A taxing conundrum

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Pencils worn to the nub and nerves frayed, you’ve made it through the tax season relatively unscathed, maybe even found your way through the muddle of the tax code to a return this year. Hey, good news. You’re not alone! Turns out the nation’s hyperwealthy have likewise had a pretty good tax season. The Associated Press reports that the top 400 highest adjusted gross income earners in 2007, the latest year for IRS data, had income of nearly $345 million and their average federal income tax rate was 17 percent, down from 26 percent in 1992. Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

But wait, you say, shouldn't the top guys be paying about 35 percent at their income's heights (down from 91 percent top rate during the Eisenshower regime of tax terror). Well yes and no. The top rate may be 35 percent in theory; in reality when the members of the top cat club have their accountants wade through our nation's inscrutable tax code, a significantly diminished percentage of income may find its way to Uncle Sam's locker. All perfrectly legal.

According to the Washington-based Tax Policy Center, there are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010. "It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," Roberton Williams, a senior fellow at the center, told AP.

But never fear, others are picking up the slack. Remember those anchor-babying, revenue vampires, the undocumented immigrants at work, even living among us natural born citizens? According to the Immigration Policy Center, using estimates produced by the Institute for Taxation and Economic Policy unauthorized immigrants paid billions in state and local taxes in 2010, including income tax despite the preponderance of "off the book" labor. According to the ITEP: "Collectively, these households paid $11.2 billion in state and local taxes. That included $1.2 billion in personal income taxes, $1.6 billion in property taxes, and $8.4 billion in sales taxes."

Can I post this item again around the ides of April next year? Time will tell, but I shouldn't be able to if President Obama honors commitments to pass some kind of immigration reform and find some way to make our tax system both more equitable and more coherent. Wouldn't hurt if he got some cooperation from Congress while he pursues those goals.

PS: You classics geeks can hold you keystrokes. I know the ides of April is actually April 13, not the 15th. Give me some credit. My computer gets Google, too.