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From: renner@uiucdcs.UUCP
Newsgroups: net.politics
Subject: Re: Do the rich pay their fair share? - (nf)
Message-ID: <29200129@uiucdcs.UUCP>
Date: Fri, 13-Apr-84 10:29:00 EST
Article-I.D.: uiucdcs.29200129
Posted: Fri Apr 13 10:29:00 1984
Date-Received: Sun, 15-Apr-84 08:46:23 EST
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Nf-From: uiucdcs!renner    Apr 13 09:29:00 1984

#R:uiucdcs:29200122:uiucdcs:29200129:000:2536
uiucdcs!renner    Apr 13 09:29:00 1984

   /**** uiucdcs:net.politics / iuvax!note     /  8:13 am  Apr 12, 1984 ****/
>  The caveat about Adjusted Taxable Gross Income not accounting for
>  abusive tax shelters is the crux of the biscuit.  Sure, once you've
>  taken out half a person's income in deductions then the percentage
>  of taxes paid will seem more equitable.  But that is precisely how
>  117 millionaries actually ended up paying no taxes whatsoever after
>  Reagan's tax changes--they had no TAXABLE income after accounting
>  for their numerous tax shelters.  Your statistics were useful but
>  still fail to address the question of how much different income
>  groups pay in taxes based on their actual income, not their "taxable"
>  income.  But it certainly is refreshing to see some facts!
>  					-- tim sevener

It is important to use the correct terminology here.  Deductions are
subtracted from AGI to form taxable income; exemptions are subtractions from
all income to form AGI.  The figures in my original article show that the
rich as a class do not have exceptionally large deductions; their deductions
average 23% of AGI compared to about 20%.  Thus the only tax shelters that
need concern us involve those which produce capital losses and business
expenses; those involving deductions from charitable contributions, etc. 
have been accounted for.

The April 16 issue of Newsweek has an article on tax shelters which provides
some more figures on the subject.

* sales of limted-partnership tax shelters totalled $14 billion in 1983.
* of the example tax shelters given, tax savings averaged about half of
  the amount invested.
* the IRS figures it could net as much as $7 billion when it audits another
  350,000 returns claiming sheltered exemptions.
* buying into a tax shelter can be a reasonable proposition for those in the
  40% tax bracket (income of $45,800 for married couples, $34,100 for singles).
* many real-estate shelter purchase are made through IRA/Keough fund
  accounts, which are already sheltered from tax.

It doesn't seem very likely that the total income exempted via tax shelters
will amount to more than, say, $20 billion.  If we define "rich" as "in the
maximum tax bracket," then the total AGI of the rich is $104.2 billion, in
which case they are exempting no more than 16% of their total income.  These
figures are admittedly not nearly so convincing as those from the Statistical
Abstract, but they do help to put some bounds on the effects of tax shelters
for the rich.

Scott Renner
{ihnp4,pur-ee}!uiucdcs!renner