Study: Top 20 Percent of Income Households Pay 87 Percent Of Taxes

160px-IRS.svgThe Joint Committee on Taxation in Congress has issued a new report on tax burdens across the United States.  The Committee used data from the Tax Policy Center and divided the public into five income groups.  What they found was that the top 20 percent of earners paid 87 percent of the taxes in the country.  The remaining 80 percent covered 13 percent of the burden.  The data could challenge the common mantra of politicians that the top earners do not pay their fair share.  Though the concentration of wealth should be considered (and a recent study found that one percent of the world’s wealthiest individuals control two-thirds of the world’s wealth), the figures in the United States shows an increasing tax burden in the top 20 percent range.  We have previously discussed such studies and the disconnect between the rhetorical and the statistical in tax debates.

The 165 millions households were divided into income brackets of roughly 65 million each.  The top 20 percent represents incomes of $150,000 or more. That bracket represents 52 percent of the income but carried 87 percent of the tax burden.  Conversely, the lower 60% of households with up to about $86,000 will pay nothing in federal income tax — down from 2 percent last year.  This does not include state or sales taxes.

543 thoughts on “Study: Top 20 Percent of Income Households Pay 87 Percent Of Taxes

  1. When income is taxed the tax is included in the cost of the goods and services provided by the income earner. The consumer of those goods and services pays the income tax of the producer of those goods and services.

    Income tax is a sales tax.

    Corporate income tax is included in the cost of goods and services provided by the corporation. The consumer of those goods and services pays the income tax of the producer of those goods and services.

    Income tax is a sales tax.

    There is only one individual who pays any and all taxes: the consumer. Who else?

    I bought a car. Much of that purchase went to paying income taxes of the employees who produced that car. That panhandler who bought a McDonald’s burger paid the income taxes of the employees of McDonald’s.

    I bought a car. Much of that purchase went to paying income taxes of the corporation who produced that car and of the corporations that sold components to the car manufacturer. That panhandler who bought a McDonald’s burger paid the corporate income taxes of McDonald’s.

    Income taxes, both corporate and individual, are a sales tax, a value-added tax.

    Income taxes are totally regressive. Sales tax is regressive. VAT is regressive.

    It cannot be avoided.

    Duties are a sales tax included in the price of the product.

    Of all these sales taxes the only “visible” one is the one added on at the point of purchase; the rest are included in the price. (Even that should go, in my opinion. You should pay what the price tag says — no more, no less. All taxes already included.)

    Even property taxes are a sales tax. They are a sales tax on the selling price of property.

    There is only sales tax.

    ———Impossible Dream———
    So let’s simplify it. Let’s call it what it is.

    The federal government could be funded by measuring of the economic contribution to the total US economy by each state and taxing that at the same percentage rate. No tax preparation by either individuals (sorry H&R Block) nor corporations (sorry tax lawyers and accountants). Fifty states free to collect the taxes they owe any way at all consistent with the US Constitution. Fifty economic experiments. The IRS consists of a couple of thousand accountants busy making sure each state measures their economic contribution the same way.

    In a stable economy the above tax rate could be driven by federal spending of all kinds including so-called entitlements. What is spent one year is collected as taxes the following year plus 1% to be applied to debt reduction.

        • ghsteele, sales taxes are levied on sales. They are triggered when a commodity is transferred from the retail vendor to the consumer. Income taxes are levied on income. Their economic impact is not a function of how you allocate your income.

      • I think what ghsteele is trying to say is that all taxes eventually are paid by the consumer which is reasonably true. The consumer is both the rich guy and the poor guy. Those on the left need to think about that because when the price of toilet paper goes up it is the poor guy who has to reckon with using less toilet paper or less of something else.

        • I think what ghsteele is trying to say is that all taxes eventually are paid by the consumer which is reasonably true.

          No it’s not. There is consumption and there is savings.

          • NII, I think you should read what I said a bit more carefully. You are an economist and ghsteele is not. You might want to categorize these things better than him, but I think my comment is a reasonable interpretation of what I think he is trying to say.

            Money is used to purchase things. The prices of anything purchased, even an investment, rise based on many factors including taxes. It might not meet your standards of economic word usage, but the concept is quite valuable.

    • That is quite different than what you said before, and I quote your words: ““consistency is the hobgoblin of little minds.” Take note of the additional two words” A foolish” Your former statement was consistent with a personality disorder. The latter statement is consistent with Emerson.

        • Nah, not foolish to quote Emerson, but perhaps you were foolish to misquote him badly while characterizing yourself as having a personality disorder.

            • I looked at your first quote and your revised quote. Your revised quote that was contextually complete was a good quote from Emerson. (“A foolish consistency is the hobgoblin of little minds”)

              Your first quote “consistency is the hobgoblin of little minds.” left out the necessary context and immediately reminded me of you. Yep, I looked again and I see you. Yep, yep,…

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