What share of federal taxes do the rich pay?

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It is a commonly held belief that upper-income people pay too little in federal taxes, or that they pay no income taxes at all. An AP story noted a Pew Research poll that found:

A majority of adults (58%) say that upper-income people pay too little in federal taxes. One-in-four (26%) say upper-income people pay their fair share in taxes, and 8% say they pay too much in taxes. Even among those who consider themselves upper or upper-middle class, fully 52% say upper-income people pay too little. Only 10% of this group says upper-class adults say people pay too much in taxes.

What share of all federal taxes are paid by the top income quintile? (top 1%?)

How many households pay no federal income taxes? (how many of those earn +$200k)

user1873

Posted 2013-07-03T06:52:59.637

Reputation: 13 508

1The question is fine, but I don't understand equating it to people's perception of 'fair share'. – None – 2013-07-03T16:35:53.013

As it's worded, there's this implication that the answer addresses the 'fair share' question. It's a bit of a leading question in that sense. In addition, federal income tax is but one particular tax that would go into any debate about what 'fair share' means. I think it'd be a better question without that aspect of it. IMHO. – None – 2013-07-04T02:52:15.820

@DA., I think you are being overly picky. The title clearly asks for what share (doesn't ask for a value judgement), the bolded questions also don't ask about "fair share" but for hard data on the exact share that the rich (I never defined this, but used some standard measures of OWS, the 1% and highest quintile) Speaking of which, I should probably outline the cut-off point for the top 1/5th and 1%. This question isn't entirely (the zero federal income liability is only about that) about federal income taxes, but all federal taxes. I suppose I could include that information... – user1873 – 2013-07-04T05:17:10.463

I have it 25% sum no payroll/income liability, 18% neither , cut-off 1% about $350k

– user1873 – 2013-07-04T05:21:59.000

2Is there any reason the question (which does NOT ask anything subjective) is being heavily downvoted other than the answer is an uncomfortable political truth? – user4012 – 2013-07-05T16:35:48.223

@dvk I think it's a good question. I have it a -1 for introducing a completely subjective element of 'fair share' which is only going to lead to debate, rather than a concrete answer. – None – 2013-07-05T21:14:32.667

@DA. - sorry, that's just looking for an excuse to DV because it makes your favoured side's political position look bad. "Fair share" was introduced merely to explain why the question's answer has relevance to politics (and is a direct quote from a Pew poll); and has NOTHING to do with the actual questions (in bold) being asked - e.g. the question itself is 100% objective. – user4012 – 2013-07-06T09:56:37.190

And to emphasize DVK's quote: "and has NOTHING to do with the actual questions (in bold) being asked"--which is exactly my point. It has nothing to do with the actual question. – None – 2013-07-06T20:41:35.267

OK, due to my lack of ability to explain myself adequately in comments, let's try an example. Take a look at this question I posted and let me know if you have the same qualms as I do (I'd downvote it, but I can't downvote my own question) http://politics.stackexchange.com/questions/1672/what-share-of-federal-tax-breaks-do-the-rich-get

– None – 2013-07-06T20:58:10.447

@DA. - so far, nobody downvoted that question (I would have over including absolutely irrelevant poll, but since you openly admitted that the poll is irrelevant, I simply edited it out since without that irrelevant quote, the question is perfectly valid). – user4012 – 2013-07-08T00:47:03.610

@DVK and do you not agree that without the 'fair share' quote on THIS question, the question is perfectly valid? You even said it yourself that it has NOTHING to do with the actual questions. I'm confused as to why you edited the other question, but not this one. – None – 2013-07-08T01:11:58.140

@DA. - Pay attention please. I didn't edit out "fair share" from your other question. I edited out irrelevant poll, which didn't in any way have anything to do with tax breaks, only taxes paid. – user4012 – 2013-07-08T01:51:02.743

@dvk, so even though you admit that 'fair share' has nothing to do with this question, you consider my downvote somehow politically motivated? And on top of that, you don't see a connection between tax breaks and the amount of taxes paid? I'm trying to pay attention, really, but your logic is all over the place. – None – 2013-07-08T02:02:53.760

But to bring it back to this question, the quoted polls above have nothing to do with the question. They may have something to do with the perception of Fair Share, but the question has nothing to do with fair share. I really can't convince you, clearly. I do wish more folks would participate in this site. Maybe I'm the crazy one here. – None – 2013-07-08T02:06:17.807

Answers

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The rich pay the vast majority of all federal taxes

The non-partisan Tax Policy Center estimates that The top quintile pay 68.3% of all federal taxes (payroll, FICA, income, estate, capital-gains).

percent of all federal taxes by income quintile

This data matches the Congressional Budgets Offices estimates for 2009. The Table 2 (page 12) notes that the Top 1% paid 22.3% of all federal taxes.

