Who’s Really Paying Taxes & Who’s Happy About It - Top 3 Takeaways – April 18th, 2024
- Who’s really paying taxes. Monday was of course Tax Day, and this week has brought the usual dose of stories about it along with it. Usually, you have the obligatory reminder stories, which if you need to be reminded on April 15th that you need to file your taxes is generally going to be a sign of much bigger problems in one’s life, or the seemingly endless tax refund stories (which, as an aside, are often like nails on a chalk board for the 36% of us who end up paying additional federal income taxes on Tax Day). But this week has been a bit different. Much of the news surrounding this year’s Tax Day isn’t what you’re accustomed to always hearing. There was the story about Mark Cuban telling us that he was proud to pay a total of $288 million dollars on Tax Day (a total he later revised to $275.9 million) in response to a question about whether he pays his fair share. There were also headlines like these: Politico: A tax mystery: Why are fewer people getting refunds? Axios: Tax refunds are bigger, but fewer people are getting them. Yahoo: Low-Income Tax Filers Are Less Likely To Receive a Refund This Year. Fox News: Record number say their taxes are too high. There’s a connectivity to all of those stories that’s summed up with the Fox News polling. In the annual Fox News survey, a total of 64% of Americans said on Tax Day this year that their taxes are too high – the highest in the twenty-year history of the annual survey they’ve conducted. What’s fascinating to me is that the exact percentage of people who are still receiving, or have already received, a tax refund this year 64%, is also the exact percentage of people who say that taxes are too high. And that’s what’s intrigued me because it does imply that more is in play. Most notably that more Americans are becoming financially informed. There is no doubt that if federal withholding of income taxes did not exist and instead every American, every payday (or at least quarterly with estimated payments) had to send money to the federal government for their incomes taxes things would be different in this country. Specifically, I would be willing to bet a sum of money that’s at least equal to my annual federal tax bill that there would be bipartisan demand for government accountability and fiscal responsibility. While there’s zero chance that federal withholding will go away anytime soon, there is increasing evidence that more taxpayers are becoming informed about what they’re paying and to whom. As noted in the Politico piece: The number of people owing at tax time has been surging. Nearly 40 million people had balances due last year, up by a third from the pre-pandemic years. The number of filers charged penalties for failing to pay estimated taxes jumped last year to 13 million, a one-third increase compared to the year before the pandemic, IRS statistics show. More than four million of them made less than $75,000. What appears to be behind it?
- More people earning money in more ways. From delivery drivers to renting out properties as vacation rentals a record number of people are earning money in more ways that are outside of the traditional federal income tax withholding system. And what’s happening? Not surprisingly a record number of tax filers are saying they pay too much in federal income taxes. The more you know... Now, in reality, who’s paying federal income taxes really hasn’t changed. For example, according to the Tax Foundation, the top 1% of income earners still pays for 45.8% of total income taxes paid with the top 50% of the country accounting for 97.7% all federal income taxes paid. That means the bottom 50% of income earners in this country are only accounting for 2.3% of all federal income taxes and still double-digit percentages think that it’s too much. And so, the point is this. Who’s paying federal income taxes, and what they’re paying in federal income taxes, really hasn’t changed. How people are earning money and paying federal income taxes is and has. Once people begin to learn what they’re really paying in federal income taxes, as opposed to being unaware of what they’re paying throughout the year due to federal withholding and being conditioned to view Tax Day as a form of a payday, they want changes.
- The gig economy is presenting a form of generational opportunity. It’s an opportunity to connect with tens of millions of Americans who are now starting to understand that there are no such things as free school lunches, free puppies, free government candy, free legacy Obama phones, free Biden Bucks...and most certainly no free student loan debt forgiveness plans. I’ve always said that politicians can lie to people about policy and those who’re inclined to believe the politician might believe the lie...but you can’t lie to people about what is or isn’t in their wallet because they know. The issue previously, and still for many, is that because the money they earned never hit their wallet – they didn’t know what they were paying. But once that money is in their wallet and they’re sending it off on Tax Day to the IRS – there's no doubt. Donald Trump and conservatively minded politicians should pick up on this and make the case for lower taxes through fiscal restraint and lower government spending. Btw, about the student loan debt relief thing. Americans aren’t buying that either. Yesterday, Sinclair Media polled: Do you think President Biden’s student loan forgiveness plan is fair to American taxpayers? 87% said NO.