Every year the IRS releases information concerning tax collections based on the income categories of taxpayers. This is important because these numbers represent actual collections. These are the raw numbers, before they have been massaged in any way. There are no assumptions in these numbers that would add bias. The information shows:
• The top-earning 1% of taxpayers earned 20% of the income
• The top-earning 1% of taxpayers paid 38% of taxes collected. That’s almost double their share, based upon income.
The following is reprinted with permission from John Gaver of www.ActionAmerica.org The original article may be found here: http://ActionAmerica.org/taxecon/irsdata.shtml The data files referenced in this article are typically posted by the IRS, with little or no fanfare and no links to them, making this data very difficult to find.
Because of this fact, ActionAmerica.org prides itself in being the first political commentary or news entity to find and publicize this data every year, usually within minutes of its publication. The numbers in the table in the link:
are broken down by descending income categories, so this tells us which income groups actually paid what portion of the tax that was actually collected after all tax breaks and exemptions were applied.
It should also be noted that when talking about the top 1% of income earners we are actually only talking about roughly one half of one percent (0.5%) of the adult population. When talking about the top 5% of income earners we are actually only talking about roughly 2.5% of the adult population.
Two issues contribute to this difference. First, approximately 47% of Americans pay no federal personal income tax at all or have all of their taxes refunded or rebated. Many even receive rebates for taxes that they never paid. Secondly, when you lump an additional estimated 13-20 million illegal aliens into the mix, almost none of whom pay income tax, it means that more than half of the adult population pays no federal personal income tax whatsoever.
If nothing else, these numbers shatter the popular liberal myth that “there are so many loopholes in the tax code for the rich that the rich don’t pay their share of the tax load.”
In 2008 the top-earning 1% of taxpayers earned 20.0% of the income and paid 38.02% of the tax collected — or almost double their share, based upon income earned. In the table taxtable is the summary of the IRS data for 2008, the latest year available.
The table shows clearly that those with the highest incomes pay far more than their share of the tax load. But what’s worse is that prior years’ collections data shows that since 1995 the top 1% and top 5% of taxpayers have seen a steady increase in the percentage of taxes collected from them.
To be fair, in 2001 there was a 3.5% drop in the percentage of total taxes paid by the top 1%, which remained virtually unchanged in 2002. There was also a 2% drop in the percentage of total taxes paid by the top 1% in 2008. But that said, each of those drops in the percentage of total taxes paid by the top 1% corresponded to an almost identical drop in the percentage of the total adjusted gross income earned by that group in the same year. In other words, those drops had nothing to do with changes in the tax code or marginal tax rates, but were caused by a decrease in earnings among top earners.
One of the key factors you won’t see reported by most of the media is that the percentage of the tax load paid by the top 1% of income earners has continued to climb rather steadily since the early 90’s (including after the Bush tax cuts) with only a few minor dips related to downturns in the economy. The ratio of income earned to taxes paid by the wealthy trended down in 1997, 1998, 1999 and 2000 during the Clinton administration but trended up again in 2001 (after Bush, Jr. took office), peaking at 2.09 times their share in 2002. The ratio of income earned to taxes paid by the top 1% of income earners didn’t drop below double their share till 2004, when it was 1.94 times their share. It was 1.86 times their share in 2005, 1.81 times their share in 2006 and 1.77 times their share in 2007, which is still higher than when Bush took office. In other words, the Bush tax cuts did not help the top income earners even a little bit. In fact, every year since Bush took office, until 2007, the top earners paid a greater percentage of tax relative to income than the 1.80 times their share in 2000 when he took office. But even in 2007, the wealthiest 1% of income earners were only paying three hundredth of a percent less of the tax load than when Bush took office. In other words, the wealthiest taxpayers paid less of the tax load under Clinton than under Bush.
It might be argued that since the top-earning 1% averaged a lower tax rate in 2003 through 2005 than in 2002, this top group got a break in 2003 through 2005. However, that apparent break is offset by the fact that tax rates were down across the board in 2003 and remained low in 2004.
Furthermore, the top income earners actually paid roughly the same percentage of the total tax load in 2003 as they did in 2002, and they continued to pay an increasingly higher percentage of the total tax load each year until 2008, when their income levels dropped as well (34.27% of the tax load in 2003, 36.89% in 2004, 39.38% in 2005, 39,89% in 2006, 40.42% in 2007 and finally dropping along with their income, to 38.02% in 2008).
