Are the Top 1% Really Getting Off Scot Free? Let’s Look Again…

The American Enterprise Institute and the Congressional Budget Office (CBO) have issued their latest report on income and taxes, and it offers an interesting response to that often-asked Liberal question: Why aren’t the wealthy paying their fair share?” In the video above, IJReview writer Michael Hausman analyzes the data.

The CBO report, entitled “The Distribution of Household Income and Federal Taxes” analyzed data current through 2011. The report looked at:

(Each) American household’s: a) average “market income” (a comprehensive measure that includes labor income, business income, and income from capital gains), b) average household transfer payments (payments and benefits from federal, state and local governments including Social Security, Medicare and unemployment insurance), and c) average federal taxes paid by households (including income, payroll, corporate, and excise taxes).

According to the latest figures, the top 1 percent of households earned 15 percent of the income in the country. Yes, that’s a lot. However, the same people actually paid 35 percent of all federal income taxes.

The top 20 percent of households earned 52 percent of total personal income. Again, that is a generous slice of the pie. But that 20 percent paid 69 percent of federal income taxes.

who-pays-what2

The bottom 20 percent of households earned only 9 percent of all personal income in America, but they only paid 1.9 percent of all taxes paid.

Taxes paid by that bottom 20 percent of households have actually fallen since 1984, from 9 percent to the current low.

Here’s a surprising statistic: 40 percent of all households in the United States get more than half their income from federal transfer programs, meaning they were largely supported by the higher earning groups. And when those government transfer amounts are factored in, 60 percent of people in the United States actually had negative rates. So they got more money from the government than they paid in taxes.

Looking at these numbers from another viewpoint, we can see the top 20 percent of households paid in an average $46,500 in taxes. This amount is the highest in both dollars paid and percentage of gross personal income tax paid by Americans.

In other words, only the top 20 percent paid a substantial amount in income taxes. Essentially, they took up the slack for everyone else.

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  • James

    Just something to consider, as of 6/30/2013 57.5 million folks or 18% of the US population were receiving social security benefits. If we remove them from the chart what would it look like? Or should I assume that the money I’ve paid for my 45 work history shouldn’t come back to me?

    • fulredy

      Depending on your earnings, you collect 100% of what you paid in within the first three to six years of collecting SS; thereafter, 100% of your SS benefit is paid by working folks. Is it no wonder why SS is nearly bankrupt?

      • Problem being there are more freeloaders than those in the workforce !

        • donjusko

          That is completely new information to this thread with no proof. Do you want to supply a little?

          • A_Nobody

            He has a point when considering those who’ve never paid into the system and numbers are readily available on the number of folks who haven’t….added by presidents like Carter, and Obozo, and I think even Bush, the last, and it’s a huge amount. I DO NOT include those who worked and paid into the system as freeloaders. Only the ignorant do that to boost their arguments. BTW, squawking about 2 T over 18 T is a little silly. Handle the 18 then we can talk about the 2 T.

        • James

          What’s a freeloader? Old folks who lived longer than we expected or worked at jobs that made our country function but didn’t make a ton of money. Perhaps we could use the old Eskimo approach and put them on an ice flow and let them drift out to sea.

          • Candice Hiler

            The freeloaders are those who receive SS benefits without having paid into the system.

          • A_Nobody

            Agreed.

          • James

            SS requires that you have worked for 10 years and earned a minimum of $4800 per year to collect benefits. I realize that’s not a lot of money but your benefits will reflect the lower earnings. I believe there is the same requirement to collect SS Disability.

          • ernaldin

            I know a family that was getting SS benefits on children as young a year old. The requirement you speak of are NOT real….

          • James

            Not sure how that works based on what I read on the SS Trust Fund web site. Unless they are collecting survivers benefits. Do you have info on what kind of benefits they are getting?

          • Ron Warren

            Your monthly SS benefit “check” is based on the three highest annual earnings during your 40 years working. So if you made a million dollars per year for only three years and only $6,000 a year the other 37 years your check would really nice. But then you have to pay income tax on your SS benefits–AND THAT IS STUPID. We’ve already paid tax on it! OK, I get it. We have to support the freeloading, non-contributing members of society with withholdings from SS payments. And don’t forget the offspring of recreational sex producing children out of wedlock that we have to support.

          • Ron Warren

            No way. They PAID INTO THE SYSTEM that is supposed to keep them afloat by way of funds BEING PAID IN NOW. However the Socialists in government positions are arranging for an excess of non-contributing members to get more when THEY SHOULD BE PAYING into the system. Now add in the illegals who clamor for freebees they never worked for and see how the benefits field is highly tilted. And tell me how people can ride in luxury cars when they pay for food with EBT cards. I’ve witnessed some doing this. If you can afford a Cadillac, Lincoln or Mercedes why do you require an EBT card. And no funny answers like “They don’t have money left over for food so require government assistance.”

        • fulredy

          Not freeloaders, just those that benefit when their earnings and contributions are less than their benefits.

      • James

        Last I saw that doesn’t happen until 2033 which means we need to address that issue before that happens. Based on my payments and the interest rate that should have been paid on the SS Trust account for what I paid in, is that my payback will not happen in 6 years. Not sure how I could actually find out what I actually paid into it, would be curious if my guess is correct.

        • fulredy

          2024 is the latest estimate.

          • James

            I think that 2024 is based on the feds not paying the interest they owe the trust fund. If they pay it’s 2033, after that their will only be enough money to pay 75% of the benefits.

      • conservative since 1962

        While a SS recipient collects 100% of the amount he/she PAID IN during the first three to six years of collecting SS payments that does not include the value of the compounded interest that should have accrued on funds that were paid in while working. Assuming only the yield of U S Treasury Bonds over a 45 year of paying in to SS would probably cover the payments to the recipient for at least a decade.

