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The Daily Signal
How Much Do the
Top 1 Percent Pay of All Taxes?
Curtis Dubay
April 15, 2015
Ever since President Obama started running for president in 2007, there
has been a debate about how much tax rich Americans pay and whether
they should pay more.
In that ongoing debate, Paul Krugman and Matt Yglesias criticized a
Daily Signal chart because, according to them, it does not give a
complete picture of the tax burden borne by Americans because it only
includes the federal income tax.
Since the rich pay a higher share of federal income taxes than of total
federal taxes, they argued we were misleading by making it look like
the rich pay a higher share of taxes than they do.
We responded to them.
In those responses, we showed we weren’t being misleading because we
make plain the chart includes only federal income tax. Furthermore,
examining the federal income tax makes sense because President Obama
has long wanted to raise it on the rich.
We also agreed that it made sense to look at the total federal tax
burden, in addition to federal income taxes, to offer additional
context to the debate.
A new chart still shows the same story: Top earners pay a
disproportionately large share of the federal tax burden.
The top 10 percent pays 53.3 percent of all federal taxes. When looking
at just federal income taxes, they pay 68 percent of the burden.
The top 1 percent pays 24 percent of all federal taxes compared to 35
percent of all federal income taxes.
The data for total federal taxes comes from the Congressional Budget
Office. The data for federal income taxes comes from the IRS. Heritage
has not altered the data from either in any way, except to combine
income categories in the Congressional Budget Office data.
The respective sources use different breakpoints for income categories.
They also use different definitions of income. The Congressional Budget
Office’s is broader because it is market income, which includes more
government transfer payments than the IRS’s use of Adjusted Gross
Income. Nevertheless, comparing them is still a useful way to
understand who pays how much federal tax.
The top 10 percent and top 1 percent pay smaller shares of the tax
burden when looking at total federal taxes than federal income taxes
because the payroll tax, which accounts for more than a third of all
federal tax receipts, is more evenly distributed than the income tax.
But the corporate tax tempers that effect because it falls mostly (75
percent according to Congressional Budget Office) on shareholders, most
of whom earn higher incomes, although not all of them.
Neither chart makes a judgment on whether those top earners pay too
much or if they should pay more. The purpose of the original chart and
this one is simply to give the American people facts.
Given the information in the charts, people will have differing
opinions as to how the tax burden on the rich should change, or whether
it should change at all. But at least they will know the starting point
from which they are changing the distribution of the tax burden,
instead of thinking that high earners are not paying a large share of
the tax burden, as some have led them to believe in recent years.
See the charts at The Daily Signal
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