In fact, the most relevant benchmark of tax load is the ratio of percent of total income earned to the percent of total tax paid by each income group. Consider that 2005 was the first year since 2001 (which was the first year that Bush, Jr. could have affected) that this ratio has been lower than the highest point of the previous four years (Clinton’s last term). Considering that lower percentages mean the rich pay less percentage of taxes, here are the actual number from the IRS collections data, which shows that the top earners paid less of the tax load, based on income earned, under Clinton than under Bush Jr.:
• 1997=1.91%
• 1998=1.88%
• 1999=1.85%
• 2000=1.80% (The last year Clinton could have affected taxes)
• 2001=1.93% (First year that Bush could have affected taxes)
• 2002=2.09%
• 2003=2.04%
• 2004=1.94%
• 2005=1.86%
• 2006=1.81%
• 2007=1.77%
• 2008= 1.90% (Last year that Bush could have affected taxes)
As you can see, the percentage of total tax paid with regard to the percentage of total income earned by the wealthiest one percentile of income earners was actually trending down in the four years preceding Bush’s election to his first term and immediately jumped back up in 2001. Only in 2007 did that ratio move down to just barely below where it was when he took office, but it jumped back up again significantly in 2008.
Now think back to the best economy that we have seen in the last 30 years. During the time that President Reagan was in office the economy was booming. The top income earners were paying in the range of 25% of the total tax load, and still that was far more than their share based upon income. With more after-tax money to spend, the wealthy invested it and created tons of jobs that in turn, spurred the best economic conditions that we have seen since Kennedy cut taxes.
Today those people who pay most of the taxes are the ones who are being punished by our tax system, and many of them are doing the only legal thing that they can to defend against this increasing assault on wealth. They are leaving. Our government is forcing those who pay the bills to take their money and leave.
If a large part of the 1.4 million taxpayers that make up the top 1% were to leave, that would mean a loss of over one-third of our tax base.
Well, guess what. Those people are leaving in quite significant numbers.
On April 25, 2010, the New York Times published an article titled, “More American Expatriates Give Up Citizenship.” It said that more and more Americans who live abroad have been turning in their passports, due in part to rising US taxes and laws that punish wealth. The number of official renunciations in the last quarter of 2009 was more than all of 2007 and 2008 combined. But those are just people who actually went to the effort of turning in their passports. Many more Americans just take their money and leave; never, as they say, “telling the jailer that they have gone.” The Bureau of the Census estimated that in 2005 over 350,000 US citizens and permanent residents quietly left the US permanently. But a series of Zogby polls between 2005 and 2007 indicate that the numbers are much higher. Zogby estimates the number of Americans permanently leaving the US to be more than 3 million each and every year.
How many of those expats do you think are poor? The people who pay most of the taxes are the ones who are leaving. It is not the poor who our tax system is punishing — it’s the wealthy, and they are the ones who can afford to live anywhere they want. Increasingly they are the ones who can’t afford to stay. At the same time the poor come streaming across our unprotected southern border with their hands out and pay little or no tax. So the most important question is: Who is going to make up the difference in taxes after the wealthy leave?
For a more thorough examination of this often-overlooked economic threat, see the annually updated Action America feature article “The Economy Bomb — Ticking Down Faster” at www.actionamerica.org/taxecon/ticktick.shtml
This article appeared in the January, 2011 PAPER SOURCE JOURNAL. For subscription information: https://papersourceonline.com/paper-source-journal/infosubscribe/
1) This is only about income tax, which is 42% of federal revenue. Everyone, even the unemployed pay other taxes.
2) The 47% number is from 2009 when the stimulus package gave one time refunds to low incomes, this inflated the number.
3) Most of these people don’t have much to give so taxing them more is no substitute for taxing the rich more.
4) I think this is the most important point and it’s a shame few people picked up on it. The 47% number is about NET payment. Here’s the thing: on average NOBODY pays net taxes because the deficit is larger than the foreign aid budget and interest payments to foreign debtors combined! If you’re gonna look at net payments then you also have to look at the exemptions, refunds and subsidies the rich and corporations get, not to mention the fact that every time the government buys a new road or jet fighter a lot of that money will find its way to wealthy executives and shareholders (who own the corporations doing the work). There is every reason to believe the rich and corporations also pay no net taxes, or very little.
It’s all standard republican/conservative retoric and as usual it’s a lie. A lie by, for and of people who don’t know basic math and logic.
John Doe is doing a very poor job of putting a spin on the facts presented in this article. The problem for him and other soak-the-rich advocates is that the data on which this article is based is the RAW IRS data, before before the tax and spend crowd has been able to massage it, in any way.
It’s the kind of data that they try their best to keep from public view. Then, when these facts do get out, they go to great lengths to try to spin the facts out of existence. But facts are stubborn things. Once they get out, they’re like a genie that you can’t get back in the bottle. To put it another way, “Facts trump spin.”
Let’s address the spin presented by Mr. Doe (whatever his real name is).
1) He starts by bringing up a straw-man argument (a fact that has nothing to do with the issue at hand). He points out that personal income tax represents only 42% of taxes collected. Although his number is roughly correct, it’s completely immaterial in the context of this article. Look at the conclusion of the article – the last few paragraphs. The article talks specifically about “PERSONAL” income tax, because of the effect that it is having on personal expatriation of our wealthiest taxpayers – the people who pay almost 70% of all personal income tax. Every time one of them leaves, everyone else has to make up the difference.
