Who Pays All the Income Taxes?


Obamanomics has made it popular to call on the “rich” to pay “their fair share” of taxes. Lets increase taxes to pay for ineffective, unnecessary, wasteful government spending, but lets make sure the “rich” are the ones who pay those increased taxes. After all, if they have a lot of money, they should pay a lot in taxes, right? Except what those promoting this idea often ignore is that the “rich” already pay far more than “their fair share” of taxes. They already pay almost all of the taxes.

Check out the beautiful illustration below. Simply… the top 10% of earners pay 71% of the income taxes. Sounds like much more than their fair share to me!

(click on the graphic to go to the website of The Heritage Foundation and use the interactive features)


18 thoughts on “Who Pays All the Income Taxes?

  1. Are the rich necessarily paying their fair share of taxes? I think that a more sensible way of measuring things is basing it on what percentage of that person’s income is being paid as tax.

    For example, Warren Buffett doesn’t think that it’s right that he is paying a lower tax rate than his secretary.

    On an absolute basis, it happens that a small proportion of people make almost all the money. But relative to their income, the high earners may be paying less tax than everybody else.

  2. jim

    Since when is Heritage a reliable data source? A corporate funded right-wing think says (surprise!) that corporations shouldn’t pay tax and the rich are getting unfairly soaked. Hmmm. No conflict of interest there…

    Why don’t you get a copy of David Cay Johnston’s book “Perfectly Legal” and educate yourself a bit before running off at the mouth about your high taxes. Remember, income tax is NOT the only tax. Considering *all* taxes, the rich pay about the same share of their income as the poor–many pay much less because they can exploit numerous loopholes to hide income, etc.

  3. Tracy Coenen

    Jim –

    You are apparently working under the assumption that all taxpayers should pay the same percentage of their income in taxes. That’s not necessarily fair. Why should higher earners have to pay more dollars? (And in the case of the U.S… SIGNIFICANTLY more dollars!) But let’s suppose your theory is the best one out there, and everyone should pay the same percentage in taxes. That would be a “flat tax.” Let’s go ahead and try it! I guarantee….. those who pay little to nothing in taxes right now (and there are millions and millions of them) would go nuts. But still…. let’s try it. I assume you and your friends will endorse such a change in the tax code?

  4. jim

    I didn’t say that a flat tax is a good thing, I only meant to refute the assertion that the rich are paying more than their “fair share” of taxes. I’m implicitly assuming that ability to pay is a criteria and that those who earn more should pay more. It is incorrect to assume that low earners pay “little or no tax” because they pay little or no income tax. They must pay excise, sales, property, and payroll taxes which add up to a significant chunk of their income. As you get richer, these taxes become smaller proportionately to your income and then the income tax takes a bigger bite.

    I didn’t say it in my first post, but I strongly believe in income redistribution, whether through the income tax or some other means (personally I think punitive inheritance and gift taxes are the way to go, but politically problematic). The reason for this is that a highly skewed income distribution is a recipe for becoming a third rate nation. Workers must earn enough to consume the things they produce and they must feel they are getting fairly compensated for their labors and that they are not the victims of an exploitive rentier class. Do we really want to become Brazil? Indonesia? Mexico? That’s where we’re headed if present trends continue.

  5. Tracy Coenen

    Who decides what one’s “ability” to pay is?

    Why not let people earn what the market will pay them or what they have truly earned through their efforts? Socialism does not create greater nations. Socialism (cleverly called income redistribution) does not make poor people less poor. It makes everyone more poor. I suppose it sounds fun to take away from the rich, but ultimately we all have less as socialism stifles growth and therefore harms us all.

    If the “rich” are not providing jobs for the “poor,” where will the poor get money? Certainly the government won’t be able to do it all. And a poor person with no job is worse off than a “poor” person with a job.

  6. Jim – you’re right. According to http://www.globalrichlist.com the world’s median income is $800/yr (per person.) Why stop at the US borders? The distribution of income only makes us a target for the world as our standards are so high. Let’s declare a $2000/yr income per person as the average is certainly higher than median, and start from there. No matter how hard I work, $2000. Whether my wife works or not, $2000 per person for the planet. That sum doesn’t even pay my electric bill, but at $2k/yr, we can’t afford this house, but no one could.
    At what level do you define ‘rich’ Jim? I am curious when you feel it’s appropriate to put your hand into my wallet, and take what I’ve spent a lifetime (of advanced education) to earn.

  7. jim

    Looks like I’ve touched a couple nerves here.

    “Who decides what one’s “ability” to pay is?”

    That’s something a nation has to decide collectively via the political process–no single person makes that decision. I think it’s safe to say that those for whom the cost of the necessities of life are less than say, a quarter of their income are well off and those for whom it is a trivial expense can be considered rich.

    “Why not let people earn what the market will pay them or what they have truly earned through their efforts?”

    You’re making some questionable assumptions here: that market prices are always right and that people are rewarded for “effort” which isn’t always the case. Some people earn a lot because they were born rich, some have cushy jobs that don’t require that much effort, some just happened to be in the right place at the right time, and some are just plain dishonest and make money by grabbing it more aggressively than others. On the other hand, there are many people out there who work very hard at low paying jobs. They expend a lot of effort and receive little in return.

