One of the most persistent myths in politics is that the wealthy pay lower tax rates than middle-income workers. New data shows just how wrong that is.
The Joint Committee on Taxation recently released its Overview of the Federal Tax System. It’s a bipartisan committee of the U.S. Congress, which means its data is highly reliable. Embedded in the report is a table showing projections of income and tax rates for 2024.
The bottom 20% of the population, the lowest 20%, have a combined income of about $540 billion. Their income tax rate is negative 16.8%. Overall, the income tax system would refund more than $90 billion to members of this group.
The second-lowest quintile has a combined income of over $1.5 trillion. Their average income tax rate is negative 4.5%. Yes, that’s still a negative number. This group of Americans will receive about $69 billion more than they paid in.
The middle class earns $2.6 trillion in income. These wage earners will pay a combined income tax of $41.5 billion. An effective tax rate of 1.6%.
The situation is very different for high-income earners: the 95th to 99th percentiles earn just over $3 trillion. They pay a total of $481 billion in taxes, at a rate of 15.8% – nearly 10 times higher than the middle class.
The top 1% (excluding the top 0.1%) earn $2 trillion. They would pay $464 billion in taxes. The average tax rate is 23.1%.
The top 1% of Americans pay the most in taxes. Of their $1.9 trillion in income, the government collects $481 billion. That’s a 25% income tax rate.
There are a lot of numbers, but the bottom line is this: There is a 40+ percent difference between the highest and lowest income tax filers, and a significant minority, and probably a majority, of taxpayers get more back in taxes than they paid.
The US tax system remains highly progressive: the top 1% of earners earn 18.4% of national income but pay 45% of income taxes.
In his recent State of the Union address, President Joe Biden warned billionaires to “pay their fair share of taxes,” and in a March 2024 fact sheet, the White House argued that Biden’s tax reform proposal includes “reforms that will finally ensure that the wealthiest Americans pay their fair share of taxes.”
Never mind that Biden and his fellow progressives, who believe that no amount of other people’s money is enough, constantly avoid defining “fair share.” The numbers show that the nation’s highest-paid workers already bear a significantly higher tax burden than other Americans, both in terms of overall tax payments and as a percentage of income.
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