The Internal Revenue Service recently released its income and tax statistics for 2020, and they show the top 1% of earners paid 42.3% of the country’s income taxes. That’s a two-decade high in the share of taxes the 1% pay.
That same 1% reported earnings of 22.2% of adjusted gross income (AGI) on their tax returns, which means the share of taxes paid by the top 1% as a group is roughly double their share of income. …
The top 5% of earners reported 38.1% of total AGI but paid 62.7% of all income taxes. The bottom 50% of earners reported 10.2% of AGI but paid 2.3% of all income taxes. … [end quote]
These figures are for the Federal income tax only. They don’t include payroll taxes (Social Security and Medicare). Or state and local income tax. Or property tax. Or sales tax on gasoline and other goods, the most regressive of all taxes.
The article shows that the cost of maintaining the Federal government is disproportionally borne by the affluent. Federal income taxes are highly progressive.
But that doesn’t include sales tax. We moved to WA State partly because it doesn’t have a state income tax. But it does have a high sales tax. Whereas Oregon has a high income tax but no state sales tax.
Here is the tax burden by state:
But this doesn’t break down the tax burden into income brackets. It’s hard to say whether the working and middle classes are “soaked” disproportionally than the affluent since workers only pay Social Security and FICA taxes on incomes up to $160,000 (for 2023).
Affluent people also need to pay attention to estate taxes. DH and I will be meeting with a lawyer next week to set up a “Bypass/ Credit Shelter Trust” to shelter part of our assets from WA State’s estate tax, which can be up to 20%. Every state is different.
According to the Economic Policy Institute, the average annual wage of the top 1% was $823,763 as of 2020.1 A more recent study by SmartAsset points out that the national average of the top 1% earners is $597,815 .2 Have in mind that the figures vary greatly from state to state.
My comments the top 5% are not burdened by their taxes. The bottom 50% of earners are burdened by their taxes. The bottom 50% face liars making claims about taxes on the rich.
Not only that but the most wealthy have a lot of money off the books. Ralph Kramden and Ed Norton have it all on the books. They can’t run. They can’t hide. Thurston Howell III lives off of money that never makes it on the books.
The standard whine about how “burdened” the rich are, what a struggle it is to get by on a few million per year, because the big, bad, socialistical government takes so much of their money.
Of course, the article ignores the regressive taxes that hit lower income people harder, because a “fair and balanced” report would not advance their agenda.
The FICA tax that the article ignores provides 36% of Federal revenue, vs 50% for the income tax, and the FICA tax falls almost entirely on middle to low income people, who see every dollar of their income taxed, while FICA would be a rounding error on Jamie Dimon’s $80M payday last year.
If taxes are so burdensome for the affluent, let them pay taxes on all their as yet untaxed assets (mainly unrealized capital gains and deferred income items like 401k plans, I’d guess) revoke their citizenship, and never allow them to visit or do business in the US again.
If they’re not willing to do that, the benefits their taxes provide are apparently worth the cost.
Wendy breaks her own rules and posts a biased political opinion from the conservative Editorial Board of WSJ which is owned by Rupert Murdoch who also owns Fox News and New York Post.
It is a well known fact that the Editorial and Opinion pages of WSJ is not vetted like the rest of the WSJ business news. Read the following from the Columbia Journalism Review:
The editorial board’s response to the letters was consistent, and they shared it with readers: “We are not the New York Times,” they wrote, under the headline “These pages won’t wilt under cancel-culture pressure.” The piece declared, “Our opinion pages offer an alternative to the uniform progressive views that dominate nearly all of today’s media.” Matt Murray, the editor of the Journal , told me that dissent over op-eds was outside of his concern: “We keep a firm separation in the Wall Street Journal between news and opinion,” he said. For Murray and for Latour, the conflict was about more than staff morale; the Journal was in the midst of an ambitious push to double its paying customer base, requiring its leaders to pull off an almost impossibly difficult trick in a divided post-Trump America: appeal to new readers without alienating existing ones. The paper’s audience—just over 3.4 million people, many of them in, or retired from, financial professions—is old; according to internal surveys, half of subscribers are over fifty-eight. Roughly 71 percent are men, and at least 70 percent are white. Among the Journal ’s dedicated readers, internal surveys suggest, opinion pieces have long been the most reliable draw.
