How Many People Don’t Pay Taxes?

June 12, 2012

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47% of Americans pay no income tax, according to many sources. Is this really true?  Let’s take a look.

First of all, I’m going to present IRS data, so I’m limited to the information from tax returns. According to the 2010 US census the population of the United States was around 308.75 million people. The number of exemptions claimed on 2009 tax returns (the most current data available from the IRS) was 283.8 million. In other words, 25 million people – about 8% of the population – don’t appear anywhere on tax returns.

Who are these 25 million people? [survata]They could be people dodging taxes. They could be people who have paid their share of taxes in their lifetime (retired) or will pay their fair share at a later stage in their life (students). These may even be people who paid some amount of income tax during the year but aren’t filing for a refund (yes, this does happen).

Let’s work with the numbers we have from the IRS. Of the 140 million tax returns filed for the 2009 tax year, just over 58% paid taxes. So this means 42% of the people in this group didn’t pay taxes, right?


It means that 42% of the returns didn’t have any tax liability. What’s the difference?

Let’s walk through this example:

  • Sam makes $3000 from his summer job and has no tax liability.
  • Danielle and Thomas have three children: Mark, Lindsey, and William. They have tax liability of $150,000.

Looking at this example, what percent of people aren’t paying taxes? Is it fair to say 50? 50% of the tax returns (1 out of 2) have tax liability. Is it 33% (1 of the 3 adults aren’t paying taxes?). Is it 17% (1 of the 6 Americans aren’t paying taxes?) The people who are simply looking at the number of tax returns with taxes paid are going to say 50%. Is that right or wrong? I’ll let you decide.

If you choose 33% or 17%, let’s dig a bit deeper. Take a look on my article regarding how many people make more than $250,000. You’ll notice an correlation between number of exemptions (essentially household size) and income. The lowest income levels have the lowest number of exemptions (1.01), with this increasing until it plateaus around 3 in the $500,000 – $1,000,000 range.

There’s also a correlation between income level and likelihood of owing income tax. Less than 3% of tax returns with under $5000 in adjusted gross income owed any taxes, building to 77%+ in the $40,000 – $50,000 range and near 99% by the time we reach the $100,000+ range.

What’s my point? Let’s look at an extreme example. A million tax returns in the sub-$5000 range represent 1,010,000 Americans (1.01 exemptions per return). A million tax returns in the $500,000 – $1,000,000 range represent 3,050,000 people (3.05 exemption per return). Let’s take a sample of a million returns from each of these groups. Let’s further say that all one million returns in the $500,000 – $1,000,000 group have taxes owed and 160,000 returns in the sub $5000 group have taxes owed. That means that 1,160,000 / 2,000,000 – or 58% – of the returns have tax liability. However, these returns represent 3,211,600 or the 4,150,000 people – in excess of 77%. The basic mathematical concept here is weighted average.

An extreme example, yes. However, it does illustrate a valid point. The 42% of tax returns with no liability is going to represent less than 42% of the 283.75 million people covered by these returns.

Just want the data? Here it is!

Source: (compare column 6 to column 1)

AGI Filers Pay tax
All returns 140,494,127 58.27%
No adjusted gross income 2,511,925 N/A
$1 – $5,000 10,447,635 2.93%
$5,000 – $10,000 12,220,335 15.54%
$10,000 – $15,000 12,444,512 23.17%
$15,000 – $20,000 11,400,228 42.69%
$20,000 – $25,000 10,033,887 46.21%
$25,000 – $30,000 8,662,392 53.15%
$30,000 – $40,000 14,371,647 66.71%
$40,000 – $50,000 10,796,412 77.62%
$50,000 – $75,000 18,694,893 87.99%
$75,000 – $100,000 11,463,725 95.81%
$100,000 – $200,000 13,522,048 98.88%
$200,000 – $500,000 3,195,039 99.38%
$500,000 – $1,000,000 492,568 99.18%
$1,000,000 – $1,500,000 108,096 99.05%
$1,500,000 – $2,000,000 44,273 99.06%
$2,000,000 – $5,000,000 61,918 99.09%
$5,000,000 – $10,000,000 14,322 99.06%
$10,000,000 or more 8,274 98.86%


How Did Your Ancestors Come To America?

March 5, 2012

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NEW YORK CITY- SEPTEMBER 22:  The Statue of Li...

How did your ancestors come to America?  Very few of us can claim to be descendants of the people who walked from Asia across the land bridge that is now the Bering Sea.  If you are, congratulations.  I personally can only claim residency for just over 100 years.  That does not mean that I have no relatives that live in America before 1900, I just have not found them yet.

My ancestors are almost all European.  That makes it a bit easier for me to track my heritage before the American experience.  I have found that I come from very average people, not poverty stricken and not nobility.  They left Europe to escape the wars, most of them leaving between the Franco-Prussian war and World War I.

