Wednesday, October 10, 2007

Top 1% Pay More Taxes Than The Bottom 90%

According to an analysis by the Tax Foundation, based on recently released data from the Internal Revenue Service for 2005 (see chart above, click to enlarge):

The top-earning 25% of taxpayers -- those with an Adjusted Gross Income (AGI) over $62,068 -- earned 67.5% of the nation's income, but they paid 86% of taxes collected.


The top 1% of taxpayers (AGI over $364,657) earned about 21% of the nation's income, yet paid more than 39% of all federal income taxes collected.

That means the top 1% paid about the same amount of federal individual income taxes as the bottom 95 percent, and the top 5% paid more (about 60% of all taxes collected) than the bottom 95% (about 40% of all taxes).

The IRS data also shows increases in individual incomes across all income groups:

Just as the highest earners lost the biggest percentage of their incomes during the recession of 2001, so they have prospered the most as the economy has continued to rebound.

Between 2000 and 2005, pre-tax income for the top 1% group grew by 19.1%, and the pre-tax income for the bottom 50% increased by 15.5% during the same period.

This pattern of income loss and growth at the top of the income spectrum is the same during every recession and recovery, says the Foundation. The net result has also been a sharp rise in federal government tax revenue from 2003-2005 compared to previous years.


Note: The top 1% paid 35.7% of all income taxes in 2004, and 39.38% of all income taxes in 2005, suggesting the "rich" now pay more as share of all income taxes than before and the tax burden on the rich has increased. Weren't the income tax cuts of 2003 supposed to be "tax cuts for the rich?"

20 Comments:

At 10/10/2007 11:22 AM, Blogger james said...

Forgive me if I do not feel bad for these people. They are so far beyond Maslow's hierarchy of needs that they do not even know how to spend their money. Not to mention that they may not be as successful as they are with out the free wheeling capitalists environment that these taxes help to maintain. Things like police, public schools, traffic lights etc. things that keep us consumers’ content and "under the ether".

 
At 10/10/2007 6:46 PM, Anonymous Anonymous said...

"Not to mention that they may not be as successful as they are with out the free wheeling capitalists environment that these taxes help to maintain."

What a miserable attitude.

Get a life.

Stop hating the fact that others are doing better than you.

 
At 10/11/2007 12:40 PM, Anonymous Anonymous said...

While I often see these kind of income and income tax distribution studies, I think it would be a more valuable analysis of tax burden to look at total taxes by income quintile, including payroll, sales, local and property taxes. Has someone seen a study along these lines?

 
At 10/11/2007 11:21 PM, Blogger juandos said...

I for one can't see the rationalization of someone who makes $200k/year having to pay one cent more than someone making $20k/year - percentages be damned...

Then there is this nauseating whine: "Things like police, public schools, traffic lights etc. things that keep us consumers’ content and "under the ether"...

Obviously YOU aren't paying enough to hold up your end of civilization...

 
At 10/12/2007 2:56 AM, Anonymous Anonymous said...

annoy-no-mous said: "I think it would be a more valuable analysis of tax burden to look at total taxes by income quintile..."

Why? Are you advocating for the cessation of sales taxes or other "regressive" levies? Probably. You want to make a case that "poor" folks spend a disproportionate percentage of their income on taxes. You would, of course, be totally wrong. They may spend 5%, 5.5%, 6%, or even 8& on sales taxes, but you are ignoring the substantial, and much larger, income taxes paid by wealthier individuals.

Plus, what's with your arbitrary fixation with quintiles? Why not deciles, centiles, or some other quantile? I think you are trying to obfuscate what your true motive is...cast doubt on the data and demand a new set. Sorry, the data will show, diced up into however many subsets that you prefer, that higher income pukes contribute more in income, payroll, and sales taxes than the "poor" people. That should be obvious, but if it isn't, I will help you out and label it as "a horse flogged to death...thrice."

And James, whoever brings up Maslow has already lost the debate. Your psycho-management, low-level business school crap is bunk. I could pick your pap apart, but it is late and I have beer to drink. Do us all a favor and don't interject subjective, unproven theoretical crap into a comment thread.

skh.pcola

 
At 10/12/2007 7:34 AM, Blogger james said...

It amazes me how sure anonymous people are of themselves. Bold, very bold!

So how bad should I feel for these people with multiple homes that we protect with our infinite defense budget. If you are above our country go set up your corporate headquarters in China or Iran. I am sure there are better tax systems for your business elsewhere, if that is all you need to be successful. Now that is free market at work.

No man is an island.

 
At 10/12/2007 8:32 AM, Blogger juandos said...

Its painfully obvious james is either an outright liar or completely clueless: "So how bad should I feel for these people with multiple homes that we protect with our infinite defense budget"...

Perusing the 2006 1040 EZ booklet one can see that 67% of income taxes are spent on Constitutionally questionable programs by the federal government...

BTW james there is a country nearby that might satisfy YOUR needs...:-)

 
At 10/12/2007 9:03 AM, Blogger james said...

juandos, I agree, our spending is out of control and it does need to be reined in. However that still does not make me any more empathetic to the upper 1% of income earners.

Some how they have you towing the line for them with no benefit's to yourself.

Juandos, I think you have been sold a bill of goods my friend. A bill that states helping out the mega rich is going to some how trickle down to you. That's a whole lot of trickling. I do not see you cup running over any time soon.

