How much do you know about income tax?

Tax Day 2015 is here, 100 years after the first income tax returns were filed in 1915 under the 16th Amendment. So with all those years of experience, let’s take a brief quiz to see how well you know some basic facts about the tax burdens Congress places on Americans.

1. Were total income taxes, adjusted for inflation, higher or lower in 2014 than in 2000?

2. Per American, were 2014 income taxes, adjusted for inflation, higher or lower than in 2000?

3. What share of taxpayers did not pay income taxes in 2012?

A.     36 percent

B.     42 percent

C.     47 percent

D.    50 percent

E.     64 percent

4. In 2012, the latest year for which detailed data is available, what portion of taxpayers paid 30 percent or more of their adjusted gross income in federal income taxes, known as their effective tax rate?

A.     1 in 15

B.     1in 150

C.     1 in 1,500

D.    1 in 15,000

E.     None of the above

5. In 2009 the income on the 400 top tax returns averaged $202 million. How many of those 400 returns were tax-free?

A.     None

B.     6

C.     24

D.    50

E.     100

Bonus question: In 2013, Wyoming’s Teton County had the highest average income in America at $296,778, tax returns show. The lowest was Gooding County in Idaho. The top county average was how many times higher than the average in the bottom county?

A.     5 times

B.     11 times

C.     19 times

D.    28 times

Now for some answers and insights.

The answer to the first question is higher, but barely. Total income taxes in 2014 rose by just less than 1 percent compared to 2000. Revenue in 2014 was $1.39 trillion, up $13.7 billion in inflation-adjusted dollars over 2000.

For the second question, though, you got the answer right if you said lower. That’s because the population of America grew by almost 37 million to 318.9 million. That 13-percent increase in population means the income tax burden was spread over a larger base. The income tax per capita in 2014 was $4,374, down by $520 or 10.6 percent compared to 2000.

The third question is a bit of a trick. Both A and B are correct, depending on who we’re calling a taxpayer. 

In 2012 almost 145 million tax returns were filed and 93.1 million showed an income-tax liability. That’s 36 percent not paying any income tax.

Many of the 51.9 million who filed but paid no tax got money back from the government. This is primarily because of tax credits championed by Congressional Republicans. The $1,000-per-kid Child Tax Credit can reduce taxes to zero and in some cases generates a reimbursement. Because of this credit, a married couple with two children can earn about $45,000 before any income tax is due.

The Earned Income Tax Credit, championed by President Ronald Reagan for the working poor, also plays an important role. It pays most of its benefits to parents who make about $12,000 a year, not much on which to live on, much less raise children.

However, answer B is also correct because in addition to those who file tax returns, another 15.7 million individuals and couples get by on such small incomes that they are not required to file tax returns. That brings to almost 161 million the number of what economists call “tax units.”

Using tax units as the base, the number of nonpayers rises to 42 percent. That is still well below the 47 percent figure Mitt Romney cited in a private speech to donors that was leaked to the public and damaged his 2012 presidential campaign. Romney never noted that Republican policies significantly enlarged the number of non-taxpayers. In 1995, during the first Bill Clinton Administration, less than 25 percent of tax returns showed no tax obligation.

Question 4 concerns effective tax rates, the share of income paid. The correct answer is C. About 1 in 1,530 taxpayers forked over 30 percent or more of their income to the Treasury Department. (Measured against tax units, one in 1,696 taxpayers had an effective tax rate of 30 percent or more.)

The average tax rate for this group was 33.3 percent, IRS statistical tables show. Their average income was $2.7 million, putting them well into the top tenth of one percent income class, which earns about half the income reported on tax returns.

These taxpayers are mostly workers, not investors. Congress taxes wages more heavily than income from selling assets at a profit or collecting dividends from stock holdings. The 2012 top tax rate on investment income was 20 percent, on wages 35 percent.

In addition, many of the 94,000 plus taxpayers paying 30 percent or more work in fields where they incur expenses that are not deductible. For example, successful actors pay managers, physical trainers, hair and makeup stylists and others to enhance their appearance and polish skills. Those expenses are deductible for some actors, but not others, depending on how they are paid and how they organize their affairs. This is one of thousands of examples of how all the fine print in the tax code produces an unlevel playing field while also creating jobs for accountants and tax lawyers.

A few people actually paid more tax than their income. For 202 taxpayers with adjusted gross incomes of just $5,000 to $10,000, their average tax rate was 137 percent of their income.

How can that be? Since generally Congress does not levy the first $9,750 of income for single people, double that for married couples, why would they owe any tax, much less 137 percent of income?

The answer has to do with the complexity of the tax code and how Congress defines adjusted gross income, which is the last figure on the front page of a Form 1040 tax return.

These 202 unlucky folks actually had economic gains that were much larger than the tiny sums they reported. They took advantage of tax preferences, as the favors handed out by the grace of Congress are known, that for various reasons were denied.

One of those reasons would be the Alternative Minimum Tax, signed into law by President Reagan in 1986. It eliminates the individual exemption, the standard deduction and other commonly used tax breaks, making virtually all income taxable.

The answer to question 5 is C. Only six of the top 400 tax returns in 2009 showed no income tax due. That anyone can make $202 million in a year, whether from work or capital gains, and live tax-free is a testament to the skill of tax specialists in exploiting the complexities of the tax code.

And that bonus question? C: The average income in Wyoming’s Teton County, home to Jackson Hole, was 19 times the average income of Idaho’s Gooding County. The top county average was $296,778, the bottom just $15,379.

What all this tells us is that we are taxed more lightly than most of us imagine and that our burdens on average are lighter today than at the turn of the century.