The Reality of actual average taxes paid

2017 May 28
by Daniel Lakeland

According to IRS data, the following graph summarizes the tax situation in the US. It compares actual average taxes paid by AGI categories (points) to a linear tax plus a $500/mo UBI to all adults.

This graph shows the range all the way out to 10M/yr income, here's the range where most of us actually are:

Finally, here's the number of people in these tax brackets:

You can see, there are tons and tons of people down in the region near basically zero income, the brackets there are very closely spaced. Then families who work and earn in the range 40k to 150k are the vast majority.  Overall, there are a trivial number of people out past the ~$300,000 top bracket shown here, especially out past a $1M or more. Taxes on the ultra-rich just don't matter for revenue, because there are too few of them to make a difference. (But they matter a lot for behavior, because ultra rich people will dodge those taxes and distort economic efficient allocation of vast amounts of business resources).

Note that this compares a 35% flat tax + UBI to current. But to be deficit growth neutral, we really only need around 28% flat tax + UBI. and then use the UBI to replace many separate inefficient government programs.

 

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