NCPA - National Center for Policy Analysis

MIDDLE CLASS -- NOT THE RICH OR THE POOR -- PAY MAJORITY OF FEDERAL TAXES

June 22, 2010

Middle-class Americans -- not the rich or the poor -- pay the majority of annual tax revenues taken in by the federal government, according to data released in a new Congressional Budget Office (CBO) study. Households earning less than $34,300 per year, meanwhile, actually pay a negative average federal income tax rate. 

According to the CBO: 

  • Middle-class households that earned between $34,300 and $141,900 paid 50.5 percent of all federal tax revenues in 2007 (the most recent year analyzed).
  • Households that earned between $34,300 and $352,900 paid 66.7 percent of all federal taxes.
  • Households in the top 1 percent for annual income (those earning more than $352,900) paid a healthy 28.1 percent of all federal taxes.
  • Households in the lower income brackets paid relatively little; those earning less than $34,300 paid only 5.2 percent of all federal taxes, and those earning less than $20,500 carried almost none of the federal tax burden (just 0.8 percent of the total) in 2007. 

Other findings: 

  • The average overall federal tax rate (including income, Social Security, Medicare, excise and other taxes) for all American households was 20.4 percent in 2007.
  • But the average rate rose dramatically as household income rose.
  • Households earning less than $34,300 paid an average overall federal tax rate of 10.6 percent, while households earning more than $74,700 paid an average overall federal tax rate of almost two and a half times that much -- 25.1 percent.
  • The average federal income tax rate for households earning less than $34,300 was -0.4 percent in 2007, and the average federal income tax rate for households earning less than $20,500 was 6.8 percent. 

Over the past three decades, according to the CBO data, taxation has been getting more progressive, as the tax burden has lightened on lower income households while increasing on higher income households.  During those three decades, Presidents Ronald Reagan and George W. Bush signed laws cutting the top marginal income tax rates, but Presidents George H.W. Bush and Bill Clinton signed laws increasing the rates. 

Source: Terence P. Jeffrey, "Middle Class--Not the Rich or the Poor--Pay Majority of Federal Taxes, Says CBO Data," CNSNews.com, June 21, 2010.

 

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