David Leonhardt has a rather lengthy article in the New York Times right now, trying to discredit the significance of the fact that 47% of Americans might not pay any federal income taxes this year.
Leonhardt writes it off as a sign of generous U.S. stimulus, and then bemoans the fact that tax rates for wealthy Americans aren’t as high as they used to be in the past. He also critcizes the 47% figure for only looking at federal income taxes, not all taxes.
But there’s one tiny detail not in there… based on the latest available data from the Congressional Budget Office, wealthy Americans are paying a larger share of Total Federal Tax Liabilities (Yes, total, not income tax only) than ever in at least the last 30 years. The 47% figure the New York Times attacks just scratches surface of what is an enormous disconnect between who and who doesn’t pay for all the Federal programs everybody feels entitled to argue about. And come on, this is simply what you’d want to know — at the end of the day, who is paying the bills? Ie. what percentage they are paying, ie. what is their tax burden.
Hence… In 2006 (the latest data available), the 40% highest earning American Households paid 86% of Total Federal Tax Liabilities. The 60% lowest earning households paid just 14%. The 40% highest earners have never paid such a large share of total federal tax liabilities as far back as we found tax burden data (back to 1979). You can see that there has been a steady erosion in the bottom 60%’s contribution to total federal taxes. We don’t show it in the chart below, but in case you’re wondering, the picture is even worse for the top 10% of Americans. The top 10% of Americans paid 55.4% of total federal taxes, which was a higher share than at any time in the data period going back to 1979. In 1979 they paid 40.7% of total federal taxes, so the top 10% highest earners have taken on a substantially larger share of total taxes, ie. funding of the federal government, over time.
Given the massive stimulus benefits given out during the crisis we wouldn’t be surprised if the trend shown in the chart below has expanded even further recently. Make whatever moral judgment you will about whether or not this is fair or unfair. But it’s a fact, according to the Congressional Budget Office. We encourage you to check our numbers, you can find them here.
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