Numbers tell a different story of what constitutes fair share of taxes

Raymond Keating

Raymond Keating

It’s a presidential election season, so there’s a great deal of debate going on over taxes. Of late, the chatter has focused on who pays federal taxes — especially income taxes — and who doesn’t. So, let’s just simply go to the numbers and sort this out.

First, we consider total federal tax liabilities by household income levels.

The 2009 data is the latest from the Joint Committee on Taxation and shows what households in various income groups pay as a share of federal tax liability:

Bottom 20 percent — 0.3 percent

Second 20 percent — 3.8 percent.

Middle 20 percent — 9.4 percent.

Fourth 20 percent — 18.3 percent.

Top 20 percent — 67.9 percent.

Moreover, households in the top 10 percent pay 51.5 percent of the liability, while households in the top 1 percent pay 22.3 percent of the liability.

Those are pretty stunning numbers if you’ve never seen them before.

What really jumps out is that the bottom 40 percent of households in terms of income level pays only 4.1 percent of the federal tax liability. At the other end, the top 10 percent of households pay more than half, and the top 20 percent cover 67.9 percent of federal taxes.

Anyone saying that upper-income earners aren’t paying their fair share is playing politics and not looking at the hard numbers.

The story gets even starker if you focus on federal income tax liability.

Again, here’s what households in various income groups pay as a share of federal income tax liability:

Bottom 20 percent — negative 6.6 percent.

Second 20 percent — negative 3.5 percent.

Middle 20 percent — 2.7 percent.

Fourth 20 percent — 13.4 percent.

Top 20 percent — 94.1 percent.

Now, consider this: Households in the top 10 percent account for 78.2 percent of the liability, while those in the top 1 percent pay 38.7 percent.

Again, the breakdown is breathtaking. First, the bottom 40 percent of households not only pay nothing, but get money back — through the earned income tax credit, for example. Consequently, the top 60 percent of households in terms of income actually pay 110.2 percent of the federal income tax liability and the top 40 percent pay 107.5 percent of federal income taxes.

It’s also striking to note that the top 10 percent pay nearly 80 percent of federal income taxes and the top 1 percent fork over  nearly 40 percent of federal income taxes.

The point, once more, is clear: Class warfare on tax policy — claiming the rich don’t pay enough — is completely disconnected from reality.

In fact, it’s clear from these numbers that middle- and higher-income earners carry too much of the tax load in this nation. That creates a dangerous political dynamic for any nation in which lower-income earners who do not pay income taxes either don’t care or have an incentive to vote for politicians who seek to raise taxes on upper-income earners.

But that, of course, isn’t any good for anyone. Those upper-income earners overwhelmingly are business owners and investors who play key roles in driving the economy forward. That point must be understood, so that people at all income levels understand the economic reality that higher taxes on upper incomes means less risk taking, slower economic growth, reduced income growth and fewer jobs. Punishing upper-income earners with high taxes in no way helps lower-income earners find jobs and get ahead in life.


Raymond Keating is chief economist for the Small Business & Entrepreneurship Council. The nonpartisan, nonprofit advocacy, education and research organization works to protect small business and promote entrepreneurship. For additional information, log on to the website at
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Posted by on Oct 4 2012. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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  • TuckerMax

    No, it is not clear that the middle and upper classes carry too much burden. The ultra rich and rich carry no where near the load they did during Clinton-era. The rich still managed to get richer then. Same thing should go for now. And I’m sick of the ‘small-business’ councils dominating the narrative. You don’t make a goddamned thing here–you simply import it from China, mark it up, and hawk it to the public. TAX THOSE RICH BASTARDS.


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