NCPA - National Center for Policy Analysis

Majority of Households Receive More in Government Payments than they Pay in Taxes

November 18, 2014

How much are the rich paying in taxes? A new report from the Congressional Budget Office (CBO) outlines exactly who is paying -- and receiving -- tax dollars. The report looks at households' income before and after taxes and transfer payments (government benefits such as unemployment insurance or Medicare).

The results? American Enterprise Institute scholar Mark Perry explains:

  • Sixty percent of American households -- the bottom three income quintiles -- receive more in government transfer payments than they pay in taxes. The bottom quintile receives $8,600 more than it pays in taxes, while the second quintile receives $12,500 more and the third quintile receives $9,100 more. These households are "net receivers."
  • The second-highest quintile consists of households that are "net payers," but barely. Those households receive $14,100 in government transfer payments while paying $14,800 in taxes.
  • The top fifth, however, pay $46,500 more in taxes than they receive in government transfer payments.

It is the top income quintile that is funding government transfer payments to the majority of American households after paying an average of $57,500 in federal taxes as of 2011. After accounting for transfer payments, Perry explains that the bottom three quintiles effectively face negative tax rates of -35 percent, -27.6 percent and -13.7 percent. The fourth quintile faces an after-transfer tax rate of just 0.7 percent. But the top quintile? It has an after-transfer tax rate of 18.9 percent.

Source: Mark J. Perry, "New CBO study shows that 'the rich' don't just pay their 'fair share,' they pay almost everybody's share," American Enterprise Institute, November 15, 2014.


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