NCPA - National Center for Policy Analysis

Rising Tax Burden On The Rich And Not So Rich

June 11, 2001

A recent Congressional Budget Office study of effective tax rates by income was followed by a 13-page summary from the liberal Center on Budget and Policy Priorities (CBPP) highlighting everything in it supporting the idea that the rich are getting richer at the expense of everyone else.

The CBPP implies that tax cuts for the rich have somehow contributed to widening income inequality. But the full 154-page CBO study shows the rich are shouldering an ever-heavier burden of total taxation. Moreover, it shows raising taxes on the rich would have no impact on reducing inequality.

In fact, the effective federal tax rate (taxes as a share of income) has fallen for every income group over the last 20 years EXCEPT those with upper incomes.

  • For those in the bottom quintile (20 percent of the population), the tax burden has fallen from 8.3 percent in 1981 to 5.3 percent this year.
  • Those in the middle quintile saw a drop from 21.9 percent to 20 percent.
  • The other quintiles also declined, except the top quintile, whose tax rate increased from 27.1 percent to 27.4 percent.

Those at the very top saw the largest tax increase.

  • The top 5 percent, who paid 24.9 percent of their income to the federal government in 1985, now pay 30.5 percent.
  • Thus the top 5 percent in terms of income now pay 39.4 percent of all federal taxes, up from just 28.5 percent in 1985.

Even the top 5 percent may not really be "rich." While the CBPP emphasizes their average household income is $355,800, the income cutoff is just $93,300 -- which could be the joint income of a policeman married to a teacher. They probably don't realize that when liberals talk about "the rich," they mean them.

Source: Bruce Bartlett senior fellow, National Center for Policy Analysis, June 11, 2001.

For CBPP summary


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