According to the Tax Foundation, the Top 50 Percent of Earners Pay 97.2 Percent of All Income Tax
A new report from the Tax Foundation shows that the top 50 percent of earners pay 97.2 percent of all individual income tax.
While this doesn’t come as a shock, it does confirm that America’s progressive income tax structure is working as designed—contrary to what many liberals claim (misinformation is seemingly their raison d’être).
The report analyzed the most recent comprehensive data-set available from the Internal Revenue Service by splitting taxpayers according their income distribution. Anyone making more than $39,275 in adjusted gross income fell into the top half, while anyone making lower than this fell into the bottom.
In terms of tax burdens, they found that the top half paid some 97.2 percent of all individual income taxes, while the bottom half paid just 2.8 percent of these taxes.
Additionally, the top 1 percent of taxpayers—those earning an adjusted gross income of $480,930 or more—paid 39 percent of individual income taxes, while the bottom 90 percent paid 29.4 percent.
But of course, America’s income distribution follows a power law, meaning that we would expect the top to pay the majority of the taxes simply because they make most of the money. Therefore, without comparison to the income distribution, this tax data is meaningless.
According to income data compiled by Statista ,the bottom 20 percent of Americans earned some 3.1 percent of all income in 2016, while the next 20 percent earned 8.3 percent:
When compared to the income tax data, it’s clear that America’s tax system is indeed progressive—the poor should be paying far more in tax than they do, if a flat tax was in place. This is born out in the effective tax rates paid by individuals: top earners paid an effective rate of 27.1 percent, while the bottom 50 percent paid an average rate of 3.6 percent.
And of course, this doesn’t take into account the tax cuts yet to be reaped from President Trump’s Tax Cuts and Jobs Act.
Although the data is encouraging, it does leave out one critical detail: many government services require user fees, which are not included in the tax burden: for example, registering your motor vehicle, renewing your driver’s license etc. While these costs are insignificant to the rich, they can eat up a large chunk of a working class family’s income. And because they’re a per head fee, they fall disproportionately on the middle and working classes.
Likewise, this analysis doesn’t include a discussion of sales taxes, which also fall disproportionately on the poor, by virtue of a far higher percent of their income is spent on consumer goods.
Including these into the analysis would doubtlessly shift the numbers around a bit, but there’s no question that when it comes to income tax, America’s rich indeed pay their “fair share”.