Income Tax Burdens in Perspective

Here is a chart that shows how much income taxes are paid by each income tax group:

As you can see, the top-earning 1 percent of Americans (the 1.4 million returns making more than $380,000) paid 38 percent of federal personal income taxes while the Americans in the lower half of the income spectrum (or 70.0 million returns) paid 2.7 percent of the total. This chart also shows that roughly half of taxpayers pay for almost all of federal personal income taxes.

Based on this data, it is hard to say that top income earners are taxed unfairly lightly.

More importantly, the people in the top are not always the same year after year. This week, E. J. Dionne’s Washington Post column quoted an author as saying:

“The effective rate for the top 400 taxpayers has gone from 30 cents on the dollar in 1993 to 22 cents at the end of the Clinton years to 16.6 cents under Bush,” he said in a telephone interview. “So their effective rate has gone down more than 40 percent.”

In fact, the top 400 aren’t a static group. There’s lots of income mobility in and out of the “top 400″ every year, and most of their income is due to highly fluctuating capital gains (which are taxed lower than ordinary income). IRS data for the top 400 over a 15-year period shows that 72 percent of them appeared only once. A little more than 12 percent appeared twice, and a little over 15 percent appeared three times or more. Trying to fine-tune tax policy to attack the “top 400″ will only tax different people tomorrow than are there today.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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