 
At 10/12/2007 6:21 PM, Blogger juandos said...

Well james its really quite simple, I take SOLE responsibility for myself and I don't need the federal or state government to stick their hand in the pockets of someone else to help me out...

james when was the last time a poor person put someone to work and gave them a paycheck for their troubles?

Are you under the impression that the rich got rich by NOT working hard for it?

I mean we aren't talk Ted Kennedy here...

I'm guessing you can find all sorts of rationales for that scam called, "progressive taxation", right?

The rich are not around so you or I can benefit from the contents of their collective wallet...

 
At 10/13/2007 8:46 AM, Blogger james said...

The rich get rich on consumption, in order for you and I to consume there need to be a certain amount of social needs that have to be maintained in order to keep us from "turtling" up with our money in a bomb shelter. That's called the great depression. I am not saying that I need social assistance but I can not be waking up to dead people, that just did not make the cut, in my front yard every day either and still feel good enough to pony up for the high definition tv. Consumers create wealth, not producers. You can be the best producer in the world, but with out healthy consumers, you have nothing. Go sell HD TVs in Africa.

 
At 10/14/2007 10:18 AM, Blogger Wayne, "El Guero" said...

It is interesting that when there are those that are doing much better than average American, that there are still down trodden Americans willing to support those that are doing so well. It as always amazed me how cheap we value the lives of America's middle and lower classes as they serve and die to support the wealthy.

Ironically, I am referring to the fact that some slaves continued to support the efforts of the South to continue slavery (which was the main economic factor leading to the Civil War).

 
At 10/14/2007 10:28 AM, Blogger Wayne, "El Guero" said...

Moving directly back to the OP. I am glad that the top 10% of our wage earners lead the way and pay in cash for our system of government.

I hope and pray that I am in that top 10% soon. And I will cherish the honor of being in that small group that carries one third of the tax burden for those that (and I would go along with the rest of the wealthy) I do not want to pay fair wages to.

Honestly, do you think I would pay my fellow American a fair wage so that he (& she) could afford a greater share of the tax burden. That would make me keep less money in my pockets? That would be communism not capitalism. I will gladly pay a higher rate on my income and just pay my fellow Americans less. Isn't that why Americans voted in the Congress that let my job get outsourced? Since my fellow Americans let me endure that financial hardship - shouldn't I return that kind favor?

;)

PS - I vote to outsource Congress.

 
At 10/17/2007 4:24 PM, Anonymous Anonymous said...

I was surprised to see such strong reactions to my question about the distribution of the total tax burden. I had no ideological agenda here, in fact my personal tax situation and general philosophy are essentially aligned with those who are so concerned about tax levels and government size and intrusion into the private sector. It remains clear to me, however, that if you want to really analyze the distribution of the financing of government,( and not just make a strident political point) you can't single out any one tax and ignore the balance. So rather than questioning motives of such questions, it might be more useful to get an objective answer that can then be debated by all.

 
At 5/13/2008 11:31 AM, Blogger NoeValleyJim said...

It is interesting to note how "income tax" in the lead became "all taxes" by the bottom paragraph. With some bloggers, this would be forgivable, but with a Professor of Economics, you can be sure that there is an intent to deceive. Shame on you, Professor Perry, for deliberately lying to your readers.

 
At 5/13/2008 11:40 AM, Blogger Mark J. Perry said...

I have added the word "income" before the word "tax" in the last paragraph, to clarify.

 
At 5/13/2008 12:48 PM, Blogger NoeValleyJim said...

Wow, thanks for your prompt update.

 
At 6/17/2008 1:03 PM, Anonymous Anonymous said...

Playing the numbers with percentages distorts the picture. When you look at the actual figures rather than percentages it shows the tax is actually lower. Go look at the Forbes list of the 400 richest people in the US, they pay an average of about 17% on their taxes.

 
At 8/04/2008 6:35 AM, Anonymous Anonymous said...

The top 1% of earners should pay 60% of the total tax burden. They represent the owning class. They'd still be very comfortable and well taken care of. The massive amount of wealth accumulation in this country is obscene. The people that benefit the most from society should be expected to pay for it. The only reason rich people become rich is because they depend on workers to support their enterprises. The workers control the means of production. Real wealth is the ability to be productive. Rewarding ownership produces an aristocracy that rewards inheritance.

 
At 10/09/2008 1:25 AM, Anonymous kullfarr said...

The article is a sham. In 2004, the tax burden of those having income of $100,000 or more (top 20%) was 53% of the total tax burden in the United States. Change the title of your article to "Top 1% Pay More Federal Income Taxes Than The Bottom 90%" or consider yourself just another dishonest snake oil salesman.

 
At 11/04/2008 4:50 PM, Blogger misplacedamerican said...

Most millionaires do pay taxes. In fact, the top 1% of earners paid nearly 40% of federal income taxes in 2005 -- a whopping $368 billion -- according to the Internal Revenue Service.
That said, the wealthy tend to derive a higher portion of their income from dividends and capital gains, which are taxed at lower rates than wages (15% for long-term capital gains versus 25% for middle-class wages). Also, high-income earners pay Social Security tax on only their first $97,500 of income.
But the big savings come from owning a business and deducting everything related to it. Landlords can also depreciate their commercial properties and expenses such as mortgage interest. And that's without doing any creative accounting.

 

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