NCPA - National Center for Policy Analysis

Total Burden On Upper Income Taxpayers Is Also Higher

September 13, 1999

Tomorrow, Bill Clinton is expected to receive the congressional tax bill and give it his long-expected veto. He will say the tax cut is inequitable because it gives more to those at the top of the income distribution than to those at the bottom.

Since cuts in income tax rates necessarily only help those who pay income taxes, many people are not going to benefit simply because they have no tax liability.

But critics respond that there are other federal taxes that fall more heavily on those with low incomes, including Social Security payroll taxes and federal excise taxes, such as the cigarette tax.

However, as a new report from the Congressional Budget Office points out, total federal taxes rise even more for those at the top than at the bottom, as compared to the income tax alone. This is mainly due to the corporate income tax, which ultimately falls on people.

  • This year those in the top 20 percent of families will pay 65 percent of all federal taxes and an astonishing 79 percent of all income taxes.
  • The top 10 percent of taxpayers will pay 49 percent of all federal taxes and 63 percent of income taxes.
  • The effective federal tax rate on those in the top 10 percent of families is 30.6 percent, rising to 31.8 percent for those in the top 5 percent and 34.4 percent for those in the top 1 percent.
  • The rate for all families has risen from 22.6 percent in 1991 to 24.2 percent this year.

The tax bill cuts taxes roughly in proportion to taxes paid. Although those at the top would benefit most, it is only because they pay almost all the taxes.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 13, 1999.


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