Analysts Compare Utah, U.S. Income Tax Burdens

By Sun Advocate

Wealthy Americans continued to pay the lion’s share of federal income taxes.
Headquartered in Washington, D.C., the Tax Foundation recently compiled data collected by the United States Internal Revenue Service.
Based on the IRS statistics, the non-partisan research organization concluded that the portion of total federal income tax paid by the top 15 percent of American wage earners increased from 25.2 percent in 1989 to 36.2 percent in 1999.
The top 5 percent of wage earners in the U.S. paid 55.5 percent of all federal income taxes in 1999 compared to 43.9 percent in 1989, indicated the foundation’s recently released report.
The top 10 percent of American employees accounted for two-thirds of total federal income taxes, up from 55.8 percent in 1989.
The bottom 50 percent of workers employed at locations across the United States paid 4 percent of total income taxes generated nationwide in 1999.
The 1999 share decreased from the 5.8 percent burden assumed by the bottom group of American taxpayers in 1989.
The high-income Americans are paying an increasingly larger share of the federal tax burden for two reasons, pointed out the research report.
First, top wage earning U.S. citizens pay a significantly higher effective rate due to the progressive nature of the federal income tax code, noted the foundation report.
The disparity in tax rates between high and low income groups widened during the 1990s.
The effective rate for taxpayers in the top 1 percent of the American labor force increased from 23.3 percent in 1989 to 27.5 percent in 1999.
By comparison, the rate for the bottom 50 percent decreased from 5.1 percent to 4.5 percent during the decade.
The total average rate for all U.S. taxpayers increased from 13.1 percent in 1989 to 14.8 percent in 1999.
Second, high salaried Americans are earning a larger share of total income, noted the independent research report.
From 1989 to 1994, the share of wages or salaries earned by the top 1 percent of Americans decreased from 14.2 percent to 13.8 percent, noted the independent research report.
Between 1995 and 1999, the stock market run-up proved especially beneficial to higher income individuals residing at locations across the United States. However, the situation is likely to reverse significantly when the latest IRS statistics are compiled, pointed out the organization’s analysis.
At the state level, the association’s analysis indicated that the top wage earners account for a disproportionate share of Utah income tax. In 2000, Utahns earning more than $250,000 comprised 1 percent of all state taxpayers. The group earned 17.1 percent of the state’s total adjusted gross income and paid 21.9 percent of Utah’s income taxes.
Utahns earning less than $50,000 annually comprise nearly three-quarters of all taxpayers statewide, noted the organization report. The group of Utah’s lower wage earners accounted for one-third of total adjusted gross income and paid slightly less than one-quarter of all related state taxes.
The state’s income codes are significantly less progressive than the federal guidelines, explained the Utah Taxpayers Association.
The majority of the independent analysts researching the matter attribute the difference to Utah’s failure to index state tax brackets for inflation.
Federal brackets have been continuously adjusted for inflation for more than 20 years. But Utah’s tax brackets have been adjusted only once since 1973.
Utah’s top income tax bracket starts at $8,626, compared to approximately $60,000 for the average state, .
Since Utah has one of the lowest thresholds in the nation, the majority of the personal income in the state is taxed at the highest 7 percent rate, explained the independent non-partisan associations.
Consequently, the effective rate on the state’s top wage earners registers only slightly higher than the tax burden shouldered by low income Utahns.
Additionally, the financial burden assumed by Utahns exceeds the national average by 22 percent since the state taxes income at the highest rate, concluded the independent non-partisan research organization.