US population - 325 million
US tax filers - approximately 138 million filed, but only 45% of those filers paid any federal income tax
The number of tax payers declined 59% from 2000 to 2008, even though the number of tax filers increased by 10%. The reason for this is less about the amount of income and more about the amount of deductions and credits.
Biggest deductions:
1. Credit and deductions for homeowners,
2. Earned Income Tax Credit
3. Tax deferrals for retirement plans
4. Lower taxes for non-wage income (capital gains)
5. Employee benefits (tax free health care)
6. Other popular credits and deductions - credits for college, child care, job related expenses.
Only 20% of income reported by millionaires come from wages that are taxed at 35%, but income from long term capital gains are capped at 15%. It is important to note that long term capital gains is 0% for taxpayers in the 10% and 15% tax bracket. This was news to me.
Why not lower the income tax rate for the wealthiest to 25% and increase their capital gains cap to 25%? Since 80% of their income is from capital gains, it would raise more revenue. Right?
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