NCPA - National Center for Policy Analysis

Look Who's Paying The Tax Bill

November 20, 2002

Over the past decade or so, fewer and fewer Americans have been paying income taxes and fewer still a significant percentage of income in taxes. Those being squeezed are the nation's top earners.

  • In 1999, Americans with incomes above half a million dollars constituted 0.5 percent of taxpayers but accounted for 28 percent of total tax revenue.
  • That means that only 553,380 taxpayers were responsible for more than one-quarter of the total income tax take of $877 billion.
  • In 2000, people with adjusted gross incomes of $128,336 or higher were responsible for 56 percent of the tax take.
  • The top 50 percent of taxpayers coughed up 96 percent of the total tax take that year.

Compare that with the situation 14 years earlier.

  • In 1986, the top 1 percent paid 26 percent of revenue, the top 5 percent was responsible for 42 percent and the top half contributed 93 percent.
  • The bottom half of taxpayers accounted for 7 percent of the total in 1986 -- but only 4 percent in 2000.

Almost 13 percent of all workers have no tax liability at all -- and another 16.5 million have some income but don't file at all. This complicated system of progressivity and escape hatches is creating a nation of two different tax-paying classes: those who pay a lot and those who pay very little. And as fewer and fewer people are responsible for paying more and more of all taxes, the constituency for tax cutting, much less for tax reform, is eroding.

To some observers, this suggests that the last thing the White House should do is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.

Source: Editorial, "The Non-Taxpaying Class," Wall Street Journal, November 20, 2002.


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