Are the “Rich” Paying Enough in Taxes?

In an April 13^th speech describing his plan to reduce the country’s $14 trillion debt, President Obama singled out the wealthy as part of the solution.

“In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans,” said the President. “But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society.” The President later pointed to “millionaires and billionaires” again, and called for policies that would raise taxes on “the wealthiest 2 percent of Americans.

So who is this wealthy 2 percent, raking in money hand-over-fist and skipping out on their tax responsibility?

In 2008, the income cutoff to be in the top 2 percent was about $253,000; that might seem like a lot of money, but it hardly qualifies as super-rich. Folks at this income level still struggle with costs like a mortgage and their child’s education.

More importantly, though, the top 2 percent are already paying the lion’s share of federal income tax.  In 2008, the top 2 percent of taxpayers—representing about 2.8 million tax returns out of 140 million total—provided 46 percent of all federal income taxes (see chart below). The bottom 50 percent of taxpayers—representing nearly 70 million tax returns—provided only 3 percent of all federal income taxes.

Of course, this could be an anomaly—perhaps wealthy Americans paid more in this particular year, but the trend doesn’t hold up over time. Or it could be that the wealthy pay more in income taxes, but—due to special tax shelters and gimmicks—their cut of all federal taxes is far less than the rest of us pays.

But neither of those sentiments squares with the facts. For instance, consider the share of all federal taxes paid by the wealthiest one percent over the last thirty years. According to the Congressional Budget Office, that share has been growing progressively larger over time. In fact, the share paid by that one percent has almost doubled over three decades; by contrast, the already-tiny share paid by the bottom 20 percent was cut in half. In 2007, the most recent year for which numbers are available, the top 1 percent shouldered 28 percent of the federal tax burden; the bottom 20 percent shouldered less than one percent.

Contrary to the rhetoric of the President and others in Congress, the “rich” are already paying their fair share—and quite a few other peoples’ share as well. Demonizing those who have prospered is ultimately a distraction; instead, our elected representatives must get about the hard work of reforming entitlement programs (like Medicaid, Medicare, and Social Security) that the Congressional Budget Office has identified as the main drivers of our national debt.

Read more at Defeat the Debt