Thursday, October 09, 2008

The Top 1% of Taxpayers Paid More in Federal Income Taxes in 2006 Than the Entire Bottom 95%


According to the most recent tax data from the IRS through 2006 (available here from the Tax Foundation):

The top 1% of taxpayers earned $1.79 trillion (22.06% of the total) in 2006 and paid $408.4 billion in taxes (about 40% of the total). The bottom 95% of taxpayers earned $5.14 trillion (63.34% of the total) and paid $408.1 billion taxes (about 40% of the total).

In other words, the top 1% of U.S. taxpayers paid slightly more in federal income taxes ($408.4 billion) in 2006 than the entire bottom 95% of taxpayers paid ($408.1 billion), see top chart above.

Moreover, the tax burden on the top 1% has increased over time, while the tax burden on the bottom 95% has decreased (see bottom chart above). For example, in 1980 the top 1% paid only 19% of total federal income taxes paid, while the bottom 95% paid more than 63%. Over the last 25 years, the tax burden on the top 1% increased from 19% to 40%, while the tax share of the bottom 95% has decreased from 63% to 40%.

In 2002, before most of the "tax cuts" went into effect, the share of income taxes paid by the top 1% was below 34%, and by 2006 that share increased to almost 40%. If we assessed tax policies by the share of income taxes paid by "the rich" (i.e. top 1%), the "Jobs and Growth Tax Relief Reconciliation Act of 2003" wasn't a tax cut, it was a tax increase, since it increased the tax burden on the top 1% to record levels (40%), and resulted in more tax revenue from the top 1% than the entire bottom 95% of taxpayers!

Now, it's also true that the share of adjusted gross income earned by the top 1% has increased over time, while the share of income earned by the bottom 95% has decreased (see chart below), although the income share of the top 1% has been fairly stable at around 20% for the last ten years.

31 Comments:

At 10/09/2008 9:11 AM, Anonymous Anonymous said...

Does the IRS publish the FICA totals as well? It seems that this would be rather substantial and would alter the landscape somewhat. However, I'm not sure by how much.

-- Dave

 
At 10/09/2008 9:24 AM, Anonymous Anonymous said...

"To be fair, it's also true that the share of adjusted gross income earned by the top 1% has increased over time, while the share of income earned by the bottom 95% has decreased (see chart below), although the income share of the top 1% has been fairly stable at around 20% for the last ten years"

****************************

Is that comment a joke? To be fair the rich got richer and the poor got poorer, it looks like the trickle down theory is working really well. The rich are peeing a "trickle" on the heads of the majority of society which is getting poorer.

 
At 10/09/2008 9:39 AM, Blogger Colin said...

"To be fair the rich got richer and the poor got poorer, it looks like the trickle down theory is working really well."

Nonsense. Having your share of income decline and becoming poorer are not the same. Imagine a world that comprises solely my boss and myself. Let's say I make $50K and he makes $100K. Then let's say after a profitable year that I earn $75K and while he gets a raise to $200K. Under such a scenario my share of income has declined from 33% to 27%, but it is obvious that I am still better off.

In fact, look at the last chart. We see the income of the rich increasing as the fortunes of the overall economy increase -- taking off in 1995, declining during the 2000 recession and then increasing again in about 2004.

So, under your logic, the other 95% were better off when their percentage of shared income increased during the last recession. That is insanity.

 
At 10/09/2008 11:42 AM, Blogger DB said...

So, under your logic, the other 95% were better off when their percentage of shared income increased during the last recession. That is insanity.

No, Colin, that is logic. And logic is like kryptonite to an idiot. Unfortunately, your words will be lost on those who are just "intelligent" enough to see the world, not as it is, but as they are.

 
At 10/09/2008 12:19 PM, Anonymous Anonymous said...

A fire burns two houses to the ground, a $200,000 house with property taxes of $5,000, and a
$2,000,000 house with property taxes of $50,000. The fire department says that both houses could have been saved with the addition of one more firetruck
which would increase property taxes 20%. The town increases property taxes 20% and buys the
firetruck. Having rebuilt their
houses with insurance proceeds, both home owners are content to pay
the additional $1,000 and $10,000;
and both receive the same utility from the payment. Protection of their houses.

