Kay Bell takes a look at who pays federal income taxes in Where Does Your Taxable Income Rank:
Kiplinger took 2007 tax data (the most complete available) from the IRS and created an online calculator to show you where your income ranks compared to the rest of U.S. taxpayers.
I ran some various incomes through the calculator and learned that, in 2007 at least:
- The top-earning 50 percent of taxpayers reported 87.7 percent of all adjusted gross income (AGI) and paid 97.1 percent of total income taxes.
- The top-earning 10 percent of taxpayers reported 48 percent of all AGI and paid 71.2 percent of total income taxes.
- The top-earning 5 percent of taxpayers reported 37.4 percent of all AGI and paid 60.6 percent of total income taxes.
- The top-earning 1 percent of taxpayers reported 22.8 percent of all AGI and paid 40.4 percent of total income taxes.
At the bottom of the income scale, the calculator told me that the lowest-earning 50 percent of taxpayers reported 12.3 percent of all AGI and paid 2.89 percent of total income taxes.
These statistics won’t stop the pro-tax crowd from accusing the anti-tax crowd of lying about which class of Americans bears the bulk of the tax burden. But the lies come from the left, not the right. And although these prevarications are not morally justifiable, they are politically understandable.
The only way the left can get its pro-tax, pro-big government agenda enacted is to convince the public that the rich are not paying their fair share. The left thinks you’re stupid and will take the bait.
But don’t.
The rich do not merely fund the lion’s share of the federal government, they fund it overwhelmingly.
Related Posts:
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21 responses so far ↓
1 The Richest 10% Pay 71% of Federal Income Taxes at Taxes // Sep 5, 2010 at 4:12 pm
[...] Kay Bell takes a look at who pays federal income taxes in Where Does Your Taxable Income Rank: Kiplinger took 2007 tax data (the most complete available) from the IRS and created an online calculator to show you where your income ranks compared to the rest of U.S. taxpayers. I ran some various incomes through the calculator [...] Tax Lawyer’s Blog [...]
2 garth // Sep 6, 2010 at 5:37 pm
How do things change when you include Payroll and State/Local taxes?
If you leave them out of the analysis then you are only picking up about a third of total taxes paid. Which third? The third that tells the story the anti-tax crowd wants to tell.
If you look at all three as an individual’s tax burden then you still end up with a progressive tax system, but not as much as when you cherry-pick and use only “Federal Income Taxes”.
3 LawStudent // Sep 6, 2010 at 6:15 pm
@ garth
Payroll taxes only account for one third of federal revenue while the income tax, corporate taxes, and excise taxes make up the remainder. Also, payroll taxes are supposed to be funding your SS retirement and Medicare fund (though it is going into the general fund in reality and the SC has said that individuals have no claim to SS). So, there was no “cherry-picking” and the post is totally accurate both in letter and spirit.
4 garth // Sep 6, 2010 at 7:03 pm
@law, I disagree with your conclusion and here’s why: Yes, there are a few smaller taxes that make up federal revenues but in the big picture you’ve got Individual and Payroll taxes, roughly equal in size. And state/local roughly equal to either one of those.
One of those three is waaaaay more progressive than the other two. In fact, most people pay more in the other two taxes than in the Federal Income tax. Using just ONE is indeed cherry-picking. How in the world is it not?
Furthermore on the Payroll Tax front, as you indicate, they have been subsidizing the General Fund. Translation: The regressive tax is subsidizing the Progressive tax. How this happened is quite interesting, but I don’t want this post to be too long.
Looked at another way, the Individual Income Tax is just about 7% of GDP, or one trillion dolalrs. That’s about what we spend on National Defense.
5 Peter // Sep 6, 2010 at 8:17 pm
Garth,
The issue is who bears the bulk of the FEDERAL tax burden.
The answer is: The rich do.
For what it’s worth, rich people probably pay more in sales taxes and property taxes as well.
6 garth // Sep 6, 2010 at 11:39 pm
Yes, Peter. But you are cherry-picking.
If someone wrote about how the largest tax obligation for most American families is the Payroll tax(es), and noted with numbers how this tax is regressive, you may take issue. You’d correctly note that this isn’t the only tax in the world. Looking at payroll taxes alone will give a distorted picture.
This is less of an issue for readers of a blog like yours. Most probably know what is and isn’t included in the “Federal Income Tax”. But when such fact-like figures are reported ad-nausem on AM radio then you wind up with a significant segment of the population that is badly misinformed on an important issue.
7 LawStudent // Sep 7, 2010 at 8:17 am
@ garth
From the Headline of the post: “The Richest 10% Pay 71% of Federal Income Taxes”
How is this cherry-picking? Payroll taxes only account for 36% of federal revenue whereas income taxes account for 45%, corporate taxes for 12%, and excise taxes the remainder. Further, many of the people who don’t pay income taxes, or pay a small amount, but do pay payroll taxes receive other government handouts (e.g. EITC) making their effective payment of taxes non-existent (i.e. they actually receive more from government handouts than what is withheld in payroll taxes). The post in entirely accurate in form (i.e. the title) and substance (see the text).
8 Eric // Sep 11, 2010 at 2:15 am
Isn’t the important thing how much we all pay in taxes as a percentage of income.