    “Socialism does not create greater nations. Socialism (cleverly called income redistribution) does not make poor people less poor.”

    You’re confusing two different things here. Socialism means government owned enterprise and/or property. Income redistribution isn’t socialism unless you define socialism as any collective interference with individual freedom in which case there is no government on earth that I’m aware of that isn’t socialism. Aren’t the bank bailouts socialism for the rich? Hell, isn’t national defense and law enforcement socialism? Why doesn’t everybody hire their own private army and security detail so we can be free from socialism?

    It is not the case that income redistribution makes people poorer. In the extreme, yes, but in the other extreme we’re all made poorer also (except for a few elites, which unless you are a politically connected jet-setter, does not include you). It’s a matter of balance, a balance that cannot be pinpointed exactly but it is clear that the US is moving to an unhealthy extreme on the top-heavy end of the spectrum.

    Joe Taxpayer’s point about global income is mostly a red-herring rant. It would be better if global incomes were more equal, but of course the solution is to help raise their incomes to our level, not to drop ours down to theirs. Our first concern is to our own nation since that’s where we all live.

    “At what level do you define ‘rich’ Jim?”

    Generally I’d say the top 1% is “rich” but the top fraction of a percent is the bigger problem. Your argument seems a bit incoherent for someone with a “lifetime of advanced education” 🙂

    The reason why you should not want a highly skewed income distribution in your own country is because it’s in your enlightened self interest. Poor people don’t make good customers, they consume public assistance and all the other things you seem to resent. I’m not advocating putting poor people on the dole, they need to earn more and have access to good education, healthcare, and secure pensions.

    I suppose it isn’t obvious why taxing the rich more than the poor will help someone in the low quartiles earn more. In the short run, income is a zero sum game; if the rich have more, the poor have less. In the long run that isn’t necessarily the case because the economy grows, but the long run is the sum of the short runs. People living hand to mouth can’t scrape up the surplus to upgrade their education and job skills or give their kids a good start in life. They suffer stress that diminishes their productivity. They may have to take any job, regardless of whether it pays well enough, just to pay the rent. This puts disproportionate power in the hands of employers, driving wages down–a vicious spiral that we all have an interest in preventing. If subsidizing those at the bottom can prevent that then we all have an interest is doing it.

  8. Tracy Coenen

    Jim – People have never had better access to education, health care and jobs than they do today. To suggest they need more of that is completely ludicrous. The opportunity to better oneself and earn more is greater than it has ever been. No need to steal from one class of people and give to another.

    The concept of not having disparities in income is simply ridiculous. I don’t care whether a rich person inherited their money, lucked into it, or has a good job he doesn’t deserve. His money is his money, and I’d rather earn my own than steal from him. We’d be much better off teaching this concept than telling the poor they can only survive if they steal (legally or not) from others.

  9. Ken


    I’m a subscriber to your blog via RSS and I bought your book – both help me with my job.

    However I’ve skipped reading the blog as extensively of late, because of the space in it devoted to the US Healthcare reform debate.

    I guess this is your blog and you can do with it as you wish, but I guess I would rather read about scam busting here than stuff I might hear on a right-wing radio talk show – where I even to tune in, I don’t live in the States. Further whilst I know it’s of vital importance, not knowing enough of the facts to form an opinion, the HCR debate leaves me cold after a certain point in the continually re-hashed wrangling.

    Hope I don’t get an unfairly ascerbic reply!

  10. Tracy Coenen

    Okay – I had to take a look through the old posts, and I count exactly THREE posts about healthcare in the U.S. Is that really overdoing it? In fact, I’m a bit ashamed I haven’t written about it more!

  11. Jim – Red Herring? Or the logical limit of what you suggest?
    But, you did answer my question. The top 1% are rich, they already pay 40% of the taxes, and as the slide shows 43 million returns pay no tax at all. So I think it’s fair to ask you, what do you feel the right solution is for the issue you perceive? A higher marginal rate at the top end? A cap on income regardless of source? Is there a difference between me ‘earning’ $200K on a $4M retirement portfolio at 65 vs that same $200K as a kid out of B-school? I’ll agree with you that these are different situations (I hope we agree) and that perhaps that kid is overpaid, but what’s the process to not nail the retiree?
    I respectfully suggest you review the history of marginal tax rates at the high end, and read about the Laffer curve. We appear to be at or near the optimum rates needed to maximize revenue. Watch revenue drop if rates are raised.

  12. jim

    Joe Taxpayer: “what do you feel the right solution is for the issue you perceive?”

    An end to loopholes that favor the rich, somewhat higher marginal rates, stricter enforcement, an end to offshore tax havens, and somewhat higher corporate taxes. Also very progressive taxes on gifts and inheritances in the very top percentiles of wealth that can’t be evaded. Not really a big deal but it seems to be sufficient to brand me as an out and out commie in this neighborhood!

  13. jim

    “Censorship reflects a society’s lack of confidence in itself.” [Potter Stewart]

    The same is true of some individuals. So long, and have a nice life…..

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