Senior Finance: The Income Tax Inequity

Oct 13th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances

Forbes.com recently published its annual list of the 400 wealthiest Americans.  The total net worth of the top 10 wealthiest people in the United States is $270 billion; the last 15 on the list are worth $1 billion each.  Senior citizens will find this information interesting in view of the current issue in the country related to the federal tax cuts enacted early in the Bush (#2)  administration.

First some facts:

This information presents a challenging question:  How does the wealth of 400 billionaires affect senior citizens?

There really isn’t any direct tangible effect; they pay their taxes and we pay ours.  But what about the indirect consequences of 400 people earning on average $105 billion, and only paying $18 billion in taxes?  That’s just 17% of income.  

“ The 400 highest-earning taxpayers in the U.S. reported a record $105 billion in total adjusted gross income in 2006, but they paid just $18 billion in tax, new Internal Revenue Service figures show. That works out to an average federal income tax bite of 17%–the lowest rate paid by the richest 400 during the 15-year period covered by the IRS statistics.”  Forbes.com 

Whether we look at actual dollars or percentage of income, the net effect of this tax reality has the potential for a direct and tangible effect on seniors.  Many of us pay more than 17% of our income in taxes.  And $105 billion minus $18 billion, leaves $87 billion.  That’s $87,000,000,000.  The reality is that proportionately, we are paying much more of our income in taxes than the wealthiest 400 Americans.  Our tax burden is much heavier, and many of us live on fixed incomes and have to budget very carefully for basic necessities like food, housing and clothing. 

Warren Buffet, the #2 wealthiest American on Forbes’ list, has decried the tax inequity for years.  We seniors need to make our voices heard regarding the inequity and its effect on us.



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