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IRS Just Released Income Stats For 2009

The Internal Revenue Service just released the statistics of tax returns filed for 2009
By MICHAEL B. NELSON, ESQ - INTERNATIONAL TAX ATTORNEY
Published: March 18, 2012
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The Internal Revenue Service just released the statistics of tax returns filed for 2009.
 
 
There were 140,494,127 individual income tax returns filed for Tax Year 2009. Of those, 81,890,189 (or 58.3 percent) were classified as taxable returns. This means that 41.7 percent were not taxable returns, representing the highest number of non-taxable returns in more than 24 years.  Why would anyone file a non-taxable tax return?  Well, they could have Net Operating Losses carrying forward into subsequent years, such as into tax year 2009 which shows up on the tax return for 2009, (when taking into account current losses); even there was no currently taxable income to tax.  Also, many individuals filed tax returns to get credits, refunds or rebates even though they did not earn any money in 2009.
 
The IRS provided payments to tax return filers for 2009 under the economic stimulus package.  Even if you or your family had at least $3,000 in qualifying income from, or in combination with, Social Security benefits, Veterans Affairs benefits, Railroad Retirement benefits and earned income you could still be eligible for the rebate.  The only other two criteria: 1. You and any family members listed on your tax return have valid Social Security numbers and 2. You or any family members are not a dependent or eligible to be a dependent on someone else’s federal tax return.
 
So, of the more than 58 million taxpayer returns showing inadequate income to be subject to Federal tax, these eligible people could receive rebates of between $300 to $600.  If filing jointly, then the husband and wife could claim $600 to $1,200 in rebates.  Also, there were additional rebates if the eligible individuals had eligible children, then there was an additional rebate of $300 for each child.
 
HOW DOES THIS APPLY TO THE REBATES FOR 2009?
 
Just for the effect of providing a unsupported unscientific calculation, if half of the above noted 58 million taxpayers were eligible and had two children each and a wife, that would entitle them to $1,800 of rebates for the 2009 tax year.  That’s according to my calculation 29,000,000 tax returns times $1,800 of rebates = $52,200,000,000 of rebates for just the tax year 2009. 
 
In essence, that would have delivered over 52 trillion US$ into the hands of U.S. taxpayers.  Amazing!!!
 
Now, the IRS Statistics show that the Treasury took in tax dollars for 2009 of 866 billion US$.  So, if my assumptions and math are correct, we gave out more in rebates than tax revenue taken in for 2009.  What does that tell us?  It says that the U.S. Treasury needs to find additional sources of bringing in income.  But wait, is that what the U.S. Treasury is doing?  No, they are offering even more credits for low income taxpayers who do file tax returns which, in turn, increases the probability of the U.S. Government taxing the so called “rich” with more taxes, higher taxes, less deductions and a lower threshold for death taxes to apply.  This now seem to be a definite and drastic direction against the rich based on the following new additional low income tax credits:
 
1.      Beginning in 2009, the American Recovery and Reinvestment Act (ARRA) provided a 2-year “making work pay refundable tax credit” of up to $400 for working individuals and $800 for working families.
 
2.      This Act then temporarily increased the “earned income credit” by modifying calculations on qualifying earned income amounts and phase-out ranges.
 
3.      The Act also increased eligibility for receiving the refundable portion of the child tax credit for 2009 and 2010 by lowering the earned income floor to receive the credit from $8,500 to $3,000.
 
4.      For 2009 and 2010, the Act provided an “American opportunity tax credit” of up to $2,500 per student of the cost of tuition and related expenses.  However, the Federal Reserve Board announced today that the average school loan balance is $23,300 per person.  Therefore, it is possible that the Treasury may increase the credit for subsequent years.
 
5.      A temporary refundable first-time home buyers credit of up to $8,000.
 
6.      A temporary suspension on Federal income tax on the first $2,400 of unemployment compensation.
 
7.      Additional deduction for State sales and excise taxes on the purchase of certain motor vehicles.
 
8.      A $250 credit for certain government retirees.
 
9.      A $1,500 residential energy credit for 2009 and 2010.
 
According to the IRS, taxpayers used $110.1 billion of tax credits to reduce their income taxes in 2009.  Most of these types of credits are either phased out or completely not available to higher income earners.
 
WHAT ABOUT THE RICH?
 
The top 5 percent of tax returns accounted for 58.7 percent of total income tax collected for 2009 while the remaining 95 percent of the population paid 41.3 percent.  If we assume the average individual tax return has 2 individuals’ income, such as husband and wife or single with a dependent such as a child or elderly parent, then the total tax return filing population is 140,494,127 tax returns filed x 2 people = 280,988,254 population.  According to the U.S. Population Clock, http://www.census.gov/population/www/popclockus.html. There were approximately 307,771,500 U.S. populations in 2009, which puts my calculated number fairly accurately.  So, with 5% of Americans paying 58.7% of 866 billion = 508,342,000,000 or 15,388,575 people paying $33,034 each, including household members which could be infants and elderly.  The rest of the country’s population is 292,382,925 people paying 41.3% of the 866 billion revenues = $2,962 each, which includes household members which could be infants and elderly.
 
RESULTS OF THE ABOVE FACTS WITH ASSUMPTIONS:
 
Each person in the top 5% of tax return income paid $33,034 in 2009
Each person NOT in the top 5% of tax return income paid $2,962 in 2009.
 
CONCLUSION:
 
With the real possibility of President Obama being re-elected for another 4 years and a the unrelenting legislation by the President to increase taxes on the high income families combined with continual elimination of tax deductions and credits, companies owned by these 5% individuals and the individuals themselves may be seeking to change their company jurisdiction and their own nationality to escape the tax burdens.  Can we afford to lose even a small fraction of this 5%?  Maybe the solution is to bring jobs back to the U.S.A. through increased American productivity, re-training and money to fund businesses that provide high employment.  For example, we have a tunnel between the San Francisco Bay area, called the Caldecott Tunnel, which received President Obama’s stimulus money of $200 million, but seems to employ less than 100 people, see http://kalwnews.org/audio/stimulus-dollars-go-reconstruct-caldecott-tunnel, so when the tunnel is competed the Government will have spent $2,000,000 to employ one person who will be skilled at building tunnels.  How will this help us compete internationally for jobs?
 
From my assumptions and math, there certainly does seem to be some very real and chilling prospects for getting our country back on track and economically viable in a world that is quickly passing us by.
 

2 COMMENTS - VIEW

Great job, thanks.

I recently left a position at a company that handled the data for one of the three large credit reporting bureaus. We estimated that forty percent of the US population had a net worth of zero or less. Although the tax law is clearly counter-productive, the issues are far more complex than presented above.

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