The rich don’t pay taxes? Really?

Key Findings

  • In 2019, taxpayers filed 148.3 million tax returns, reported earning nearly $11.9 trillion in adjusted gross income, and paid $1.6 trillion in individual income taxes.
  • The top 1 percent of taxpayers paid a 25.6 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).
  • The share of reported income earned by the top 1 percent of taxpayers fell to 20.1 percent from 20.9 percent in 2018. The top 1 percent’s share of federal individual income taxes paid fell to 38.8 percent from 40.1 percent.
  • The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
  • The top 1 percent paid a greater share of individual income taxes (38.8 percent) than the bottom 90 percent combined (29.2 percent).
  • The Tax Cuts and Jobs Act reduced average tax rates across income groups.
The Tax Foundation 2022

Yeah, they do and this country runs on what a minority of citizens pay in taxes.

But what about payroll taxes? Well, they are dedicated to paying benefits directly to those individuals paying those taxes. Social Security provides greater benefits proportionally to lower income. While not directly related to Medicare, low income people generally use more health care.

The idea that the “rich,” “wealthy,” “1%,” should carry the tax burden is seriously flawed. Everyone must carry the burden, the obligations, pay toward what they want government to provide. Perhaps that’s why a VAT is often used in other countries.

8 comments

  1. The biggest lie is that employment taxes – Social Security and Medicare – are regressive. The only thing more regressive than the taxes themselves are the benefits they fund. Everytime folks put forward this “tax the rich” or the “rich don’t pay enough in taxes”, someone needs to say that “rich” is “wealth” not “income”; and importantly, the US Constitution does not permit wealth taxation.

    With respect to progressive/regressive and employment taxes, here it is one more time, updated for 2023!

    The bend points in the Social Security formula ensure that the benefits are wildly disproportionate to the taxes individuals pay. For those reaching age 62 in 2023, the bend points on average indexed monthly earnings are:
    (a) 90 percent of the first $1,115 of his/her average indexed monthly earnings, plus
    (b) 32 percent of his/her average indexed monthly earnings over $1,115 and through $6,721, plus
    (c) 15 percent of his/her average indexed monthly earnings over $6,721.

    Today, the maximum Social Security tax (FICA) is: 6.2% of the first $160,200 or $9,932.40, $19,864.80 when including the employer contribution. Someone who earned the maximum during the past 35 years (1988 – 2022) would have an AIME of $12,410.36, and a SSPIA @ SS Full Retirement Age of $3,650.82. Keep in mind that almost all of that benefit will be taxable income.

    Had she paid the maximum fica tax over a 50 year working career (as some have), that would have been $418,307.65 (employee, all on an after-tax basis), $836,615.30 (total). The Social Security indexation averages out to 4.3% per year for the last 50 years.

    For Medicare, someone turning age 65 this year who started working in 1978, could have non-contributory Hospital Insurance (and would likely be dual eligible under Medicaid and have no monthly premium, no deductible, etc. for Part A, B and D coverage), after having paid as little in taxes as $181 (40 quarters, during the period 1978 – 1987)!

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  2. “…this country runs on what a minority of citizens pay in taxes.”

    A minority of citizens receive most of the income. And control most of the wealth.
    “The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.”

    Butt…

    The top 50 percent “earned” 88.5 percent of total adjusted gross income. The bottom 50 percent earned 11.5 percent.

    The bottom 20 percent earns just 5 percent.

    Nobody is asking Elon Musk and Warren Buffet to foot the whole bill, but the current inequality is not natural, and not healthy.

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  3. You have to tax the rich, cause that where the money is.

    “If you ever took a college economics class, there’s a strong likelihood that you were instructed that because poor people value a dollar more at the margin than do wealthy people, it follows that when the government imposes “progressive” income taxes, it raises the overall level of utility. The rich don’t miss the money taxed away from them as much as the poor value the money they’ll get through governmental redistribution. Therefore, redistributive tax policies are good.”

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  4. In 2019, 43.9% of households paid no income tax. By 2020, that number increased to 61% paying nothing probably due to loss of income from the lockdowns. Somebody must be paying the income tax and I am sure that those 43.9% were not in the 1% but most likely the working poor and the lower middle class aided by child tax credits.

    If they got rid of the income for a VAT tax, I might consider it. It could be the closest thing to a flat tax as you can get. Although after just completing another road trip, the thirst for my money is unbelievable. Beside state and local sale tax, there is hotel taxes, resort taxes, and other fees that added up to almost 1/3 of the hotel room. It is as bad as a phone or cable bill with all the governmental fees and taxes piled on. I don’t know if a VAT would covered it all or just be another tax on the pile.

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    1. I would rather go for a sales tax maintaining something progressiveness by exempting food, medicine and shelter. A national sales tax would force those in the underground economy (those off the books or dealing drugs for instance) to contribute.

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  5. VAT sends a shiver down my spine also. I was working in England when they introduced the VAT. It started at 13% and is now in the 20s. Instantly after its introduction, the UK went into a recession, the unemployed workers hit an all time record at that time. It’s been worse since, but it was a record number then. I hope we never have a VAT. It would be paradise for lawmakers.

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  6. The income tax is an “income tax” and not a head count tax so that is why high earners pay more. The bean counters weren’t stupid when they extolled the progressive income tax as the way forward. The income is in the top 10 percent and that is where the tax hits hardest.
    I do believe everyone should have some skin in the game but you can’t get enough revenue from the bottom half to make much difference in the collection plate. Just an aside, but you do realize where the largest concentration of democratic voters is when talking about bottom 50% of taxpayers, don’t you?

    A vat tax sends shivers down my spine but is probably next up for consideration.

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