“[Obama] repeated the old half-truth about millionaires not paying as much in taxes as their secretaries. (In reality, the top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S. People in the richest 1 percent pay 31 percent of their income to the federal government while the average worker pays less than 14 percent, according to the Congressional Budget Office.)” — David Brooks
Oh, please. The top 10 percent pays nearly 70 percent of all income taxes because the top 10 percent makes half the income–49.74 percent, including capital gains, before the recession and only slightly less now… The relevant statistic isn’t what proportion of the nation’s taxes comes from the rich. It’s what proportion of the rich’s income gets paid in taxes. Brooks cites a Congressional Budget Office report that says people in the richest 1 percent pay 31 percent of their income in taxes to the federal government. Boo hoo. What he doesn’t say is that back in 1979, on the eve of the Reagan revolution, the richest 1 percent paid 37 percent of their income in taxes to the federal government, even though its share of the nation’s income was much lower than it is now (34 percent, including capital gains). Effective tax rates on top earners didn’t change as much as many people think during the past 30 years, but they did go down (except for a brief uptick in the early Clinton years). For the very richest Americans, the drop was more precipitous. As recently as 2000 the 400 richest Americans paid 22.3 percent of their adjusted gross income in federal taxes. In 2008 (the last year for which data are available) they paid 18.1 percent. Again, this occurred while their income share was going up, not down.
Obama isn’t even talking about making the rich pay a higher proportion of their income than the middle class in taxes. God forbid! He’s merely saying (with his proposed “Buffet Rule”) that the rich shouldn’t get away with paying a smaller proportion…
The result of paying a smaller proportion of one’s income to taxes, from Mark Thoma: “The Great Income Shift”
This great income shift means the average middle-income American family had about $9,000 less after-tax income in 2007, and an average household in the top 1 percent had $741,000 more, than they would have had if the 1979 income distribution had remained. Here’s how this looks in graph and table form:
IN OTHER WORDS this ‘great income shift’ means that there has been a bottom-to-top income redistribution going on since 1979 with tax laws. The 99 percent pay proportionally more of their income to taxes than the wealthiest 1 percent. Meanwhile the GOP and their benefactors want to convince us that the wealthiest should pay even LESS of their income to taxes than they do now. The Republican party’s plan for a reduction in revenue is to cut programs and services used by the 99 percent.
- Posts on income from labor vs. capital gains