 
At 10/09/2008 12:31 PM, Anonymous Anonymous said...

Better off is of course a relative term, and is far more dependent on spending then income.
The top 1% would have a tough time spending all of their income, compared to the bottom 95% where income cannot keep pace with spending!

 
At 10/09/2008 12:38 PM, Blogger OBloodyHell said...

> The rich are peeing a "trickle" on the heads of the majority of society which is getting poorer.

Once again, and as usual -- you're an idiot.

Are we surprised?

Why, no, not at all.

Accurate description of what has happened here:

The rumor about "stagnant middle class incomes" is false

It's got pictures, so even anon can figure it out. Since it won't stick, that will not change any of his blatherings, but should at least help those who actually care about understanding things get a grip.

 
At 10/09/2008 12:40 PM, Blogger OBloodyHell said...

> No, Colin, that is logic

Ah, but db -- logic has the weakness that it works on any axioms, regardless of their inherent veracity. "GIGO".

In this case, Colin's are not GIGO, but anon can respond with perfectly logical answers -- and probably will -- but they'll be garbage nonetheless.

 
At 10/09/2008 12:56 PM, Blogger OBloodyHell said...

> The top 1% would have a tough time spending all of their income, compared to the bottom 95% where income cannot keep pace with spending!

Well, if they decided that having three cars for two people, a boat, a 5br-2ba-4-car garage house with a fully equipped media room/home theater is something they want to spend money on, am I supposed to be playing the violin for them?

And what you are saying is, if someone is rich, it's ok to steal things from them at gunpoint, at least if you get enough people together to agree on the theft.

This is not starving peasants in rags vs. the opulence of the French court, you nimrod (in the modern, not classical, sense of the word).

This is *most* people making enough to have more than the RICHEST PEOPLE IN THE WORLD DID 100 years ago.

Cripes, I'm not that well off and I've got a 32 flat screen and a 17" HDTV grade laptop. And ANYONE can have that if they want to bust their asses a bit for it. It does not take that much extra work to obtain such things -- an additional 20 hrs a week for about a year or so -- at minimum wage -- will do it.

No one is begrudging helping the legitimately homeless with assistance.

They're begrudging people who CHOOSE not to work whining about how they don't have as much as people who BUST THEIR ASSES for it.

... that tinny, barely audible noise you hear is me playing the world's smallest violin as accompaniment to their whines and cheese.

I've known quite a few people who make income in the upper 70s in an area where the median is more like 50s. You know what almost every one had in common? They work 60 hour weeks. EVERY WEEK. And in the rare case where they don't do that, it's usually because at some point they DID do that for 15 or 20 years, and didn't spend their money on the biggest and best bling they could lay their hands on, but did without and invested it.

So pardon me if I have a problem with THIEVES whining about wanting to rip STILL MORE off of people who I know include a lot of people who bust their @$%#$%$#^ asses for everything they have.

Idiot.

 
At 10/09/2008 1:04 PM, Anonymous Anonymous said...

"OBloodyHell said...
> The top 1% would have a tough ....

...now include a lot of people who bust their @$%#$%$#^ asses for everything they have.

Idiot.

12:56 PM"

I had a couple of responses, but, decided they did not need to be released once I read your signature.

 
At 10/09/2008 1:27 PM, Anonymous rvturnage said...

Ohbloodyhell, thanks for that link. I'm constantly trying to explain that phenomenon in local editorials and forums. Now I can just link to that!

BTW, its worth looking at this post (about this paper)which discusses in part how inflation actually affects the wealthy more than the poor.

"What Broda and Romalis quite convincingly demonstrate, however, is that the prices of goods that poor people tend to consume have fallen sharply relative to the prices of goods that rich people consume. Consequently, when you measure the true buying power of the rich and the poor, inequality grew only one-third as fast as economists previously thought it did — or maybe didn’t grow at all."

 
At 10/09/2008 1:27 PM, Blogger like such as said...

