Who Pays Taxes in the USA
My friend Thomas Ryan Stone has a nice blog entry on the topic of who actually pays the vast majority of the taxes in the United States. He provides a link to a two-page report (PDF) from the congressional Joint Economic Committee.
From Tom’s summary:
- The top 50% of income earners pay a whopping 96.5% of federal income taxes, while the lower 50% pay just 3.5%.
- The top 25% pay 83.88% of federal income taxes
- The top 10% pay 65.8% (these are people with an adjusted cross income of about $95,000 or higher)
- The top 5% pay 54.4%
- The top 1% pay 34.3% (these are people with an adjusted gross income of about $300,000 or higher)
So keep these numbers in mind the next time a politician (or anyone else) bemoans the lack of “progressivity” of the Federal Income Tax. Ask them what percentage of federal income taxes they want the top 1/5/10% of earners to pay, what is their ideal amount? Should the top 1% pay over 50% of the total collected? Should only the top 10% of earners pay any federal income tax at all? Is that what they want to see? Nail them down on their numbers.
While you’re at it, ask them what they think rich people do when they get a tax cut. Do they reinvest that money into their businesses, hire more employees, purchase goods and services that keep poor- and middle-class people employed, or give more money to charity? From the debate on tax cuts for the rich — from those against them — one gets the sense they never do these things... they instead hoard this money in a sack under their bed, or burn it, or put it in an offshore account that in no way helps the US economy. In reality of course, the opposite is true almost 100% of the time.
Well said, Tom.
A progressive tax structure means that the rich pay more as a percentage of their income, not just that they pay more overall. Without looking at what percentage of overall income each group makes, its impossible to judge whether the tax structure is truly progressive or not.
I imagine the tax system is overall progressive. I know the basic tax bracket structure is, and I doubt theres enough to accounting tricks available to totally overcome that even among the wealthiest. But I imagine the system is much less progressive than these figures would indicate.
While we’re talking about taxes, let’s not forget that the bottom 50% of wage earners bear the brunt of payroll taxes to fund Social Security and Medicare; this makes these taxes regressive. These programs will go broke unless we shore them up by changing how they are funded.
I particularly like the way the FairTax pays no attention to income and wealth, making taxation zero up to poverty level for everyone and proportional to spending above the poverty line. Traditionally, a sales tax is considered regressive, but the FairTax renders these textbook definitions of progressive and regressive insignificant.
I like the sound of this fairtax but am unclear on a few things. The fairtax website says you keep 100% of your paycheck... then I read where you will pay state taxes. Which is it?
What if you are divorced and have shared custody. How does the prebate work then? Who gets the check?
What do the makers of new products think of this? the Ford’s, GM’s, Big Box stores of the world?
Greg, buy The FairTax Book. It explains everything.
Lets be honest about income taxes in America. I a high wage earner with over $2 million in tax free investments pay much less taxes percentage wise then the poor worker making 50K a year. As Warren Buffet, 2nd richest American says he pays 17% on his millions of income a year and his employees making 60K a year pay 28% on there wages this is not right. Let us be honest and be fair in taxation. The more we make the higher our tax bracket shoud be without special deductions. Of course our politicols, the scum bags they are, do not want to pay there fair share. So as long as we keep re electing the rich pols the average working guy can watch his family sink into the quicksand while the rich get richer. And oh, by the way did you folks know that on average the middle class donates a much higher percentage of there wages to charities then the rich. Something to think about.
What seems to be overlooked is that the top 1% of Americans OWN 40% of the wealth in America.
The bottom 80% of Americans own 10% of wealth in America.
Of course the wealthy pay more, they own more and make more than the bottom 80% of Americans.
Let the Democrats pay the taxes and spend the money.
“Of course the wealthy pay more, they own more and make more than the bottom 80% of Americans.”
..and employ more.
What the statistic’s above don’t say is: What is the income needed to be in the top 50% of income earners? We can conclude that the top 10% and the top 1% are part of the top 50% so what is the income level of the other 39%? (Personal attack statement removed by moderator)