Tax Bills for Rich Families Approach 30-Year High

March 5, 2013

With Washington gridlocked again over whether to raise taxes, it turns out wealthy families already are paying some of their biggest federal tax bills in decades even as the rest of the population continues to pay at historically low rates, says the Associated Press.

President Barack Obama and Democratic leaders in Congress say the wealthy must pay their fair share if the federal government is ever going to fix its finances and reduce the budget deficit to a manageable level. A new analysis, however, shows that average tax bills for high-income families have rarely been higher since the Congressional Budget Office began tracking the data in 1979. Middle- and low-income families aren't paying as much as they used to.

  • For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center.
  • The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.
  • Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20 percent of households won't pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

The Associated Press analyzed two sets of data to compare tax burdens over time.

The Congressional Budget Office (CBO) produces data from 1979 to 2009; the center has overlapping data from 2004 through 2013. Both get tax data from the IRS, but they use slightly different methodologies to calculate federal tax burdens.

  • Average after-tax incomes for the top 1 percent of households more than doubled from 1979 to 2009, increasing by 155 percent, according to the CBO.
  • Average incomes for those in the middle increased by just 32 percent during the same period while those at the bottom saw their incomes go up by 45 percent.

Source: Stephen Ohlemacher, "Tax Bills for Rich Families Approach 30-Year High," Associated Press, March 3, 2013.

 

Browse more articles on Tax and Spending Issues