There are all sorts of resources available to track your family.  To actually track where you come from is also available.  I am referring to the source of your family, hundreds of generations ago.  I participated in the Geanographic project sponsored by National Geographic.  I sent in a swab from my cheek and they traced my DNA to common sources.  We are all Africans at some point, but my common source is northeastern Europe in the region of Lithuania.

Is any of this important?  It is at least interesting.  In the long run, it is not that important as all of us are related.  We are all human beings, we all eventually have common ancestors.  Knowing where your family comes from, learning the stories, that is what is important.  You can learn more from the decisions your ancestors have made than from any book on ethics, morals, or self help.  You can also learn more about what real life is than the official histories of significant events and famous people.  The birth or death of someone in your own family has much more direct impact on you and you personal development than any politician, movie start or sports hero.

Besides the personal fulfillment that can be found in researching your roots, this type of study provides a cornucopia of ideas for writing.  These are events that are unique to your family, special as only you can portray them.  They are an opportunity to take some of yourself and become part of your past, sharing it with the world through the written word.

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Is Apple Bringing 700,000 Jobs Back To America?

March 2, 2012

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English: Apple's headquarters at Infinite Loop...

When I logged onto Facebook on Thursday evening, two of my friends has posted a link to an article proclaiming the great news.  Apple was going to bring 700,000 jobs to America – jobs that are now down by workers overseas (mostly in China).

The grand plan was to drop 70,000 on each of ten cities spread throughout the country.  By the end of 2013, all 700,000 jobs would be staffed.  Apple, a company that was fighting for its very existence just 15 years ago, would breath life into the economy and slash the unemployment rate from 8.3% to 7.8% – a tremendous amount of impact from just one company.

The news made sense for a few reasons:

  • Apple’s never been one to follow the lead of other companies, often opting for unconventional paths.  Not only that, but with CEO Tim Cook out of the shadow of Steve Jobs, maybe Cook would make some decisions that Steve wouldn’t have.
  • Apple has around $100 billion in cash and has a market capitalization in excess of a half trillion dollars.  That’s not a typo. Apple is the most valuable company in the world – and it’s not particularly close.  Oil giant Exxon Mobil trails by a hundred billion dollars – meaning that it is worth 20% less than Apple.  If Apple wanted to employ 700,000 workers in the US, it could afford to.
  • Finally, Apple has been under fire for the working conditions at FoxConn, one of its major partners.  FoxConn is a large company that builds components for a lot of tech industry giants, but Apple has been the company taking the most heat.

I wasn’t born yesterday, however, so I hit Google and search for the news on other sites.  Nobody else was running the story.  That seemed odd.  Heck, Apple’s own site didn’t mention it.


Then I read the article more closely.  Really, 700,000 jobs by the end of 2013?  Was it even possibly to get factories built in that amount of time?  Sure, Apple could probably take over the facilities of some bankrupt companies and retrofit the facilities, but that still seems like a pretty aggressive timeline.

And the quote from the Chamber of Commerce seems a bit out of line:

“Just because corporations get the rights of American citizens doesn’t mean they should be burdened by the same responsibilities,” the statement said. “For example, everyone knows people can’t kill people — but sometimes job creators like corporations need to be able to kill people, as the Supreme Court is working on right now.”

So I look at the subject tags.  Yes, one of them was “satire”.  And in the comment, writer Shane Finnegan admitted that this was indeed a satirical piece.  And why not?  It’s his job to write satire for the Ocean Beach Rag.

Well played, Shane.

But why not?

Why doesn’t Apple, or some other tech company, bring jobs back to America?  It’s all about the money, of course.  Labor in China is far cheaper than in the United States, and there’s no hiding the fact that it’s also more expensive to comply with US safety regulations.

If there is ever a flood of manufacturing jobs back into the United States, tech companies will probably be the last ones to the party.  Why?  Because computers, TVs, and smart phones have a very high cost:weight ratio.  The cost of shipping an iPhone or a MacBook Pro from China is a tiny percentage of the cost of the item, so it’s really not that expensive to ship them.  Ramen noodles, on the other hand, have a low cost:weight ratio, so shipping them thousands of miles would be relatively expensive, percentage-wise.

At this point, there’s not much incentive for companies to bring jobs back to the US.  Sure, it’s what the citizens want, but the higher labor costs would make a company’s products much more expensive than those of their competitors.  At this point, I don’t see this changing at an point in the future, unless the government decides to make it prohibitively expensive to import the finished products.


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Should We Drill For Oil in ANWR?

March 1, 2012

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Is it finally time to start drilling in ANWR to offset the high price of gas for our cars?

Drilling companies most often lease the rights...

