Sunday, August 03, 2008

How Much Does Top 1% Pay of All Income Taxes?

Update: The chart above is from the Joint Economic Committe (based on 2006 IRS data), showing the percentages of federal personal income tax paid by different groups of taxpayers: The top 1% of taxpayers pay about 40% of all income taxes, the top 10% pay 71%, and the top 50% pay 97% of all taxes. The bottom 50% pays less than 3% of all income taxes paid.

The IRS has also released tax share data by state, and those data show that the top 1% of taxpayers pay as much as 51.5% of all income taxes collected in Wyoming, and the top 1% paid as little as 27.6% of income taxes in Alaska. The top 5 and bottom five states are show below:

Share of 2006 Federal Income Taxes Paid By Top 1%

Top 5 States
Wyoming: 51.5% (top 1% of Wyoming taxpayers paid 51.5% of federal income taxes collected there)
Nevada: 49.8%
Florida: 47.8%
New York: 46.7%
Connecticut: 45.4%


Bottom 5 States
Alaska:
27.6% (top 1% of Alaska taxpayers paid 27.6% of all income taxes paid)
West Virginia: 27.7%
Iowa: 30.1%
Maine: 30.9%
Michigan: 31.1%


U.S. Average: 39.9% (top 1% of taxpayers paid 39.9% of all income taxes paid)

29 Comments:

At 8/03/2008 9:04 AM, Anonymous bob wright said...

After only two tall Oberons and a short night, I'm not seeing what the numbers are saying.

Will you please elucidate?

Thanks in advance.

 
At 8/03/2008 11:00 AM, Blogger juandos said...

Hmmm, there are some very wealthy people in Wyoming and Nevada apparently...

Senators Stevens and Byrd are part of a very elite club...

 
At 8/03/2008 1:41 PM, Anonymous Anonymous said...

Interesting that Wyoming, Nevada and Florida do not have any personal state income taxes.

 
At 8/03/2008 5:48 PM, Blogger Nontruths said...

I am also a bit confused - I guess that since they do not add to 100% that the numbers are not mutually exclusive?

 
At 8/03/2008 6:36 PM, Blogger Mark J. Perry said...

Sorry it wasn't clear, check back now, I've updated the post.

 
At 8/04/2008 1:54 AM, Anonymous Anonymous said...

Interesting. The 20-80 law comes up again. The top 20% people pay 80% of the tax.

Man

 
At 8/04/2008 6:26 AM, Blogger Walt G. said...

“The top 1% of taxpayers pay about 40% of all income taxes, the top 10% pay 71%, and the top 50% pay 97% of all taxes. The bottom 50% pays less than 3% of all income taxes paid.

Here’s additional data from the same IRS table that you can compare to the statement above. You can make up your own mind what it means.

The top 1% of taxpayers has over 21% of all adjusted gross income, the top 10% has over 46%, and the top 50% has over 87% of all adjusted gross income. The bottom 50% has less than 13% of all adjusted gross income.

 
At 8/04/2008 7:51 AM, Anonymous Anonymous said...

Here’s additional data from the same IRS table that you can compare to the statement above. You can make up your own mind what it means.

The top 1% of taxpayers has over 21% of all adjusted gross income, the top 10% has over 46%, and the top 50% has over 87% of all adjusted gross income. The bottom 50% has less than 13% of all adjusted gross income.


What it means is that every income group, except the bottom 50%, pays taxes at a rate that is higher than their percentage share of income. The bottom 50% pay taxes at a rate that is more than 4 times less than their percentage share of AGI.

 
At 8/04/2008 8:33 AM, Blogger Walt G. said...

anonymous 8:11,

Actually, I pointed out the income distribution; that was not in the original post. You can put it in any context you wish, but it should be out in the open and stated clearly. The title of the post could just as easily have been How Much of the Adjusted Gross Income/Money Does the Bottom 50% Have?

Are you arguing for a flat rate, federal income tax? Is so, what percentage rate do you propose?

 
At 8/04/2008 10:46 AM, Blogger juandos said...

I think what the IRS data show when its all said and done is that the so called, 'progressive taxation system is more than merely socialist in its origination, its hurting America as a whole...

Shockingly this is from the AP: Rich begin feeling the pain in down economy

The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey...

 
At 8/04/2008 11:14 AM, Blogger Walt G. said...

We might be mixing units of analysis with individual taxpayers and households, but at a glance, if 10% of the taxpayers have 46.65% of the money, it makes sense that they would comprise 25% of all consumer spending. It even looks as if they are not spending enough.

 
At 8/04/2008 11:41 AM, Blogger juandos said...

"It even looks as if they are not spending enough"...

Well walt g since the so called rich are being punished for being successful they can't afford to spend more on fluff...:-)

 
At 8/04/2008 1:31 PM, Blogger Walt G. said...

juandos,

Throw in Universal Health Care and a few more rounds of stimulus checks, and we can just have our whole paycheck sent to Uncle Sam: Problem solved.

