,000.........5.7%....................1.8%........................0.7%
$15,000-$20,000.........4.7%....................1.3%........................0.5%
$10,000-$15,000.........3.3%....................1.0%........................0.2%
$5,000-$10,000...........2.6%....................0.3%........................0.1%
<$5,000....................(7.2%)..................(0.1%).......................0.0%

Looking at the effective rates, it does appear that the tax system is indeed progressive, with the effective rate increasing as income increases.

<snark>As for Mr. Buffett, if he believes his tax rate is too low, I would encourage him to visit the following site: https://www.fms.treas.gov/faq/moretopics_gifts.html </snark>

Source: https://www.irs.gov/taxstats/index.html

Corporate Taxes

Every publicly traded company in the U.S. needs to include a footnote in its annual financial statements reconciling their effective tax rate to the U.S. statutory rate of 35%. It's a great way to understand why the effective rate is higher/lower than the statutory rate. Indeed, many companies have a much lower effective rate. This is due, in large part, to their tax planning strategy which attempts to move as much production or value creation into lower tax jurisdictions in order to avoid paying the 35% to the U.S. Here's a small sampling:

Company...............Current year eff. rate...Impact of foreign operations...Adj. Effective Rate
Goldman Sachs.....................1%..........................(30%)...........................31%
GE...................................6%..........................(27%)...........................33%
ExxonMobil........................44%............................6%.............................38%
Wal-Mart...........................34%............................2%.............................36%
Johnson & Johnson...............24%...........................12%.............................36%

Once you adjust for the impact of these companies' foreign operations, their effective rate is in the 30s.

Source: SEC filings