Well, it’s that time again. Price of gas is climbing, the summer driving peak is approaching and the refineries will be adjusting their mixes. Every year we see prices rise in the spring and every time we hit a spike in price, a number of users start looking for ways to save money on gas.

Now we have Iran throwing a tantrum over their economic sanctions so they’re cutting oil shipments to Europe (Brits and French). While that may not sound significant, it still tightens the oil market and has impacted prices. The Saudi’s could increase production to offset this reduction by Iran but only time will tell if they do this.

This being an election year, it only stands to reason that the debate will once again come up over drilling, especially in ANWR (Arctic National Wildlife Refuge). This is not a new debate, it’s one that has been on and off again since the late 1970’s. It’s been a consistent battle of: left vs. right, liberal vs. conservative and house vs. senate.

Once the Trans-Alaska Pipeline System (TAPS) was put into use in 1977, there has been a liberal push to protect Alaska’s natural habitat. Numerous bills have been passed into law protecting one area or another. Every few years someone on the conservative side has introduced a bill to allow drilling in Alaska (in ANWR). However, every time a bill is introduced, the democratically controlled House or Senate has defeated it or it has been vetoed by the democratic president.

  • The sides were pretty well set from the start. I believe that the battle grew in the intensity in 1986 when the US Fish and Wildlife Service recommended that a large area in ANWR should be used for oil and gas development. The document noted that the economy needed the oil while those opposed to drilling noted that this development could threaten the caribou that live in the ANWR region.
  • In 1996, the Republicans controlled by the House and Senate. They approved a bill to allow drilling in ANWR but President Clinton vetoed the bill.
  • In 2000 the House passed another bill to allow drilling in ANWR but in 2002 the Senate defeated it.
  • In 2005 the Senate passed a bill to allow drilling in ANWR but included it in a budget resolution. The House removed the drilling feature after House democrats refused to pass the budget with the drilling addition.
  • In another 2005 showdown, democratic senators filibustered a defense appropriations bill that included a drilling provision.

Perhaps one the fiercest stances against drilling for oil offshore has been made by President Bill Clinton. In 1998 he signed a 10 year extension to a drilling ban to protect the US coastlines. This still allowed the drilling of the southern US which was already well established. I remember like it was yesterday President Clinton saying that drilling today won’t make a difference for nearly 10 years. He argued that making the change at that time wouldn’t fix the problems they had then. I kept thinking to myself; why not worry about 5-10 years down the road too? Why is he being so short sighted and just thinking about today?

It appears that Clinton’s thinking has come around after gaining a few more years of wisdom. In 2011, Bill Clinton told attendees of the IHS CERAWeek conference that delaying offshore permits at a time when the economy is still building is “ridiculous”. Furthermore, Presidents Clinton and Bush (George W) agreed on many aspects of oil and gas issues.

Today we are again faced with skyrocketing gas prices. AAA reports the national average for regular grade gasoline is $3.731 (2/29/2012) with the price one year ago listed as $3.375. The prices are climbing very early this year and we need to wonder where the price will peak. Better yet, we need find a solution to this and quit putting it off.

The “greenies” have pushed electric cars. Great thinking! I’m happy to see you’re looking for a solution. Right now though, electric cars suck. We can’t depend on that today just like we can’t wind technology (today). Those are potentially great long term solutions, but why limit ourselves to those two alternatives? We see that electric cars still need to run on gas, so we know that we’re going to need it for years to come. Thinking that electric cars are ready today is naïve and basing our decisions on the idea that electric cars will solve our problems is reckless.

If we open drilling today, it obviously won’t fix the problem today but it will help in a few years. Should we continue with this direction thinking that it won’t provide immediate relief? Continue thinking that we MAY harm the caribou if we move forward? Should we stake our economy and livelihood on that? Of course not, and that is why we see Bill Clinton’s thinking changing. He sees what is happening in the world. There is no green “silver bullet”. Wind and electric cars are not going to end these problems right now. It is going to take years to develop that technology and we have to still worry about the interim. If it takes 50 years to get electric cars & wind turbines developed to a standard that will actually work effectively for us, how are we going to manage the next 50 years? We need to drill. We need to use that drilling profit to fund additional research. We can’t scream carbon footprint and abandon fossil fuels entirely overnight.

We need to use some common sense. We need to plan for tomorrow so we don’t fail. We have to stop sending all of our money to manufacturer’s in China and oil moguls in the Middle East. Where is the pride? Where is the dominance? Where is the self-sufficiency that we need to re-establish?

Drilling and fossil fuels are not popular among the liberal crowd. Despite its lack of popularity, we are dependent and we need to address this. We need some long-term common sense solutions. People need to stop deciding everything based on their hearts and consider the logical business reasons too. This is not something that we can just go cold turkey on.


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