Payroll taxes are 15.3% for all workers and born by the bottom wage earners.
Corporate taxes can be considered pass through taxes and are born by the consumers – again the bottom wage earners consume more.
Sales taxes are also very regressive as are property taxes.
If you look at all taxes (as I have) it shows the supper rich pay the same amount as the poor percentage wise. The amazing thing is that everybody else in the middle pays a higher percentage.
Focusing on the only tax that is progressive is of course – self serving of the rich.
9 Peter // Sep 11, 2010 at 8:43 am
Hi Eric,
I disagree on several counts:
1. Bottom wage workers do not consume more than those who have more money to spend. If that were true, why would people aspire to be rich if they are able to consume more when they are poor?
2. The 15.3% tax rate you mention is the self-employment tax. It has two components: 1) 7.65% is the employee’s share of FICA and medicare; and 2) 7.65% is the employer’s share.
Only self-employed workers are required to pay the employer’s share because they are employers of themselves. Typical wage earners pay only the 7.65%
3. The greater the value of your real estate the more property taxes you pay. The rich generally own houses of greater value therefore, as with most everything else, they pay more taxes than those who own houses of lesser value.
4. The rich pay more sales tax because they consume more. You have to pay sales tax on Yachts.
Let’s stop the class warfare. The rich create the jobs and fund the bulk of government. The answer for the poor and the middle class is to study and work harder to become rich.
10 Jent Moore // Dec 6, 2010 at 11:18 am
@Peter, you are incorrect that the greater value of your real estate, the more property tax you pay. In upstate NY, we paid $2500/annnum on a $100,000 home. In Tampa, we paid $10,000/annum on a $550,000 home. In Nashville, we pay $2600 on a $500,000 home–the same amount we paid upstate for our $100,000 home.
11 Peter // Dec 6, 2010 at 12:38 pm
Jent, property tax assessments are based on the value of your home. Local taxing authorities determine the tax rates. You are comparing different counties and, of course, there will be discrepancies.
12 grad student // Dec 15, 2010 at 5:15 pm
Your analysis is an eye-opener, but I would suggest that there is more to human lives than math. (And I have a degree in math, and one in engineering.)
As a grad student I usually make on the order of $6000 per year, gross. Let’s also consider someone I used to know who made around half a million per year.
Let’s say I pay 10 % of my income in taxes, and let’s just say that she pays 30 % of her income in taxes.
The $65 or so less that I get each month means a few more days each month that I have to eat at a friend’s or skip laundry.
When she pays 150,000 per year out of her 500,000, she still has 350,000/yr to live on. Is that not enough to live on? …because survival is what the lower-income-bracket people are dealing with. And we work hard, by the way.
“And yes, as you pointed out, she’ll pay a much bigger portion of taxes regardless … even if I paid 30 % of my income, and she paid 5 % of hers.”
So, is it not expected that those who earn more pay more of the taxes?
13 Peter // Dec 16, 2010 at 2:08 pm
grad,
Why not just have the rich person directly give you $100K per year. After all, she’ll stilll have $400 to live on before taxes. Isn’t that enough? In fact, based on your theory, we should only allow people to keep enough money pay their necessary living expenses and use the excess to help others.
They have a word for this: communism.
14 grad student // Dec 16, 2010 at 11:25 pm
No, the word for what I said was I HAVE TO HAVE ENOUGH TO EAT AND PAY RENT.
15 grad student // Dec 16, 2010 at 11:33 pm
To explain more calmly, Peter, I didn’t say the rich person ought to give me any of their money; that was all you.
I was starting from the assumption (listed in the “MY BIAS” section of this website: “the federal income tax is constitutional and, therefore, legal”) that people are going to pay some taxes no matter what.
Based on that simple thing that we all probably agree on, I supported the original post’s findings by saying that no matter how much my taxes went up, they couldn’t add up to a small portion paid by someone who has substantially more income.
Are you following this, or are you getting ready for more name-calling?
And, in addition, I showed, in practical terms, that if both people paid 10 % of their income in taxes, only one would have trouble surviving.
I wasn’t begging for anyone to give me money; that was your interpretation. Read more carefully next time.
Communism was a hypocritical application of egalitarian ideals, and it did not work. I am not promoting it. But I certainly appreciate the many socialistic benefits _everyone_ enjoys in the US, compared to another, more purely capitalistic country I know.
16 Peter // Dec 18, 2010 at 12:57 am
Grad,
Whose responsibility is it that you have to have enough money to eat and pay rent? I say it’s yours.
17 grad student // Jan 7, 2011 at 10:46 pm
I agree, Peter, that it’s my responsibility, which is why I’ve worked as much as 110 hours per week, and an average of about 90 hours per week for the last 9 years.
I’m a productive member of society; I work unpaid overtime to educate the young people of our country, and to continuously educate and better myself.
If you can’t comprehend what I wrote in my prior posts, that’s too bad. I’ve explained it enough times.
18 Not You // May 27, 2011 at 12:47 pm
The only statistic that matters when considering if anyone pays their fair share is percentage of income. No one who has more than me should pay less of a percentage of their income than me. It’s that simple. Everything else is just spin meant to take advantage of the mathematically ignorant.
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