This past weekend, as we watched key Obama administration officials begin their campaign to soften up the American people for future middle-class tax increases, we thought it would be a good occasion to review who actually pays federal income taxes.
Now, to be clear, we’re talking about federal income taxes, not the total tax burden, which includes things like payroll taxes, sales taxes, and excise taxes.
According to the latest official data from the Congressional Budget Office (CBO):
- The top 1 percent of income earners pays 39 percent of all federal income taxes, while earning 19 percent of pretax income;
- The top 5 percent of income earners pays 61 percent of all federal income taxes, and earns 32 percent of pretax income; and
- The top 10 percent of income earners pays 73 percent of all federal income taxes, but earns 42 percent of pretax income.
In sharp contrast, the bottom 40 percent of income earners, as a group, don’t pay any federal income taxes (though some individuals do). Because of refundable income tax credits in the tax code, the bottom two quintiles are actually are net recipients of federal tax dollars equal to 3.6 percent of all federal income taxes.
The middle 20 percent of income earners, the true middle class, pay only 4.4 percent of all federal income taxes, while earning 13.4 percent of pretax income.
If you combine this middle 20 percent with the bottom 40 percent, then the bottom 60 percent of income earners together on net pay only 0.8 percent of all federal income taxes. Talk about a progressive tax system!
These numbers reflect the results of Reaganite, mostly Republican tax policy going all the way back to 1981. This tax policy actually abolished federal income taxes for what is often termed the working class, and almost abolished them for the middle class.
Last year, on the campaign trail, Obama told Joe the Plumber, “We’ve cut taxes a lot for folks like me who make a lot more than $250,000, but we haven’t given a break to folks who make less.” It was a theme candidate Obama repeated incessantly: Republicans cut taxes only for the rich, while jilting the middle class. The data above shows that this is clearly not true.