The Wealthy Pay All of the Taxes? Humbug!

Once again the argument has surfaced that the wealthy are shouldering an unfair tax burden.

The Wealthy Pay All of the Taxes? Humbug! Photo (cc) by Philip Taylor PT

As the rich get richer, the poor get poorer. So, who pays all the taxes?

A recent report from CNBC says that “when it comes to individual income taxes, the top 40 percent of wage earners in America pay 106 percent of the taxes. The bottom 40 percent … pay negative 9 percent.” These figures were calculated by the Congressional Budget Office using data from 2010 and released in a report on federal income tax distribution among U.S. households.

CNBC further explains:

How does someone pay negative taxes? The CBO’s formula offsets whatever taxes are paid with “refundable tax credits.” Some of these are due to “government transfers” of money back to the taxpayer in the form of Social Security and food stamps.

From this data, it’s fair to assume that the rich carry the tax burden, while it’s smooth sailing for the lower-wage earners.

But what about all of the other taxes collected by the government?

“Rich people do pay a lot more taxes than poor people, both in absolute terms and as a percentage of income. But the rich are not paying all the taxes. And looking just at the federal personal income tax and trying to draw conclusions about who pays taxes will lead you to wrong answers,” says Josh Barro of Business Insider.

All wage earners must pay a number of other taxes. Barro notes that payroll tax (for Social Security and Medicare), state income tax, sales tax, property tax and excise taxes should not be excluded from the equation. The poorest 20 percent of households, which generate only $11,000 of annual income on average, pay 13 percent of their total incomes in taxes.

Other highlights from Business Insider’s report include:

  • The wealthiest 1 percent pay 43 percent of their total incomes in taxes.
  • The middle quintile of earners pays 25 percent of total income in taxes.

How do you feel about the distribution of taxes? Is the tax code truly progressive? Comment below or on our Facebook page.

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