Monday, August 3, 2009

tax burden of top 1% now exceeds that of bottom 95%

From the Tax Foundation's Tax Policy Blog:

Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the "rich" are not paying their fair share of taxes.

Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.

Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.

To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.

Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.

We are definitely overdue for some honesty in the debate over the progressivity of the nation's tax burden before lawmakers enact any new taxes to pay for expanded health care. [Found here.]

There's lots a data to dig into here if you are one of those weird people that actually enjoys fact-based policy discussions.

I gotta admit it, I love this stuff. I love to dig into the numbers and finding out that while the top 1% of taxpayers pay about 40% of taxes, the top 1/10th of 1% pay about half of that. BTW, to make the top 1/10th of 1% in 2007 you had to earn over 2.16 million. To be in the top 1% took an income level of at least 410,000. If you earned over $33,000 you were in the top 50% (Table 7).

The federal income tax is progressive in that higher income groups pay a larger proportion of income taxes. In 2007 the top 1% earned 22.8% of income but paid 40.4% of all income taxes. The bottom 50% had 12.3% of total income but paid less than 3% of all income taxes (Tables 5 & 6).

Be blessed!

P.S. The higher share of taxes paid by the rich is the result of both higher tax rates and changes in the distribution of income.

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