Chart: Distribution of the U.S. Income Tax Burden
(Source: Inspiration from the Tax Foundation; Data from the Internal Revenue Service)
Some interesting observations:
- The top 1% of taxpayers includes 1.4 million people compared to 134 million in the bottom 95%
- The share of taxes paid by the top 1% increased from 24.8% in 1991 to 37.4% in 2000
- “The Bush Tax Cuts for the Rich” lowered the share paid by the top 1% to a 2002 low of 33.7% (an 8.9% increase over 1991)
- By 2005 the tax burden of the top 1% was 39.4% which is 2.0% higher than the share before “The Bush Tax Cuts”
- In each of the last four years the top 1% of taxpayers have paid a higher share of total income taxes than before the demonized 2001 tax cut
- In 2007 the average member of the top 1% of taxpayers paid 97.4 times the taxes incurred by the average member of the bottom 95%
What is the Definition of “Fair Share”?
Some politicians assert that they just want the rich to pay their fair share of taxes. This begs the question of what is the fair share? Given that the rich (top 1%) have seen their percentage of the total burden increase almost linearly since 1991 from 24.8% to 40.4% in 2007, it seems reasonable that taxes may have reached or surpassed this level.
Is it possible that the “fair share” of taxes paid by the rich is actually a percentage that increases each year? If the ideal is not a perpetually rising figure, what is the optimal, terminal value of the "fair" tax burden imposed on the top 1% of taxpayers?
It should also be noted that IRS data (courtesy, again, of the Tax Foundation) has the top 1% earning only 22.8% of Adjusted Gross Income (AGI) -- and paying 40.4% of taxes.
In 1991, the top 1% earned only 13.0% of AGI but also paid only 24.8% of income.
Data can be found at: http://www.taxfoundation.org/news/show/250.html
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A good entry, but I wonder if the percentages shown don't necessarily support the "fair share" argument you make. Namely, couldn't the fact that the share of taxes paid by the top 1% has risen (and, correspondingly, that the share paid by the 99% has fallen) be at least partly attributable to the non-policy-driven economic trend that the top 1% has increasingly earned a greater percentage of all total income earned by wageearners than the bottom 99% during this time period? If this is true, perhaps a better metric to support the "fair share" argument would be the average tax rate levied on each group -- since such rates are arbitrarily assigned by law, they would eliminate the effect of this economic trend (Income Gap, Gordon Gekko, call it what you will), and better support the argument that the 1% continues to pay higher percentages of their incomes in taxes than do the 99%. I welcome your thoughts.
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Excellent observations.
I am not arguing that the top 1% is paying a higher percentage of their incomes, only observing that:
The following is the historical tax rate paid by the bottom 50% of taxpayers over the past 20 years.
50% of the population is paying a 3% income tax rate, while politicians propose raising taxes on the wealthy under the assertion that they don't pay their fair share of taxes.
(a surprising observation is that the tax rate on the bottom 50% of taxpayers rose throughout the Clinton Presidency and fell dramatically while George W. Bush was in office)
I would always expect the top 1% of wage earners to experience income gains at a rate in excess of inflation based on access to education, gainful employment by profitable, private-sector businesses, ownership of investment assets, etc... The bottom 95% obviously encompasses a large percentage of the total economy and would see income gains more closely correlated with inflation.
Based on an observation of the current tax trend, and qualified by ongoing political assertions, is it possible that "the rich" will eventually pay the entirety of the tax burden? If not, what is a "fair share" of the tax burden to be borne by the rich? If 1% of the population paying 40% of the taxes is not fair, then what should it be?
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