NCPA - National Center for Policy Analysis

WHO PAYS THE TAXES?

December 7, 2005

A few weeks ago, the Internal Revenue Service released data on tax year 2003. They show that the top 1 percent of taxpayers, ranked by adjusted gross income, paid 34.3 percent of all federal income taxes that year. The top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top quarter of taxpayers paid 83.9 percent.

Not only are these data interesting on their own, but looking at them over time shows that the share of total income taxes paid by the wealthy has risen even as statutory tax rates have fallen sharply, says columnist Bruce Bartlett:

  • On the first point, we see that in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent.
  • After Ronald Reagan's tax cut of 1981, which reduced the top rate to 50 percent -- a massive give-away to the wealthy according to those on the left -- the percentage of income taxes paid by the top 1 percent rose steadily.
  • By 1986, the top 1 percent's share of all federal income taxes rose to 25.7 percent. That year, the top statutory tax rate was further cut to 28 percent -- another huge-give-away, we were told. Yet the share of income taxes paid by the top 1 percent continued to rise. By 1992, it was up to 27.5 percent.

Of course, it would be a mistake to conclude that tax increases will not raise the wealthy's tax share or that tax rate cuts always will, says Bartlett. Nevertheless, it is remarkable that the percentage of federal income taxes paid by the top 1 percent of taxpayers almost doubled during a time when the top income tax rate fell by half.

Source: Bruce Bartlett, "Who pays the taxes," Townhall.com, December 6, 2005.

 

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