One of the most indefatigable clichés in politics is that rich people don’t pay their “fair share” for government services. Progressives are back on this hobbyhorse, arguing that the only just remedy is to confiscate wealth. The problem is that, however one can reasonably define a “fair share,” the wealthiest Americans are already paying it.
As of the most recent federal tax data from 2023, the top 1 percent of taxpayers earned 21 percent of all adjusted gross income in the country. That’s a lot of money for a small number of people, no doubt about it. But this same group of highest earners paid 38 percent of all federal income taxes collected, almost double their share of income. Those earners between the top 5 percent and 1 percent also made outsized contributions, paying 21 percent of income taxes on 16 percent of national income. The entire bottom half of taxpayers, meanwhile, paid just 3 percent of total income taxes.
On the individual level, the average taxpayer in the top 1 percent paid $538,000 in federal income taxes. The biggest reason is that they earn far more than most people, so they have more money available to pay. A person had to make a minimum of $430,000 in 2023 to squeak into the top 1 percent, and the average income in that percentile was much greater.
Another reason is that rich people pay a greater percentage of their income, or effective tax rate, than everyone else. In 2023, the top 1 percent paid 26.3 percent of their earnings on federal income taxes, compared to 14 percent for all taxpayers. The bottom half of earners, helped by deductions and tax credits, owed less than 4 percent of their income.
Although the top 1 percent’s effective tax rate fell slightly after the 2017 reform law, their share of income taxes has risen over the past two decades. Revenue from the income tax has never been so dependent on the highest earners as it is now. By the same token, the lower 90 percent pay a lower share of income taxes than ever before — down from half of all receipts in the 1980s to merely 29 percent today.
Factoring in all federal taxes, rather than just income tax, doesn’t change the picture much. High earners pay lower payroll taxes as a percentage of their income than most people do, but they owe much more in corporate income taxes when profits are assigned to shareholders. Across the board, they still pay far higher rates than any other group.
It is simply not true that the rich aren’t paying their “fair share” of federal revenue. In fact, the top 5 percent of earners pay for most of it, and the very wealthiest among them pay more than anyone else.
Progressives’ true gripe with rich people seems not to be that they aren’t already paying a great deal in taxes, but that their wealth is fundamentally illegitimate. Alexandria Ocasio-Cortez believes that “there’s a certain level of wealth and accumulation that is unearned,” because no one can amass a large fortune without abusing power. Bernie Sanders and Zohran Mamdani state openly that billionaires shouldn’t exist.
Such envious politicians misunderstand the nature of wealth. Rich people cannot make their fortunes by stealing or cheating — only by creating immense value for others through their talent or innovation. Steve Jobs, for example, pocketed only a fraction of the wealth that he produced for Apple customers, partners, and shareholders.
Value created by entrepreneurs is not the government’s money to seize at will. All lawful wealth either is the result of post-tax savings and investment or will eventually be taxed when it translates into income. However much is left belongs rightfully to the owner.
Governments in a free society should tax their citizens only as much as necessary, and as evenly as possible. Under that standard, the richest Americans have already exceeded their obligation to the public.