The table on page 11 notes the progressive nature of federal income taxes. With the bottom-top quintiles paying an Effective Federal Tax Rate (EFTR) of 1%, 6.8%, 11.1%, 15.1%, and 23.2% respectively. The Top 1% pay and EFTR of 28.9%.

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46% of all households pay no federal income tax

Of the 76 million households that pay no federal income tax, only 110 thousand make $200,000 or more in income and pay no federal income taxes. This is roughly 1.5%-2.4% of all households with +$200k incomes, and about 0.1% of all zero liability filers.

user1873

Posted 2013-07-03T06:52:59.637

Reputation: 13 508

@ithisa There are policies that can be regressive in practice. Some countries like New Zealand exclude Capital Gains from taxable income, and the poor tend not to have Capital Gains. A study found that the USA can be seen as regressive https://www.washingtonpost.com/business/2019/10/08/first-time-history-us-billionaires-paid-lower-tax-rate-than-working-class-last-year/

– gmatht – 2020-03-17T06:04:11.847

Are these figures for tax actually paid or just the figure that it appears people should pay? – Lembik – 2014-11-22T07:52:27.767

@Lembik, these figures are taxes actually paid. The figures come from the Congressional Budget Office, from IRS individual income tax returns, payroll taxes, and excise taxes. – user1873 – 2014-11-22T08:13:34.240

1How does this compare to how much income each quintile has? – Andrew Grimm – 2013-07-03T23:35:18.453

My mind skipped over that word. It is already in the bar chart at the bottom, or if you want The chart it is in the CBO report (search Share of Income, page 10). Pg16 for before/after tax income as a share of the whole. – user1873 – 2013-07-04T05:01:42.053

1Whoops! And the bottom bar chart shows that tax grows as fast (actually, faster) as the amount of income. – Andrew Grimm – 2013-07-04T05:19:57.037

I don't think there exists any country in the world where the tax grows slower than the income. Even very non-progressive tax systems are at least flat percentage rate. – ithisa – 2013-07-06T00:40:19.870

Yes, I meant that there are no regressive tax systems. This implies that the percentage per quantile when graphed is at least linear, never drooping downwards. I was referring to Grimm's comment about "as fast as". – ithisa – 2013-07-06T01:40:44.473

1

This is rather a comment to the question than an answer (there is an answer already, and I could answer only for Germany, not for the US).

However, for Germany the claims are not unknown, either, and the asked numbers for 2011 are:

German income tax volumes for income categories

* I'm not sure what the total refers to, possibly it is the total of all federal taxes.

Source: German federal tax office data collection, table 2.2

Table 2.3 says that this covers the ca. 37 million tax payers (46% of inhabitans) another 27 million adults have 0 income tax (33 % of inhabitants). 17 million children (21% of inhabitants) are not considered for income tax.

So for political judgment, the numbers from the copied table should maybe be corrected by including the percentage of adults who are taxed at 0 €. (There are other detailed tables that make clear that the copied table refers to people actually paying taxes only)

Side note:

Even among those who consider themselves upper or upper-middle class, fully 52% say upper-income people pay too little. Only 10% of this group says upper-class adults say people pay too much in taxes.

Maybe that is less astonishing if read together with the table to Q 5 (asking the class) in the details of the survey: The "upper class" is composed of 90% who see themselves as upper middle class, and 10% who see themselves as upper class. Meaning that 90% of those counted as upper class do not consider themselves upper class.

I've seen numbers for Germany that suggest that there is a substantial gap between who is considered rich by "normal people" and who is considered rich by definition (political discussion). Here a politology prof says in an interview that his students (keep in mind that German universities have no tuition fees comparable to the US) name about 15000 €/month net as threshold for "income-rich", whereas the official wealth-and-poverty report uses a threshold of 3250 €/month net wage (rough estimate: 7500 €/month gross). So there is a gap of a factor of 4.5. That is comparably extreme, but this statistics shows the same trend (the lowest category in the diagram corresponds to the median income over the tax payers, i.e. people that contribute ca. 6 % of the total income tax volume (Wikipedia, Tax payer's federation). Both sources also say that a similar effect happens for low incomes: they do not perceive themselves as as low income percentile as they actually are. Seems to be same in Argentinia as well, where people from the lower decile perceive themselves as belonging to the 4th decile, while those from the 10th decile perceive themselves in the 6th.

Also this finding is IMHO less astonishing if read together with the income distribution (at least for Germany): if there are many people with income close to the median (or any other percentile of interest), a comparably low absolute difference makes a high difference in rank (percentile). Therefore, also a low absolute error in estimating other people's income (e.g. the median) will make a higher error in placing yourself into the correct category. Of course there may be also a bias due to wishful thinking: in societies where equality is considered good, you'd like yourself to be close to the normal person.

cbeleites unhappy with SX

Posted 2013-07-03T06:52:59.637

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