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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.

By Money Staff Dec 13, 2013 2:15PM

This post comes from Josh Barro at partner site Business Insider.

 

Business Insider on MSN MoneyCNBC 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.

 

Wealthy couple © Digital Vision/Getty ImagesThe 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.

Chart by Business Insider

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.

 

More from Business Insider:


 

VIDEO ON MSN MONEY

830Comments
Dec 13, 2013 2:57PM
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We don't have a tax problem - the government is collecting more tax revenue now than ever before, and it's still broke.

We have a spending problem.
Dec 13, 2013 2:51PM
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nothing will ever change as long as more people vote for a living than work for a living. this country is screwed big time.
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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.

Dec 13, 2013 3:06PM
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Demonizing those who have more than you will do nothing to improve your situation. It will only make you bitter and forget the things you do have.

Be kind to others, work hard, and the happiness will come.

Dec 13, 2013 3:27PM
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We need to stop supporting lazy people who DO NOT want to work and expect the government to give them everything including health benefits and free medication. I'm a professional who sees "these" people pulling in BMW,Lexis to pick up prescriptions and"never have money " to pay their co-pay, and that perpetuates to the next welfare generation. These kids have no aspiration except being on welfare. I was not born in this country and had disadvantage of not knowing English and being poor,however I put myself through school to obtain Doctorate. There is always a way, get education get skills and this country is the best for that,low income individuals can get grants and loans. I'm tired of supporting all those bums who take my money. It is funny how they can afford to smoke $7 per pack cigarettes and have their nails done every week (around $50)
Dec 13, 2013 3:50PM
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Go to a flat tax with NO deductions and all arguments go away. We all become equal. Isn't that what it is all about ?
Dec 13, 2013 3:37PM
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"We don't have a tax problem - the government is collecting more tax revenue now than ever before, and it's still broke. We have a spending problem."

Agreed. Shrink the military and train them better. Eliminate Defense contractors completely and let private sector enterprise compete for price and only accept quality. Destroy all the lobbies, PACs and other politically subversive groups... let's see who STAYS rich. Abolish the Gramm Leach Bliley Act immediately then sue the the banks, sue the Federal Reserve and sue Wall Street for the whole TARP to QE debacle. Once the trash is completely taken out, create one Flat Tax without exceptions and stick to it. 
Dec 13, 2013 4:02PM
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We can't be the police for the whole wide world. We can't afford $35,000 a crack to replace every old person's worn out joints for free. We can't afford to pay for people's electric wheel chairs and viagra. We can't afford to pay disability to drunks and druggies. We can't afford the F35 at $130 million a copy when the F16 can still do the job at $25 million each. We can't afford to spy on everyone's email and cell calls. We can't afford the war on drugs. We can't afford to set up a household for every unwed mother. We certainly can't afford the bribes that they call foreign aide... 
Dec 13, 2013 2:49PM
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the real problem is that any one grou pays a higher % of their earnings than any other. the system like laws should be blind.  the % of your income you pay should be eqyual for all  people.  the whole system is screwed up and could be much simplier but the government could not stand loosing any leverage or control over the people. we have too much government and waste by them.
Dec 13, 2013 3:16PM
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America is the land of equal opportunity, not the land of equal handouts! 

of course, I don't expect  liberals to understand the difference
Dec 13, 2013 4:03PM
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Everyone wants to pay less taxes.  Republicans come up with a complicated scheme for explaining how cutting taxes on the rich will make the country as a whole prosperous.  Democrats come up with a complicated scheme explaining how more benefits for the poor will make the country as a whole prosperous.

This is all bull****.

I see their lips moving, but all I hear is gimmie, gimmie, gimmie.  
Dec 13, 2013 3:39PM
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I look at all my bills. Electricity, gas, property tax, cell phones, garbage, internet. They all have special taxes. That subsidize electricity, gas, cell phones, garbage, internet for the 90 per cent of the poor who are lazy and do not want to work.
Dec 13, 2013 3:12PM
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If you make enough money to buy and sell our so called political leaders apparently  you deserve it  !!!The voters keep voting the same folks in!!
Dec 13, 2013 3:31PM
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This 1% figure is wrong, the truly rich people are.1% What the country needs is to have a flat tax. no exemptions. If your businesses are overseas and you live here you need to be taxed correctly, not hiding your income. Offshore bank accounts are criminal in nature also. I paid an effective tax of 28% last year. our pres and Romney paid 14% and 16% how is this fair? A flat tax -- no thousand plus pages of BS no one can figure out. this would end all this complaining.
Dec 13, 2013 3:59PM
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So, how much federal income tax is collected from federal employees and government personnel, i.e., congressmen, senators, appointed officials, etc.  Once in a while, just ONCE in a WHILE, we hear a media snippet that some candidate, or some government bigwig is in arrears with their taxes to the tune of millions of dollars.  Do these people consider this their "earned income credit"?

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.

Dec 13, 2013 3:29PM
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It's very interesting that CNBC ran a story claiming that rich people pay all the taxes...but then again, very few of their so-called journalists ever research a story before they print it.
Dec 13, 2013 4:09PM
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We have 47% that pay nothing according to the CBO.  These same 47% on average receive 18,000 in taxpayer money.  

We need to END all of that.  Then we need to tax these people.  We cannot have 15% supporting 47% for long.  Society will collapse.   We need to be rid of the democrat deadbeats ASAP.


Dec 13, 2013 3:19PM
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Some Idiots think folks are envious of everyone Wealthy, many if not most are not. In fact, there are folks that have Wealth we as Americans are very Proud of due to how it was done and yes that's important. Otherwise quit now the BS claim of a Christian Nation and take "In God we Trust" off our money.

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.



Dec 13, 2013 3:26PM
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the top 40% of wage earners re-distribute $2 trillion/year to the bottom 60%. of that $2 trillion, the top 1% pay half. they receive approx .50 on the dollar of tax paid in benefits where the bottom surplus population receives approx $5 per dollar paid in tax. so, dont tell me about the wealth disparity in the usa. how about the disparity in russia? why aren't the liberals surrounding the russian embassy? must be nice to live off the toil of others!
Dec 13, 2013 3:33PM
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The Government takes in plenty ,but spend to much on the military after telling the American people they were going to cut the budget for the military,they put it back in, taking it again from the middle class,and the poor. Both parties always give us a line of bull,Time is right for a third party.BYE
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