Tax Brackets and Have you Filed Your 2011 Taxes Yet?

What you see on your calendar if you have one of those nice ones with every holiday including Canadian holidays is tax day. You know it is the middle of March and April is almost here so I did a little spring cleaning out in my yard by picking up an old crusty slip n’ slide that needed to go in the trash. What did I find but a snake underneath. Speaking of snakes the IRS is seen by many as one of these slimy things and the closer you approach the tax deadline you may start to feel this way too but these guys are good people just doing their rightful job.

Don’t take out your angst on these government employed professionals. You may not agree with what is going on politically right now with all the union control on the IRS but many of these IRS agents are simply taking and reviewing your taxes as they ought too. This is standard procedure in any government no matter how conservative or liberal.

IRS Tax filing deadline

Tax deadline day is Tuesday April 17, 2012.

What I like to do is spread all my tax documents I have so far out on my desk around late January and start on my taxes early. There is something great about getting taxes over and done with as soon as possible. A great relief comes over me and I feel I can get back to work. I usually can’t get it done in a day because I don’t have all documents in yet from all the companies that have paid me during the year. I also have a whole family that is wondering why I am devoting 100 % of my attention to a bunch of boring papers.

You might be saying it’s only April 14th but that means you only have about 4 weeks left until deadline day! Don’t worry we have some last minute tax guides below that should help motivate you along.

What is My Tax Bracket for 2011?

If single:

• 10% for incomes up to $8,500
• 15% for incomes from $8,500 to $34,500
• 25% for incomes from $34,500 to $83,600
• 28% for incomes from $83,600 to $174,400
• 33% for incomes from $174,400 to $379,150
• 35% for incomes over $379,150

Over the last 10 years the tax brackets have increased little by little each year, and rates came down for the upper 4 tax brackets in 2003.

These are the brackets for what people pay on their reported wages. There are also capital gains taxes from investments, estate taxes, corporate tax, and fortunately for Texas no state or local income tax. We do have to pay 8.25 % sales tax and don’t forget property tax but by God’s grace lets pray we never introduce a Texas state income tax! I am going to start at the $8,500 level regarding earned income credit simply because these are some pretty big check you get back from the IRS. If you make between $8,500 $8,550 per year you won’t have to worry about any of these taxes and in fact will get the earned income credit of $2,899 whether you are single or married filing jointly. These earned income credits steadily increase as your income rises and tops out at $3,094 if you make between $21,750 – $21,800. Even if you only made $9050 – $9,100 you will get this top level amount in a big whopping check from the IRS for $3,094. It is much less if you have no children at, $464.

Putting This All in Perspective

Before 2001, income tax brackets were based on Omnibus Budget Reconciliation Act of 1993. The Clinton Administration barely got it by a Democratic Congress with Al Gore being the tie breaking vote in the Senate. This policy allowed for 5 tax brackets. If you made less than $34,317 you paid no taxes except every other year you paid 15%. All other brackets looked as follows:

28% for incomes from $34,317 to $83,075
31% for incomes from $83,075 to $178,572
36% for incomes from $178,572 to $388,200
39.6% for incomes over $388,200

There are Tax Foundation records that go as far back as 1913 although federal income taxes have been collected by the US government since the end of the Civil War in 1865. The whole bracket idea based on if you are just filing as an individual or married couple did not happen until 1948. Have you ever wondered what the first ever tax brackets looked like? We have them available below from 1913 which were for individuals regardless if they were married:

1% for incomes up to $453,292
2% for incomes from $453,292 to $1,133,230
3% for incomes from $1,133,230 to $1,699,846
4% for incomes from $1,699,846 to $2,266,461
5% for incomes from $2,266,461 to $5,666,152
6% for incomes from $5,666,152 to $11,332,304
7% for incomes over $11,332,304

Major Points in Tax History

In 100 years of U.S. tax history the first big change was when a rate of 67% was enacted in 1917. This rate increased to 73% in 1921 and then began to come back down again quite substantially. The highest tax bracket with an income of $1,282,169 paid just 25% income tax from 1925 to 1932. As the Great Depression hit, Hoover passed a big tax increase raising the highest tax bracket to 63% that eventually increased to 79% in 1936. The increases targeted the higher wealthy income levels. World War II cost a fortune and by 1945 when the war ended there was a 90% income tax on anyone who made over $1,121,898.

This high tax rate of 90% did not drop below 80% until Kennedy’s tax cut in 1964. During these high tax bracket years the lowest bracket paid 16% under the same policy. Contrast this 16% bracket for low income earners with the earned income credit we have today where millions of Americans pay absolutely no taxes at all.

During Reagan’s years The Tax Equity and Fiscal Responsibility Act of 1982 increased taxes and overall revenue and it removed the highest tax brackets and created a 50% bracket for income of more than $199.035. This bracket was quite a bit lower than prior years.

In conclusion, I believe our tax rates seem to be in a middle area when looking at all income levels. The top level income tax rates are closer to historical lows than historical highs when considering the entire tax bracket history on record. The highest rate right now is 35% but in 1964 it was as high as 91%! The perception put out in much of the media is that the rich have got it so good while the poorest among us are paying all kinds of taxes. It is true if you are rich you are doing good but they still pay most of the U.S. taxes. In reality, if you are married filing jointly with one child and making $24,000 a year in 1945 you would have paid $5,520 in federal income taxes but in 2011 you will pay $16 with earned income credit calculated in. In comparison to 1983 when Ronald Reagan was in office you would have paid $2,208 in federal income taxes but in 2011 you would only pay $16. As you can see the rich are paying most of the taxes and are even subsidizing low income earners so they don’t have to pay taxes at all. Are things fair right now in the tax code? You bet they are and if anything the rich should pay less and the millions not paying taxes at all should put in a little.

If you need a good accounting company in Tyler Texas that can do your business and personal tax returns, amend past returns, and more please visit, Bailes & Co. P.C. – Accountants & Consultants. We use them and love the great job they have done for us. They have not paid for this referral as we truly recommend them because we believe they offer exceptional accounting services. If you want to use my guy there ask for, Nick. Definitely let them know you heard about them from our blog, however 🙂

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This entry was posted on Wednesday, March 14th, 2012 at 9:56 am and is filed under Socio Political Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.