 
At 8/04/2008 2:28 PM, Blogger juandos said...

Hey walt g, you've reminded me of a not so recent John Stossel commentary with your comment: Majority of Americans Depend on Government Largesse
05/14/2007

Also walt g, do you remember this Christian Science Monitor article from April of '07?
As US tax rates drop, government's reach grows...

So it seems walt g we as a nation are well on our way to that nirvana of, "whole paycheck sent to Uncle Sam"...

BTW walt g, you may find the following site occassionally interesting and also a bit humerous: Number Watch by John Brignell...

Note his description of the site: "This site is devoted to the monitoring of the misleading numbers that rain down on us via the media. Whether they are generated by Single Issue Fanatics (SIFs), politicians, bureaucrats, quasi-scientists (junk, pseudo- or just bad), such numbers swamp the media, generating unnecessary alarm and panic. They are seized upon by media, hungry for eye-catching stories. There is a growing band of people whose livelihoods depend on creating and maintaining panic. There are also some who are trying to keep numbers away from your notice and others who hope that you will not make comparisons. Their stock in trade is the gratuitous lie. The aim here is to nail just a few of them"...

 
At 8/20/2008 9:48 PM, Blogger dsimon said...

What it means is that every income group, except the bottom 50%, pays taxes at a rate that is higher than their percentage share of income.

Sure. And what's the problem with that? It has to be the case unless you have a flat tax where even people who make under $20,000 pay the same tax on every dollar as people who make far more. Since hardly anyone believes in a true flat tax, the wealthy will pay a higher percentage of their income and the poor less. Why? Because it's far harder for the poor to pay taxes when they're just trying to pay the bills.

The bottom 50% pay taxes at a rate that is more than 4 times less than their percentage share of AGI.

That may be true for income taxes, but it's not true for all taxes. Most people pay more in wage taxes than the do in income taxes. When wage taxes are figured in, the burden assumed by lower income groups rises.

I think the argument that "the richest X% pay X+Y% of income taxes" is a canard. The richest make most of the money. Unless one wants the middle class and the poor to pay more than the do now, that's the way it has to be.

 
At 10/03/2008 10:40 PM, Anonymous Anonymous said...

Sure. And what's the problem with that?

Galbraith wrote how the means by which money is created "repels the mind". It is hard to see the mechanism by which progressive taxation inhibits the creation of capital without understanding the processes of fractional reserve banking - pretty dry stuff.

Socialists think money is just "there" - so what is the harm to getting more from the most productive?

Perhaps the biggest open secret in the world, is "where money comes from". Most people see it as a series of incoming transfers, and never follow the process back far enough to see how it is created.

Once one understands how money comes into existence, it is easy to see the foolishness of progressive taxation. It is like a collective auto-cannibalization.

There are consequences to incuriousity about economics. A 1/4% increase in interest rates affects behavior - and a 5% tax bracket jump 20 times as large has 20 times the inhibitory impact on the ability of a small business to hire staff.

When, out of jealousy, envy, and poverty consciousness, people support progressive taxation, what goes around comes around - and they end up suffering from a smaller pie in their personal lives.

 
At 10/05/2008 2:42 PM, Anonymous Anonymous said...

the wealthy will pay a higher percentage of their income and the poor less.

If you really want more money for social programs, flatten the tax rates further, and the percentage of total revenue paid by the top tiers will increase even more (than it has since capital gains taxes were reduced.)

Would this be OK? Formerly Marxist countries in Eastern Europe, and Russia, have implemented flat taxes and revenues have greatly increased.

Remember, you wouldn't be able to punish the producers as much so more capital will be generated. You'll have to be willing to give up envy and jealousy of those who make more money. In exchange for giving that up, more money for social programs would be created. Neat!

 
At 10/14/2008 9:22 PM, Anonymous Anonymous said...

Also let's not forget the loop holes in our tax system. Most of the very wealthy in this nation do not report their earnings as individuals but under the umbrella's of corperate tax shelters. The side of the argument syaing that the top 1% has only 21% of the gross adjusted income is naive. Unless of course you've never hired the cervices of a CPA.
with laughable contempt for the government, and shirking of personal responsiblity, the rich... the truly rich claim to own hardly any of their actual wealth, and instead write of their expenses to businesses and charitable trusts that they invest in. Show me a rich man who isn't trying to reduce his apparent income to the IRS, and I'll vote him in as Pope.

 
At 11/01/2008 10:27 AM, Anonymous Anonymous said...

I'm a student so please bear with me...

So in 2006 the total AGI was about $8 Trillion and the top 1% took in about $1.6 Trillion or 21%. But given the goal is to pay as little tax as possible, I'm sure these people made much more, but used smart accountants to channel these funds. And lets face it, if you make at least $400K/yr, you can afford smart accountants.