I am a subscriber to the WSJ. The editorial page is as far right as might be imagined, at least until you read Investor’s Business Daily or Financial Times They regularly take on topics for which they have no special expertise, and you can guess where they stand on, well, everything.
That said, I am occasionally intrigued by a headline and will read the piece, and nearly always find them selectively choosing their data, cherry picking examples, and playing to the stereotypes of argumentation (as we have seen with dramatic effect these past few years in other Murdoch media.)
While the NYT editorial page breaks left, they do have multiple conservative regular columnists, who espouse diverse points of view on a daily basis. The Journal does not bother with such, it is an unending miasma of dialectic - but it is, as not, sometimes entertaining. However were I to write a “Letter to the Editor” about everything I find uneven, I would have no time left for anything else in my life.
This article, for instance, wholly ignores the other mandatory “assessments” levied upon lower income Americans in favor of a selected data set “proving” their desired outcome. The ignore FICA and other use taxes (gasoline, property tax, etc.) which land hardest on the lower tiers in favor of the one which is selective on “upper” income. Bah.
I watched them do the same thing when they railed about lowering corporate taxes, without noting that most corporations pay nowhere near the statutory rate. (Apparently that fact was too inconvenient for their article.)
We have now watched Murdoch weaponize his media enough with his broadcast news - and in print -, the latest attempt to “de-personize” the ex-president in all his properties should be a warning to all: you are not reading fact. You are reading skillfully prepared propaganda - in service of one man’s political viewpoint. That is not healthy.
@jaagu notice that I carefully posted ONLY the numbers and not the (politically-slanted) opinion part of the editorial. Also, I added plenty of opposing data to show that lower-income people actually pay a disproportionately high amount of other important taxes, such as Social Security, FICA and sales taxes.
I think the raw numbers are interesting. They are simply data. They can be spun politically, but I didn’t do that.
That study is highly flawed. They have New Hampshire at 35th because of a state income tax rate of 5%. NH has never had an income tax. I don’t care, really, but "“State Individual Income Tax Rates and Brackets for 2020” from the Tax Foundation is worth looking into.
It’s also wrong about Tennessee. It lists a 2% income tax (it’s actually 0%) and a 4.10% sales tax (it’s actually 7%, and most counties tack on another 2.75% for a total of 9.75%.)
Several years ago Tennessee did have what was called a “Hall’s Tax” (named after the local legislator who championed it in the 1920’s, I think), but it was only on “interest and dividends”, and then with exceptions for interest from Tennessee banks, companies in Tennessee, etc.
Laymen or laywomen discuss tax burden as the nominal amount or the percentage paid.
In economics that is not the definition of burden.
An economic burden has to do with whether as a rich person it is easier or less burdensome to pay your taxes than as a less affluent tax payer. The lower the income the higher the economic burden of paying taxes.
Who cares if the 1% were to pay 70% of the entirety of all the tax receipts if it did not really effect how they live or retire. There probably would be only a small economic burden there.
The reality is the poor or less affluent are shopping/buying from the rich. The rich have less of a compunction about charging more of a premium and paying less for the infrastructure. That is until recently when made here in the US can again become more profitable but we need the infrastructure to make it happen.
The title is misleading because it asks if taxes soak the affluent and then focuses only on income taxes. If I own $1B in assets and pay myself $10m in income (1 percent of my net worth), i can complain that I am being soaked by a 50 percent tax on that 10 m even though it is really only 1/2 of one percent of my net worth.