the staff of the Ridgewood blog
Ridgewood NJ, a new report by budget expert Matt Dickerson at EPIC is debunking a long-standing myth about who pays taxes in America. According to the report, which uses simple charts based on data from the Congressional Budget Office (CBO), the claim that “teachers and firefighters pay a higher share of their income in taxes than millionaires and billionaires” is far from the truth.
What the Data Shows
The report lays out clear evidence: the rich pay significantly higher tax rates than the middle class. While some political narratives suggest that the wealthiest Americans are skirting their tax responsibilities, the reality is much different.
According to the data:
- Top earners in the U.S. pay an effective tax rate that is nearly twice as high as that of the middle class.
- The top 1% of income earners pay an average of $1 million in federal taxes annually—20 times more than what the average American family contributes.
Addressing the Super-Rich Exception
While it’s true that a small segment of the ultra-wealthy, such as those in the top 0.1%, might pay a slightly lower tax rate than those in the broader top 1%, this is often due to the nature of their income. These individuals often have business income, which is taxed at the corporate level before it’s passed on to them. This layered tax structure is rarely accounted for when critics point fingers at the super-rich.
In fact, some of the wealthiest Americans pay close to 20% of their income in taxes, even though that income has already been taxed once at the business level.
The U.S. Tax System: A Heavy Reliance on the Wealthy
The report also highlights that few countries rely on the wealthy to fund their government as much as the U.S. does. The top 1% alone shoulder a significant portion of the nation’s tax burden. This means that the narrative of the rich not paying their fair share is not supported by the actual numbers.
The Path to a Balanced Budget?
Dickerson’s paper concludes with an interesting proposal: the best way to balance the budget might be to create more wealthy individuals. By growing the economy and encouraging more people to become high earners, the U.S. could increase its tax base and reduce the deficit without placing undue pressure on the middle class.
This new report offers a fresh perspective on the American tax system, challenging many assumptions and underscoring the importance of data-driven discussions when it comes to taxation and government spending.
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