Every year, the Tax Foundation does extraordinary work breaking down and analyzing the macro tax data from the IRS. We’ve cited their work on numerous occasions in an effort to militate the tax myths propagated by the left. If you were traveling here from a different country and only heard media reports of our tax code, you would come away with the conclusion that the rich pay no taxes and that the poor and middle class shoulder most of the burden from the income tax. That perception cannot be farther from reality.
Until now, we’ve been using the tax data from 2009, the last year with complete information. The IRS recently released the 2010 data, and the Tax Foundation has broken it down in clear and concise categories.
So what about those rich one-percenters? Well, in 2010, with the full force of the Bush tax cuts, and including all the so-called loopholes and deductions, they paid 37.4% of federal income taxes, even though they only earned 18.9% of the gross adjusted income in the country. The top 5% paid 59.1% of income taxes, and the top 10% – those earning more than $116,000 – paid 70.6%, yet earned 43.1% of AGI.
Source: Tax Foundation
What about the super-duper rich – the top 0.1%? They paid 17.8% of the pie, while earning 9.24% of the AGI.
What about the bottom 50% – those tax units (single or joint) earning less than $34,338 on average? They paid 2.4% of the income taxes, even though they earned 11.7% of the AGI. But there’s more to the story than this. The Tax Foundation notes:
Income tax after credits (the tax measure above) does not account for the refundable portion of EITC. If it were included (as is often the case with other organizations), the tax share of the top income groups would be higher. The refundable portion is legally classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.
Remember that most of the people at this income level actually have a negative tax liability when the refundable credits are factored in. The Joint Committee on Taxation reported that in 2009, 30% of all tax units had a negative tax liability. As such, even the 2.4% of the income tax burden that is indicated above is too high. And to the extent that they incur any liability, it is mainly those right around the 50% mark.
Nobody is looking to raise the tax burden on lower-income families (although it would be nice to choose between welfare and refundable tax credits, instead of giving out both). However, can we stop lying about who pays their fair share of income taxes?
Cross-posted from The Madison Project