Should the rich pay more taxes?

by Grace

Top 20% of Earners Pay 84% of Income Tax

When people claim that the rich don’t pay their fair share of taxes, do they believe that top earners should pay 90% or more of taxes?

The bottom 40% of earners pay no taxes, and actually pay negative income taxes through government transfer payments.

Why is the share of income taxes negative for 40% of Americans? In recent decades Congress has chosen to funnel important benefits for lower-income earners through the income tax rather than other channels. Some of these benefits, such as the Earned Income Tax Credit and the American Opportunity Credit for education, make cash payments to people who don’t owe income tax.


The top 1% of earners pay “nearly half the income tax”.

20150413.COCIncomeTaxesTop20Earners1


The average tax rate for those earning more than $1 million is 27.4%.

20150413.COCIncomeTaxesRatesByIncomeGroup1

Professor Mark Perry says we should “thank top 20% for shouldering 84% of the income tax burden”.  So are the top earners villains or heroes?

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Laura Saunders, “Top 20% of Earners Pay 84% of Income Tax”, Wall Street Journal, April 10, 2015.

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9 Comments to “Should the rich pay more taxes?”

  1. No one is claiming that the rich “pay all the taxes”, just most of them. (The top earning 20% of families pay about 51% of payroll taxes.) Even with payroll and other taxes, the system is still progressive, but I know many advocate for higher taxes on the rich, even some Republicans!

    http://taxfoundation.org/blog/how-much-do-people-pay-taxes

    http://www.treasury.gov/resource-center/tax-policy/Documents/Analysis-and-Research-Distribution-Tax-Burden-Current-Law-2015.pdf

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  2. All the data that Grace pointed to ignore the fact that the rich have many more ways of hiding their income (in corporations, for example, with funds stashed overseas). The ability of extremely wealthy corporations like Apple to get away with paying almost no taxes is an even bigger problem than historically low taxation rates on the wealthy.

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  3. Yes, so many ways to escape taxation. I favor a simplified flat tax, but that’s almost politically impossible.

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  4. Focusing on Income Tax alone borders on propaganda and doesn’t belong in this blog. Most studies on effective overall tax rate have little difference (sadly?) among the deciles.

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  5. Overall federal tax rates, including income & payroll, range from -8.5 for the lowest decile of earners to 27.5% for the highest decile according to the US Treasury Dept.
    http://www.treasury.gov/resource-center/tax-policy/Documents/Analysis-and-Research-Distribution-Tax-Burden-Current-Law-2015.pdf

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  6. You didn’t include state and city taxes. Sales tax is a big deal to poor people for example. Again, the OVERALL Tax rate is what matters. States (eg TX) without income taxes are fairly regressive. Of course, one can argue for a flat tax because of efficiency and fairness, but please don’t state that wealthy US citizens are overtaxed – just ain’t so.

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  7. Even with state and city taxes added on, let’s say approximately 11% for lowest quartile to 7% for highest, overall taxes are still progressive.
    http://www.itep.org/pdf/whopaysreport.pdf

    I have not argued that the rich are overtaxed, but I would argue that they pay their fair share. Of course, with our convoluted tax system, too many get away with paying very little. That would not happen with a flat system, modified to allow for very low earners.

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