I'm still having trouble figuring out the point of "anonymity" on an already anonymous blog. If you so ardently believe what you say, why not stand behind it with even a pseudonym?

Just choose a name and go with it. I think "pinko" is still available.

 
At 10/09/2008 1:40 PM, Anonymous Anonymous said...

"like such as" said...
I'm still having trouble figuring out the point of "anonymity" on an already anonymous blog. If you so ardently believe what you say, why not stand behind it with even a pseudonym?

Just choose a name and go with it. I think "pinko" is still available.
1:27 PM"

Dear "like such as",

I made an observation, not a point. We are commenting on a blog article, which is an observation.

I'm not top 1%, but I am top 3%.
I have an MBA in Finance and a BA in Economics. I don't happen to agree with you, or most of the other bloggers. I'm not a pinko,
and

"notnidiot"

 
At 10/09/2008 2:00 PM, Blogger lebowski said...

From PEW Research


As of 2006 (the last year for which trend data are available), real median annual household income had not yet returned to its 1999 peak, making this decade one of the longest downturns ever for this widely-accepted measure of the middle-class standard of living........this long-term prosperity has not spread evenly. The upper income tier (households with annual incomes above 150% of the median) has outperformed the middle tier (households with annual incomes between 75% and 150% of the median) -- not just in income gains, but also in wealth accumulation. From 1983 to 2004, the median net worth of upper income families grew by 123%, while the median net worth of middle income families grew by just 29%. In effect, those in the middle have been making progress in absolute terms while falling behind in relative terms.

 
At 10/09/2008 2:28 PM, Anonymous BARKLEY said...

I do believe we need to make income taxes even more progressive. We need higher tax brackets. I think that is what Obama is advocating. We need this for the revenue.
I also believe that everyone with income should pay some income tax. Right now we have a system where many people pay no income tax at all. This robs them of dignity. It divorces them from the consequences of government spending. It makes them less a part of the community.

Everyone with income should pay some income tax.

 
At 10/09/2008 3:54 PM, Blogger OBloodyHell said...

> I had a couple of responses, but, decided they did not need to be released once I read your signature.

Ahahahhaaaaa...

Yeah. Right.

Don't bother to reply. You are quite correct that we can easily guess the validity of the content already when you try that kind of tapdance.

...It would be more of the same as that of your initial whining:

"I'm a thief, and I don't care because I can get away with it since I have lots and lots of friends who get a cut, too!!!"

 
At 10/09/2008 4:17 PM, Blogger OBloodyHell said...

> I'm not top 1%, but I am top 3%.

Yes, and I'm president of not just one bank, but thre////fou//// *five* banks.

Talk is cheap on a blog. And you didn't disprove the notion that you are a pinko, you just handwaved it off.

Doesn't work here, we recognize handwaves.

Your arguments suggest pinko, so, for the time being, that's what we'll stick with. You're a pinko, subject to some astounding surprise, like a rational argument or something in support of a proposition.



Oh, and frankly, if you were able to actually have an income in the top 3%, then any or all of several things are possible:
1) You've never actually *worked* in finance or economics, and you're probably a Keynesian.
2) One would expect that you'd have enough imagination to come up with a name, just because you'd want to differentiate your posts from any others.
3) You inherited it all, in which case you DO deserve to have your money taken away by your own argument. But that doesn't justify the theft of it from people who actually DO earn it for themselves.


lebowski:
From PEW Research

Dude, go read the link connected in my 12:38 post, and you might get why it is that that PEW research is, if not directly false, based on substantially misleading concepts, tailored to make an argument which doesn't hold water under close examination.

Actual Income, and, more critically, income-vs-household-size-vs-cost-of-living has been anything but stagnant for anytime in the last 25 years, and this is true of the whole of the bush admin, too. Up until the last couple months, we are all doing better now than we were 8 years ago.


"The middle class is disappearing" -- yeah, they're disappearing into the upper class.

 
At 10/09/2008 4:28 PM, Blogger notnidiot said...

OBloodyHell said... "we"

Who's we? What vote did you take to get the support of anyone?

