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Are the rich taxed too much? or too little?

November 10, 2011 | Filed under: Commentary and tagged with: 1%, federal taxes, tax quintiles, total taxes

I posted some numbers about a week ago on taxes, income, and wealth, and I’d like to follow up with the questions asked in the title, “Are the rich taxed too much or too little?”
If we look at Federal Income Taxes, the top 1% of income earners pay a portion of federal income taxes (34.3%) at about double their portion of income (16.9%).  For the top 5% and the top 10%, the story is similar, if less extreme. On the face of it, the wealthy pay a disproportionate share of the income taxes.
If we look at total federal taxes, not just income taxes, we see for the top 1% a similar, if much less extreme story. The top 1% of income earners pay 25.6% of all federal taxes (remembering that they earn about 17% of all income). Meanwhile, the top 5% pay 43% of the taxes while making 31% of the income. The top 10% pay 55% of taxes while making 43% of the income. That leaves the bottom 90% earning 57% of the income and paying 46% of the taxes. If we consider all federal taxes instead of  just income taxes, the rates at which individuals in different income brackets pay seem less pronounced.
If we look at wealth, instead of income, and correlate it with taxes paid (even though we pay taxes on income and not on wealth), we see the top 1% holding 33% of the wealth and paying 40% of income taxes (using the year 2006 instead of 2010 as above). Still progressive, but modestly so. The top 10% hold 70% of the wealth and paid 71% of taxes, very flat. This leaves the bottom 90% holding 30% of the wealth and paying 29% of the taxes; again, very flat.
If we look at total taxes paid, including state and local as well as federal, we see something approaching very close to a flat tax. The top 1%, top 5%, top 10%, and top 20% all pay just about 30% of their income in taxes; the next 20% pay 29%. The bottom 3 quintiles pay 25%, 20%, and 16% of their income in taxes.
So, do the rich pay too much? or too little? While certain commentators like to point exclusively to the income tax when making the point that the wealthy carry the tax burden, if we look at the total tax picture, I think most Americans would agree that the wealthy certainly pay no more than their fair share.

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Written by Jacob Jefferson Jakes

← Tax you, tax me
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