No, the rich do not pay all the taxes
Wealthy Americans contribute most of the levies collected from federal personal income. But that's not the whole story.
This post comes from Josh Barro at partner site Business Insider.
CNBC ran a story Thursday with the headline "The rich do not pay the most taxes, they pay ALL the taxes."
The story has thousands of Facebook shares. And its premise is completely false.
The article goes on to present data regarding the federal personal income tax, which is indeed paid almost entirely by people with high incomes. People with low incomes pay negative federal personal income taxes (that is, the government sends them checks) because of the earned income tax credit.
But "taxes" are not the same thing as "federal personal income taxes." The federal personal income tax only made up 28 percent of all U.S. government tax collections in 2012. Federal, state and local governments collected $4 trillion in taxes last year; just $1.1 trillion of that was federal personal income tax.
And people with low incomes who don't pay federal personal income tax do pay lots of those other taxes: payroll tax, state income tax, sales tax, property tax, excise taxes, and more. They pay other taxes indirectly: Workers bear the burden of employer-paid payroll taxes and part of the burden of corporate income taxes.
Here's a chart I made earlier this year showing the distribution of the tax burden when you add all the taxes together. Earners in the top 1 percent pay about 43 percent of their incomes in tax. People in the middle quintile pay 25 percent. The poorest fifth pays 13 percent.
Rich people do pay a lot more taxes than poor people, both in absolute terms and as a percentage of income. But the rich are not paying all the taxes. And looking just at the federal personal income tax and trying to draw conclusions about who pays "taxes" will lead you to wrong answers.
P.S. While it's true that rich people pay most federal personal income taxes, to get to CNBC's claim that they pay "all" federal personal income taxes, you have to use a really expansive definition of "rich."
The Congressional Budget Office finds that payments by the top 40 percent of the income distribution exceed the total of all net federal income tax collections. (This is because many poor people have negative federal income tax bills.) But that top 40 percent group includes single people with incomes as low as $51,100 and couples with incomes of $72,300. Those people aren't poor but it's a real stretch to say they're rich.
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VIDEO ON MSN MONEY
We have a spending problem.
So, when you want to write a story that poor people pay more than what everyone thinks, you count all taxes instead of just income taxes. But when you want to write a story that business pays little to no taxes, you count only income taxes and ignore every other tax that they do pay.
So which is it? Do we count all the taxes or only income taxes?
On October 14, you published an article with the headline, "Rich folks whine more about their mortgage". Your definition of "rich" was any household in the top 25%. The top 25% is any household grossing more than $89,000 a year. You play just as fast and loose with "rich" as the people you are criticizing.
Be kind to others, work hard, and the happiness will come.
And, yes, spending is much more of a problem then the amount of taxes paid by Americans. If the fed takes in more money, it simply spends more. And, if there isn't enough to supply the pork barrels and special interests, they borrow. Then, we have the interest on the borrowed money to deal with as well. No matter how you want to spin this thing, it comes down to overspending and wasteful spending.
It's becomes a Insult to Christianity when we preach to others one thing and do another. If your Wealth meant the demise of others, not liking that person has little to do with envy. I love the Concept of Free Market Capitalism. However what we have instead is a corrupt Family and Friends network that is tittering on the Edge of Collapse. The Proof, Too Big To Fail, Too Big to Jail. But sure, some folks are find and dandy about that. Figures.
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