Is America Inspiring You to Achieve, to be More Successful?

My point in my previous article, 545 vs. 300,000,000 – What the Heck is Happening, is that if we had better leadership/management of the government we would likely have a balanced budget or surplus, we would not have to be raising the debt ceiling frequently nor would we have to be adjusting the tax rates. As a result a lot of time is being “wasted” on dealing with these issues instead of applying the time to ways of improving our competiveness and GDP (things that would be beneficial to our own financial success). In other words there is a lost opportunity cost of having to focus on problems versus opportunities for improvement.

I have received several comments about the tax rates and who pays what. Here is a quick summary of what is going on based on data from the IRS.

Federal Tax Rates by AGI Brackets

Below is the 2011 percentage of federal income tax paid based on a person’s taxable income after deductions and exemptions (adjusted gross income “AGI”).

$0 to $8500 – 10%

$8500 to $34,500 – 15%

$34,500 to $83,600 – 25%

$83,600 to $174,400 – 28%

$174,400 to $379,150 – 33%

$379,150 and above – 35%

Overall Federal Tax Burden – Who Pays What

Below is the overall tax burden ranked by AGI. The burden has been constantly shifting from the bottom bracket to the top bracket. For example in 1999 the top was 36.18% and the bottom was 4.00%

Data for Tax Year 2008

Tax Hikes, Tax Cuts

See table below for what has actually happened to tax rates since 1992. In 1993 there was a tax hike on the higher taxable incomes (via two new brackets at the top from 31% to as much as 39.6%), and then 2001 through 2003 saw a series of tax cuts that lowered the tax brackets for everyone as follows:

From 2000 to 2002 most brackets dropped by one percent, and there was a new low bracket added for the very bottom from 15% down to 10%. In 2003 most brackets got an additional cut of two percent with a 3.8% reduction for the very top bracket. But note that the upper brackets still paid more in 2003 than in 1992 and everybody else paid less.

Leadership/Management

Tax revenues to the federal (and state) governments have been reduced/slowed as a result of the recent economic downturn. Yet the federal government has been on a hiring binge…If you were a private business owner and your revenues were going down, would you be out hiring more people and increasing your overhead costs? If your salary went down would you be increasing your level of spend or decreasing it to at least match the change? The answers are obvious when framed in this context.

Unfortunately, the government can yield its power to increase its revenue by simply raising taxes, what I call the easy way out or lazy management. Of course raising taxes can have its consequences on the economy as the government is a much less efficient user of the money than the private sector is.

I think we need a shake-up in our governmental thinking. For example what is the vision for our country, what do we want it to become, what are we trying to accomplish in measurable terms versus anecdotal statements, what and where is the plan.

Frankly, I am not sure what America is really up to, what it’s plan is - to be whatever it is going to be. I think we have a right to know and we need to know. Knowing these types of things is what inspires all of us to make achievements…which will make us and America more successful.

Don Redinius, Author - The New Era of Financial Success, Process Management for Team Members and a contributing author to Six Sigma for Dummies.