Are you royalty? 'doubt it.
Do you have mutliple personalities?
I'd guess yes.

So far I have not expressed an opinion on tax policy. Period.

You have twice put words in my mouth and called me names.

The name calling has hurt my feelings. No really...no apology expected.

I'm still trying to figure out your initial rant. Your description of the personal effects of the mythical taxpayer puts him squarely in the 95%, not 1%. If you think I believe we should tax the 95% more, you're wrong (first opinion on tax policy).

I would appreciate you ignoring me.
Please. I'm obviously no match for your wit, wisdom and ability to call people names.

I can hardly wait to read your response, because I know that your
multiple personalities will prevent you from refraining.

You rock dude(s?)

 
At 10/09/2008 4:40 PM, Blogger OBloodyHell said...

> I do believe we need to make income taxes even more progressive. We need higher tax brackets. I think that is what Obama is advocating. We need this for the revenue.

Barkley, it's generally a given that the Laffer curve works.

Hence increasing taxes does NOT necessarily increase revenue. Decreasing taxes MAY NOT increase revenue, but, so far, we've noticed that the taxation level in the USA is sufficiently high that it ALWAYS does so. To the best of my knowledge, there has not yet been a tax cut in US history which did not, within the second year, increase revenues.

Mor critically, Obama has made public statements that class envy is at the heart of his call for tax cuts -- he thinks that whether it increases revenue or not does not matter.

Hence, you are mistaken as to why Obama wants tax cuts. I'm not going to hunt up a link, I think it's probably available with an easy search. Try "Obama Tax Cuts Class Warfare Envy" as a search term.

He has, however, made that statement even if you can't find it.

> I also believe that everyone with income should pay some income tax. Right now we have a system where many people pay no income tax at all. This robs them of dignity. It divorces them from the consequences of government spending. It makes them less a part of the community.
Everyone with income should pay some income tax.

Well, everyone does pay Social Security tax. As a matter of fact, the SS tax is structured so that poor black men pay for wealthy white women. Great design, huh?

That said, I tend to agree with you about everyone paying SOME taxes. But there's enough brackets as it is.

I'd consider voting for the Fair Tax *if and only if* it also absolutely repealed the Income Tax Constitutional Amendment (it doesn't, it only abolishees the IRS and the current tax code, while saying that the 16th should be repealed). If it does not do that, there is nothing stopping Congress from using some future emergency to impliment an "income tax, for the duration of the emergency", which will leave us with both in perpetuity.

 
At 10/09/2008 5:08 PM, Blogger notnidiot said...

Oh, and frankly, if you were able to actually have an income in the

top 3%
(what you don't?)

then any or all of several things are possible:
1) You've never actually *worked* in finance or economics, and you're probably a Keynesian.

(UCLA so, free market, Milton Friedman-style theories, oh and 22 years in publicly held and privately held company finance)

2) One would expect that you'd have enough imagination to come up with a name, just because you'd want to differentiate your posts from any others.

(registered as notnidiot)

3) You inherited it all, in which case you DO deserve to have your money taken away by your own argument. But that doesn't justify the theft of it from people who actually DO earn it for themselves.

(...I am of the 95%, must have worked even harder than your friends...and I intend on keeping it my money)

You described the Laffer curve as working...Keynes described the effect as well...

notnidiot (but you are)

 
At 10/09/2008 6:02 PM, Blogger like such as said...

notnidiot...

i like that.

 
At 10/09/2008 7:03 PM, Anonymous Norman said...

As someone else mentioned without Social Security and Medicare taxes (both the employee and the employer) the relative tax payments don't mean much as presented. We need a useable graphs on this subject and CARPE DIEM can do it.

I have seen other data that show using the Social Security cut-off income and the flattening of the marginal income tax rate above a certain level of income that the total marginal rate for tax payers actually stays flat at about 40% for all tax payers. I'd like to see verification of this.

No matter what political views any of us have the low income people are paying way too much in total taxes.

 
At 10/09/2008 7:10 PM, Anonymous qt said...

