NCPA - National Center for Policy Analysis

Even With Payroll Levies, High Income Earners Pay Most Taxes

February 24, 1999

Political observers note that Republicans who might otherwise champion an across-the-board 10 percent income tax cut have been spooked by Democratic arguments that the rich would get most of the relief. Certainly they would, say tax policy specialists, since they pay most of the taxes anyway.

  • If each tax rate is cut by 10 percent, the bottom 62 percent of taxpayers -- those with annual incomes under $40,000 -- would get 10 percent of the cut, but they pay less than 5 percent of total income taxes.
  • The top 10 percent of earners -- with incomes of more than $82,000 a year -- would get 62 percent of the cut.
  • House Ways and Means Committee numbers show that the top 8.7 percent of earners pay 62 percent of all U.S. taxes -- a reality to keep in mind when "benefit the rich" arguments are raised.
  • The top 2 percent -- who earn more than $200,000 a year and who pay over 40 percent of income taxes -- would get less than 39 percent of the cut.

Liberal groups like Citizens for Tax Justice point out that the share of income taxes paid doesn't include Social Security and Medicare payroll taxes -- which even those who don't pay any income taxes must pay on the first dollar of wages. But even including those and other levies, say analysts, the bottom 60 percent of taxpayers account for a mere 14.5 percent of total federal receipts, while the top 10 percent pick up more than 45 percent of the tab.

Source: Michael W. Lynch (Reason magazine), "When Only 'The Rich' Pay Taxes," Investor's Business Daily, February 24, 1999.

 

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