Top one percent

The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. Since total personal income is about 13 trillion the top 1% earned 2.7 trillion.

The government collected 1.2 trillion in personal income tax and the top 1% paid 472 (1,200 billion multiplied by 21.2%) billion of that amount. This means that the top 1% paid 17.4% (472 billion divided by 2,700 billion) of their income in income taxes

This results from the top 1% getting 75% of their income from capital gains and dividends. The Bush tax cuts reduced the capital gains tax from 20% to 15% and the dividend tax from 39.6% to 15%.

If these two tax breaks were reversed the income tax collected from the top 1% would increase by almost one trillion. I believe a good compromise would be adding a trillion to the tax burden of these top 1% and cutting three trillion from entitlements like Medicare, Medicaid and Social Security.

In addition we could cut another half trillion from defense by just spending what the Pentagon wants instead of what congressman want the Pentagon to spend in their various districts.

In any event thanks to the courage of Congressman Paul Ryan we now have both parties talking about cuts. We are on our way. Let’s see where this leads.