NCPA - National Center for Policy Analysis


April 15, 2008

The number of Americans who are bearing the largest share of the nation's income tax burden is shrinking, while the bottom 40 percent of Americans by income had an effective tax rate that's negative, says writer Geoff Colvin.

That means the number of people who actually pay America's income taxes -- totaling almost $1 trillion in 2005 -- is surprisingly small:

  • Of those who filed returns (themselves a subset of the population), just half accounted for 97 percent of the Treasury's total income tax revenue.
  • The top half's share of total payments has been growing steadily for the past 20 years.
  • The top 10 percent of taxpayers kicked in 70 percent of total income tax.
  • And the famous top 1 percent paid almost 40 percent of all income tax, a proportion that has jumped dramatically since 1986.

Are the richest Americans paying so much because they're actually getting clobbered with higher tax rates?  No.  Their effective tax rate -- the total tax they pay as a percentage of their income -- has declined substantially.  The top 1 percent paid an effective tax rate of 23 percent in 2005, down from 27.5 percent in 2001.

The real issues here are clear, says Colvin.  One is having a shrinking minority of citizens pay most of Washington's bills.  Social cohesion falls apart.  The majority who pay nothing resent those with higher incomes; the minority who pay heavily resent those who don't pay.

Source: Geoff Colvin, "The Tax Debate We Need to Have," Fortune, April 2, 2008.

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