Tax Policy, Fairness, & the Economy - Part 4
- davidcogd
- Oct 7, 2024
- 3 min read
In the first three posts in this series, Cogport reviewed the background on Taxes of Personal Income, Capital Gains, and Corporate Income.
These Cogport reports give a lot of data. Cogport views it as necessary to understand the complexity of Tax Policy and its effects on the Economy.
Now it is time to look at the sum of the parts. We will look at comparisons between 2016 and 2022 IRS data so you can see how things have changed.
All 2016 data is inflation-adjusted to 2022 value of the Dollar.
You rarely find a basic table of how much the Federal Government collects in taxes by year. The following is a breakdown of all major sources of Revenue:
Tax Comparison | 2016 ($ Billion) | 2022 ($ Billion) | Percent Change |
Payroll Taxes | 1,342 | 1,500 | 12% |
Personal | 1,647 | 2,250 | 37% |
Capital Gains | 244 | 350 | 43% |
Corporate | 366 | 425 | 16% |
Other | 390 | 375 | -4% |
Total Taxes Paid | 3,989 | 4,900 | 23% |
($ 4.0 Trillion) ($ 4.9 Trillion)
So how do the increases in taxes compare to increases in income:
Total Income Reported | 2016 ($ Billion) | 2022 ($ Billion) | Percent Change |
Personal | 12,444 | 14,100 | 13% |
Capital Gains | 784 | 1,000 | 27% |
Corporate | 1708 | 2,700 | 58% |
Total Income | 14,936 | 17,800 | 19% |
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Observations |
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Personal Taxes:
From 2016 to 2022 Total Real Personal Income increased by 13%.
From 2016 to 2022 Total Personal Taxes Paid increased by 37%.
Most of the increase in tax paid came from the Top 10% of Incomes. Here’s the tell: High Income individuals have gained in the last 6 Years while the middle class has lost in real terms of purchasing power. More income by the Top 10% means higher tax paid in total.
Capital Gains:
From 2016 to 2022 Total Capital Gain Income increased by 27%.
From 2016 to 2022 Total Capital Gain Taxes increased by 43%
The high increase in Taxes came from high income individuals who have seen large gains in stock and real estate investment. They are subject to Net Investment Income Tax (NIIT) in addition to the regular capital gains rate of 20%.
Corporate Taxes:
From 2016 to 2022, Total Corporate Income increased by 58%
From 2016 to 2022 Total Corporate Taxes increased by 16%
In 2017, Trump passed a Tax Act that made significant reductions in tax paid by Large Corporations. The outcome is a much lower rate paid. The theory was that lower capital gains rate would make more cash available to invest in job growth and capital equipment.
What was the outcome for Large Corporations ?
Here is summary for the S&P 500 companies:
From 2016 to 2022 Total taxable income increased by 79%
From 2016 to 2022 Total Tax Paid increased by 42%
This is a huge gain for the S&P 500’s Net Income.
Capital Investment increased by 45%, much less than gain in income.
Employment in the U.S. by the S&P 500 fell by 3 Million People.
The 2017 Tax Act did not meet its purpose, other than to increase income for Major Corporations.
Summary
Clearly, Tax Policy has been a political football over the years. The strategies have been flawed.
Future posts will focus on Fairness in Tax Policy and the effect of current proposals by Trump and Harris.
Cogport will propose Policy Improvements for a Fair, Stable, and Long Term System.
David Hollaender October 7, 2024
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