So, I assume that the top 1% control a lot more money than their 21% AGI reflects. I think the top 1% paying 40% tax figure is misleading. If they're better at manipulating their AGI, then I don't think the hit they're reportedly taking is as severe as some would like us to believe.

I wish there was an objective source that could explain the parameters of our private and federal economy in a way that helped us make decisions without jumping to emotional conclusions. The end result is that you can't trust any source...

 
At 11/02/2008 3:54 AM, Blogger Independent Thought said...

With the top 1% paying 40% of all income tax and the bottom 50% paying just 3% of income taxes you really can't expect any tax break to substantially benefit the bottom 50%-they aren't paying much, if any, taxes in the first place. Conversley, if the top 1% is paying 40% of ALL the income taxes, then even a modest decrease would look huge when comparing just dollars. Remember, the bottom 50% will get their trickle down advantages through pay raises and improved benefits at work (health insurance for example) and increased job opportunities. Too bad "BIG MEDIA" doesn't share this information broadly. You should also review the US Census Report on Income, Poverty and the Uninsured for 2007 released August 27, 2008. It is good news for our country; incomes are up, poverty is flat and the uninsured rates are down. I guess it's much too good news for this election year when one candidate is encouraging class warfare.

 
At 11/02/2008 3:55 AM, Anonymous BCG said...

I fail to see the point. 90% of Americans make less than 100,000 a year. I know I would happy pay may share of taxes to move up into that 10%. If that wasn't the case that most would agree then most would not attempt to get hiring paying jobs.

If 90% of us are making less than 100k. 90% of us are the workhorse that make it possible for the top 10% to feed off of.

If the top 10% doesn't like the current way income tax is figure then change the law...but don't expect the other 90% of us to vote for it.

If you think it is unfair then give back all money made in the US and go someplace else and attempt to re-earn it. Don't forget to give back all this country gave you to get you in first place to get you were you are today.

 
At 11/04/2008 12:27 PM, Anonymous Jonathan said...

"Independent Thought" says that,"Remember, the bottom 50% will get their trickle down advantages through pay raises and improved benefits at work (health insurance for example) and increased job opportunities."

However, over the past 8 years, wage growth and corporate spending on employees has remained flat, while corporate profits and income for the wealthy has sored. http://money.cnn.com/2006/08/28/news/economy/real_wages/index.htm

As the article says, even salaries nearing the top 10% of earners haven't risen past inflation. Retirement contributions have shrunk as well.

Meanwhile, productivity has risen.

Where's the trickle? Seriously? Where is it?

So, the wealthy have gotten wealthier thanks to the increased productivity at lower costs. Meanwhile, we're supposed to shed a tear for higher tax rates on those wealthy people?

Also, a commenter here makes a good point about the reporting of AGI probably greatly understating the actual earnings of the top 5%.

 
At 1/08/2009 8:27 AM, Blogger steven said...

Hmmm...that same IRS report for 2006 provides "average tax rate" paid for each income group:

Average
Tax Rate
23% Top 1% $388,806
22% Top 2% $250,869
21% Top 5% $153,542
19% Top 10% $108,904
18% Top 25% $64,792
14% Top 50% $31,987

How does everyone interpret these data?

 
At 9/10/2010 3:03 PM, Blogger Steve said...

Jonathan you are missing the point of this. If you tax the 1% more then they spend less. If they are spending less then the economy suffers a great deal because they account for 25% of spending which accounts for 70% of the economy. So they aren't spending, a lot of people lose their jobs. Understand it now? Or is your liberal logic (oxymoron) effecting your vision.

 
At 2/26/2011 12:21 AM, Blogger vulturesign said...

"In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%"

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

 
At 2/26/2011 12:31 AM, Blogger vulturesign said...

There are variety ways we could implement a tax that was more proptionate to a taxpayers total wealth.

One way would be to have a "Flat Tax" not on income or consumption (which are regressive and arguably unfair) but on wealth.

A number of countries around the world actually have a annual tax based on wealth.

http://en.wikipedia.org/wiki/Wealth_%28Net_Worth%29_Tax

Some countries have rejected such a system (no doubt in part because they were unpopular with the wealthy).

The potential problems of capital flight and brain drain which are often cited can be addressed by taxing citizens on their global wealth regardless of residence (as the US already does for income).

One real disadvantage of such a system is that they can be somewhat more expensive to administer. Seems like a small price to pay for a more just tax system. Getting the wealthy to go along with such a system is a whole other matter!

 
At 5/06/2011 12:53 AM, Blogger Christos said...

The top 20% hold 93% of all the wealth in the US while only paying 65% of taxes.

The middle class pays the rest.

The middle class is being fleeced.

 
At 9/26/2011 10:42 PM, Blogger The Guz said...

The top 50% also have 97% of the net worth in
America, so this seems about right

 
At 11/17/2011 11:01 AM, Blogger Unknown said...

I'm interested why no one's concerned that 50% of the people in this country aren't paying ANY taxes at at....

 

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