Saturday, September 23, 2006

"Tax Hike" for the Rich

The Joint Economic Committee (JEC) of Congress just released its annual report on the share of total personal income taxes paid in 2004 (most recent year available) by different income groups (percentiles) on Friday. The report is titled "Top Half of Taxpayers Pay Highest Tax Share in Decades."

The share of income taxes paid by the top 50% of taxpayers reached its highest level in decades - the top 50% paid 96.70% of the individual income taxes paid in 2004, compared to 86.05% in 1949, 89.35% in 1959, 90.27% in 1969, and 96.54% in 2003. The share of income taxes paid by the bottom 50% declined from 3.46% in 2003 to 3.30% in 2004. (In 1949 the income tax burden of the bottom half was 13.95%!)

The top 1% paid 36.89% of 2004 income taxes, compared to 34.27% in 2003, 33.71% in 2002 and 33.89% in 2001.

According to JEC Chairman Jim Saxton:

The new IRS data confirm once again that the tax burden is disproportionately borne by taxpayers in the top half. These tax data should be at the center of any future debate about tax policy. Unfortunately, a lot of discussion of tax policy is conducted without any reference to the shares of taxes actually paid by various income groups. As I have stressed for many years, the tax shares already paid by various income groups largely determine the distributional outcomes of most major tax changes, not the tax rate structure of the legislation itself.

Income Percentiles

Income Thresholds

Percentage of Personal Income Tax Paid

Top 1%



Top 5%



Top 10%



Top 25%



Top 50%



Bottom 50%

< $30,122


Source: IRS (Tax Year 2004)

I think if you asked the general public two questions:

1. Is a household with two income earners that reported an annual household income of $99,000 in 2004 part of the group that you would describe as "the rich"?

2. Would you consider the top 10% of American households (by income) part of the group you would describe as "the rich."

I suspect that most people would answer NO to the first question (they would think of that household income as "middle class") and YES to the second question, even though those two groups are exactly the same households!

Note that in 2004, the average weekly manufacturing wage in Flint, Michigan was about $1400 per week, or about $70,000 per year. Therefore, even the average manufacturing worker would be in the top "richest" 20% (approximately), some would likely be in the top 10%.


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