EDITORIAL: The rich pay more than their ‘fair share’ of taxes
One of the most persistent myths in politics is that rich have lower tax rates than middle-income workers. New data shows how false that is.
The Joint Committee on Taxation recently released an overview of the federal tax system. That’s the nonpartisan committee of the U.S. Congress, which means its data is very reliable. Buried in the report is a table showing projections for 2024 income and tax rates.
Collectively, the bottom quintile, or lowest 20 percent, of the population earns aggregate income of around $540 billion. Their income tax rate is negative 16.8 percent. Overall, the income tax system will return members of that group more than $90 billion.
The second-lowest quintile reports a combined income of more than $1.5 trillion. Their average income tax rate is negative 4.5 percent. Yes, that’s still a negative number. Americans in this group will receive back almost $69 billion more than they pay.
The middle quintile earns income of $2.6 trillion. Net, these wage earners will pay $41.5 billion in income taxes. That’s an effective tax rate of 1.6 percent.
The story is vastly different for higher income earners. Those in the 95th to 99th percentile earn just more than $3 trillion in income. They’ll pay an aggregate $481 billion in taxes, for a tax rate of 15.8 percent. That’s almost 10 times higher than those in the middle.
The top 1 percent, excluding the top one-tenth of a percent, earned $2 trillion. They’ll fork over $464 billion in taxes, which is an average tax rate of 23.1 percent.
The top one-tenth of 1 percent pay the most. On their $1.9 trillion in income, the government takes $481 billion. That’s an income tax rate of 25 percent.
That’s a lot of numbers, but here’s the bottom line. There’s a greater than 40 percentage point gap in income tax rates between the top and the bottom filers. And a sizable minority of taxpayers or possibly a small majority receive more back than they pay.
The U.S. tax code remains highly progressive. The top 1 percent earned 18.4 percent of national income, but paid 45 percent of income taxes.
During his most recent State of the Union address, President Joe Biden admonished millionaires to “pay your fair share in taxes.” In a March 2024 Fact Sheet, the White House asserted Mr. Biden’s tax plan has “reforms that will finally make the wealthiest Americans pay their fair share.”
Never mind that Mr. Biden and his fellow progressives, for whom there is never enough of other people’s money to spend, always avoid defining “fair share.” The numbers reveal that the country’s highest wage earners already shoulder a significantly larger tax burden than other Americans, both in terms of overall contributions and as a percentage of income.