Boys, does it really have to get so personal. Testosterone levels are off the Rictor scale here. What is the harvest of scorched earth?

Shall we not return to the issues? Our personal finances are not relevant to this discussion. We are all from different backgrounds and our opinions are shaped by our experiences.

Count to ten and let us return to the substance of the post.

 
At 10/09/2008 7:40 PM, Anonymous Fred said...

qt,

Your no fun. I will concede that obloodyhell is so far ahead on points that there is less play value now.

 
At 10/09/2008 8:21 PM, Anonymous Anonymous said...

Looks like AnonyMouse's comment
"the rich got richer and the poor got poorer" has our Wall Street "greed is good" crowd worked up into a tizzy.

 
At 10/10/2008 2:37 AM, Blogger juandos said...

"I do believe we need to make income taxes even more progressive. We need higher tax brackets. I think that is what Obama is advocating. We need this for the revenue"...

Why barkley?

Why should one follow the idea of a known a pinko simp?

Here's a novel idea, why doesn't the government (federal, state & local government) back off of its 43% of the economy?

Maybe the money wasted on Constitutionally questionable entitlements should be reconsidered:

Right now, you are carrying a burden of about $175,000. That is each and every American's share of the US government's approximate $53 trillion in current obligations. And every year in which no down payments or reforms are made to these obligations, the total grows by $2 trillion to $3 trillion - or $6,600 to $10,000 per person - on autopilot

 
At 10/10/2008 9:40 AM, Anonymous qt said...

Fred,

Agree that OBH is far ahead. Just thought some of our anon. friends were getting a bit upset and perhaps, we needed to turn the temperature and the sarcasm down a bit.

Sorry to be a party pooper.

 
At 10/10/2008 12:20 PM, Blogger notnidiot said...

Personally, I was never upset. I have entered new neighborhoods before (like this blog), and have had the blog bully (OBH) or junkyard dog try to protect their sandbox, or fire hydrant. These little communities are always surprising. I wouldn't have expected to see so many vituperous
remarks in an 'intellectual' community. "Pinko", lol...grow up.

I didn't kick sand or use the fire hydrant. I also didn't let OBH put words in my mouth, and then trash me for something I didn't say.

If calling names and venomous rants puts OBH "far ahead", OBH is clearly ahead...I don't want to win that one.

I may or may not stay (regardless of your pleas to leave) in this silly inbred community.

CD offers a lot, with or without the comments area.

 
At 10/10/2008 1:06 PM, Blogger DB said...

Count to ten and let us return to the substance of the post.

I agree with qt. It's getting a little outta hand. More cogent and logical debate, fewer raspberries please. I DO love the passion in this forum, though.

 
At 10/10/2008 3:35 PM, Anonymous qt said...

Notnidiot,

I reread OBH's posts. There are some good arguments which tend to be obscurred by the over-the-top put-downs and insults.

Was a bit concerned about the choice of "notnidiot" as a blogname since it seemed as though the user identity was being shaped by the insult rather than being a positive expression of the user's identity. Guess I was reading more into that than there was.

The value of this blog is the variety of opinion and postings rather than the quality of invective. We can all let our anger get the better of us but it does not improve our reasoning or persuade others. We merely undercut our own case and create resistance to the ideas that we offer.

So much of our opinions and the things we value are shaped by different life experiences. I imagine that is why our thoughts and opinions are held so passionately.

 
At 10/21/2008 9:14 PM, Anonymous Anonymous said...

I found this link to the 2005 data regarding tax rates from the Congressional budget office.

http://www.cbo.gov/ftpdocs/88xx/doc8885/EffectiveTaxRates.shtml

It paints a somewhat different picture when you take into account the Effective Federal Tax rate that includes the payroll tax, excise tax, and social insurance. If I'm reading this correctly in 2005 the top 1% accounted for 28% (rounded) of all Federal taxes paid and the bottom 95% of taxpayers accounted for 56.2% of all Federal taxes paid. The percentages are much closer to each other if you focus only on the income tax which I think is what's being displayed in the chart for this post. I may be wrong about this comparison which is why I provided the link.

 

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