Mark J. Perry@Mark_J_Perry
December 30, 2016 1:03 pm | AEIdea
We hear all the time that “the rich aren’t paying their fair share of taxes” (you’ll find more than 4,000,000 Google search results for that phrase). In a 2013 video at the start of this second term, President Obama celebrated his tax increases that “make our tax code more progressive than it’s been in decades,” but then reiterated his belief that the wealthiest Americans still aren’t paying their “fair share” of taxes. Here’s an analysis using recent IRS data that suggests otherwise.
1. In 2014, the top 400 US taxpayers based on Adjusted Gross Income earned $127 billion collectively, and they paid $29.4 billion collectively in federal income taxes at an average tax rate of 23.13% (see chart above). Just those 400 taxpayers paid more than 2% of all the federal income taxes collected in 2014 ($29.4 billion out of $1.377 trillion).
2. In 2014, the bottom 50% of taxpayers, a group totaling nearly 70 million Americans, earned collectively more than $1 trillion and paid $37.7 billion in federal income taxes at average tax rate of about 3.4% (see chart above).
Update:
3. According to the IRS, the top 0.001 percent of US taxpayers (N = 1,396) paid $49.7 billion in federal income tax in 2014, which is $12 billion more than the taxes collected from the entire bottom 50% (see updated chart above). Also, because of the progressive income tax schedule, note that the bottom 50% of US taxpayers reported about 5 times as much income as the top 1/1000 of 1% (more than $1 trillion vs. $207 billion), but paid $12 billion (and 24%) less in income taxes in 2014.
Not a particularly useful analysis since it doesn’t include payroll taxes. Our tax system is setup such that people with lower incomes don’t pay much income tax, but do pay a lot of payroll taxes.
Payroll tax, my ass. Everyone who gets paid pays that and it is paid proportionally.
@10:57 – In dollar terms, the lower income people pay less in payroll taxes than the higher income people. Additionally, the payouts (Social security) are reverse indexed, so the lower income people take out a LOT more than what they paid in.
So if you were to include that effect, it would look even worse for lower income people.
7:03am and 12:50pm –
What you write is true. But there’s still no point in comparing federal tax receipts vs. income level without including payroll taxes. It doesn’t particularly matter to an individual whether they are paying a federal income tax or a federal payroll tax. Both are taxes that fund government spending. So if one is trying to make an argument that top earners are already paying their fair share in federal taxes (which indeed might be true!), a better analysis is to include ALL federal taxes.