2) He follows the first straw-man argument with another straw-man argument. He points out that the 47% number comes from 2009, when the one-time stimulus added to the number of those who don’t pay any tax. But as with such straw-man arguments, he had to stop there, without telling us how much difference it made. In fact, the difference was nominal, since the vast majority of those who received the stimulus money didn’t pay any tax BEFORE they received the stimulus money. In fact, in 2007, those not paying any income tax was 45% (big difference, huh?). I couldn’t find numbers for 2008. But let’s look at where we are today. According to the non-partisan Tax Policy Center, 46% will either pay no taxes in 2011 or get 100% (or more) of their taxes rebated. So whether it’s 45%, 46%, or 47%, the whole point is that typically, almost half of adult US citizens will effectively pay no personal income tax, whatsoever and many will get rebates for taxes that they never paid. Then add in 20 million illegal aliens that pay no personal income tax and the number climbs to over half of all adults residing in the USA, legally or illegally.
3) Next he ignores the whole point of the article – that over-taxing the rich is driving those who pay almost all of our personal income tax out of IRS jurisdiction – and simply states that since the poor can’t afford to pay tax, then the rich should be taxed more. He of course ignores the logical option of cutting taxes for everyone, including the rich and making deep spending cuts, to match, since that doesn’t fit his tax and spend agenda. If we keep punishing those who pay almost all of our personal income tax, for their success, then they will leave and John Doe will suddenly find that his taxes will be forced up, to make up the difference. Well, there will be one other option. The government can ask the Fed to create more money out of thin air. The tax and spend crowd just can’t fathom the hole that they are digging this nation into.
4) Finally, he bestows upon us yet another straw-man argument. This one is actually composed of several irrelevant arguments.
First he talks about the deficit and its relation to NET taxes. But the rich are concerned primarily with what’s coming out of their bank account. Sure, the deficit is on their mind. But if anything, the deficit is adding to their incentive to take their wealth and leave for countries that appreciate the jobs that their wealth creates.
Then, without losing a beat, he talks about exemptions, refunds and subsidies that are received by the rich and corporations. Of course, as you can see by his bringing corporations into this, he is trying to spin away from the subject of this article – personal wealth expatriation. But let’s assume that he just got carried away and meant to focus on personal exemptions and refunds. It’s still spin. That because the IRS data, on which this article is based, is the RAW COLLECTIONS data, AFTER ALL REFUNDS AND EXEMPTIONS HAVE BEEN TAKEN. It’s what was actually paid.
Then his argument devolves into the meaningless hyperbole to which every liberal argument eventually sinks – “The corporations are the root of all evil”. I’m actually surprised that he actually mentioned the stockholders. It was probably a typo. After all, if he has a 401K, then he is probably a stockholder in several of those “evil” corporations. He also makes the totally disprovable claim that most corporations don’t pay tax. In fact, his opening statement, about personal income tax representing on 42% of taxes collected is drawn from evidence that the corporations pay huge amounts of tax. A very few find ways around paying a lot of tax. But most pay huge amounts of tax. But liberals never let the facts get in the way of their agenda. The corporations make lots of money, so they must be evil.
Once again, FACTS trump spin.
Nice to spin statistics, but only fools think that the rich pay their fair share.
Warren Buffett and the hundreds of other millionaire know a lot more than you the author of this inaccurate information blog, and want to pay their fair share.
Dave,
you may or may not be a foolish yourself, but you most certainly qualify as someone who makes igorant statements!
Please respond and explain, was your previous statement written because you are completely incapable of perfoming and confirming research on your own and therefore unable to verify the information stated above, or are you so utterly unwilling to consider that your beliefs and actions may be culpible as a conspirator, in perpetrating theft, through the redistribution of income in the form of ever higher taxation on the more productive members of our society?
You sound as if you feel the same as most far left wing liberals, and would like to abandon personal acheivement, and accountability and instead be eternally compassionate and completely fair, to assure every individual in America who does not produce the size income they are pleased with, should be taken care of by the Federal Government no matter what there production or output toward their own success!
Is it your belief that we should share everything equally, no matter what type of work and commitment was required to produce the things of value in our society?
Should all students, in all levels of our education system, receive a C as their grade for every assignment, regardless of the different levels of the work, or effort expended to complete each assignment?
In Conclusion, Warren Buffett is not restricted by any laws from paying a larger amount of taxes than he is required to pay under the current tax code; however, to this date, there is no information available which would prove that he has ever paid a larger amount than the tax code has required!
We need to go to a flat tax. We need to pay 10% of gross. If you goss $10.00 your pay .10 cents. If you make $1,000 you pay $100 and if you make 1,000,000 you pay $100,000. Now who is paying more, it is equal to the pay you get.
Yes, and if 33% of all income tax imakes up only around 2% of the top 1% s income, then adding the other 98% means the wealthy earns equivalent to 1617% of the total US income tax. This wealth is unprecedented. Hardly “punishing” them to increase taxes.
What we need to do is teach math. Try again. You got 1 out of 3 right. You fail, sorry dude.