        • independent thinker

          Exactly. I did some rough calculations on my SS contributions and if I were reimbursed for my contributions with interest compounded annually my SS account would be worth over half a million dollars and I have never made what would be considered a large salary.

          • James

            Simple question, so why does this article make us look like takers when in reality we are givers?

          • independent thinker

            This article? Not really but I have seen many on Huffpo and Daily Kos that indicate their belief that if you were successful enough to make a decent living and retire with any kind of income you should be considered part of the elite and taxed to death.

          • James

            If you were successful and saved for retirement in a 401k or 403b you didn’t pay tax on that income. So when you start taking those dollars you pay income tax. Seems fair to me especially since you will probably be in a lower tax bracket than you were when you deferred that income.

          • A_Nobody

            And I saw a calculation for mine that put mine at close to one million dollars at a 4% compounded interest.

        • fulredy

          True, unfortunately, that’s not the way it works.

          • A_Nobody

            From the numbers provided me, yes it does.

        • James

          According to the SS Trust Fund, if you retired in 2003 it would take 17.4 years to get your money back. And if you retire in 2020 it will take 21.6 years.

      • rocky63

        Not necessarily true. I recently did that calculation — got my “pay in” record from the SSA and also the history of SS payments to me. I will “break even” at about the 19.5 year point.

        But that doesn’t take into account the changing value of the dollar. A collar I paid in in 1963 would buy much more than the dollar I receive in 2014. If I had been allowed to put that 1963 dollar into a private investment account, one that paid interest and where the stocks involved would appreciate, my 1963 dollar would have earned a significant amount of interest and appreciation in the intervening 50 years.

        Bush got attacked for suggesting that SS payments be allowed to be put into a private investment account. But he was right and all who pay into SS would be better off if that were allowed — at no cost to the government.

        The basic problem with SS is that we are required, by law, to give $ to the Federal Government, who does whatever they want with those dollars, and we allow that same entity to decide what to give back to us. In an investment account, the worker would OWN the investments and the private agency managing his funds would be required to pay them back. The federal government would no longer be able to just decide to steal the money for whatever it wants to use if for.

      • ernaldin

        FDR is considered a great president for enacting the greatest Ponzi scheme of our times, and Bernie Madoff still sits in prison. I find it odd, and possibly laughable….

        • fulredy

          You are right. Plus, I wonder if FDR would of even been a great President if people knew that he deceived them four times to become and remain President? Deceiving the voter seems to be job #1 to get elected.

  • paul

    Throw the old folks under the bus its a favorite habit of Obama think of all those defense secretaries and senators like in LA where Mary will collect a bigger retirement than any so called freeloader on social security. As the population ages and the health of Americans declines the number of those getting money from social security and social programs will increase. The baby boomers will age and have aged and are on the programs surprised? Am so tired of hearing about how many are on social programs when this should be no surprise the population ages via abortions and poor educational systems we create a shortage of potential taxpayers to pay for any programs. Should a nation that commits the sin of prenatal murder? Should educators and Obama who purposely designed school systems that failed our modern day students what those one expect?

    • James

      Too bad we were having a reasonable conversation about SS issues and now the right wing racist nut has too enter the discussion. Thought SS was FDR’s issue, perhaps Obama is the secret son of FDR. Would think that abortion and the death penality would also cut down on the number of future recepiants of SS which in your opinion might be helpful.

      • paul

        What I discussed was reasonable solutions to taxation you know nothing of racism or SS issues. I do not believe in abortion for any reason especially financial convenience as far as the death penalty is concerned that is a state issue where if the state and its voters decide that a crime such as murder is so devastating to society it is deserving of that penalty that is up to them criminal cannot collect SS while incarcerated anyway. I will not respond to your comment on race it is not worthy of any discussion. SS was started by Roosevelt but expanded by every politician in the early years because the early beneficiaries did die off sooner than their retirement dates the average expectancy was 65 many people paid into it died never getting much or any of their money left. FDR did have sexual affairs where he found the time I do not know but maybe you know something about him and Obama I do not. Those who desire reasonable conversations do not use your tone or interject race where ever you get that one from you have quite an imagination

        • James

          Sorry, perhaps my racist comment was incorrect but interesting you mention Mary without mentioning that the current majority of House members are Republican and in Jasnuary that will also apply to the Senate. They will get the same benefits as Mary so why not reference all Congressional members instead of just focusing on Mary?

          • paul

            Mary is current news’ I do mention other senators here is the exact quote “senators like in LA where Mary will collect a bigger retirement than any so called freeloader on social security” so other senators are mentioned. The key idea was Obama throws people under the bus Cassidy got the Keystone Pipeline through the House Mary could not despite her 97% voting record with Obama and Reid the latter never changed the rules so the bill could go to the White House. Mary also lost democratic funds for her race. Therefore Obama and company throws Mary under the bus. Neither one of the candidates in LA are black. Racism?

          • James

            I admited that that comment was incorrect, however your comment about Mary did not mention any other Senators. How does Obama throw people under the bus? Not sure what that means, there were other races in the 2012 and 2014 elections where the Republican Party didn’t think they had a shot and didn’t invest their money, so who do we blame Romney, McConnell or Boehner? So why is it Obama not the Democratic Party that makes that decision?

          • paul

            I answered all your questions after you called me a racist please reread the last comment. Obama raises more money than anyone else in one day he is head of his party and has influence over where it is spent. The Republicans are even worst who ever is making their decisions is an idiot no candidates recruited or no funding of those who were candidates. None of the republicans you mentioned claimed to be a candidates friend like Obama did to Mary she votes 97% of the time with Obama bragged about her influence and ties with Obama and Reid thereby not changing the rules to pass the Keystone Pipeline or fund her campaign any further he threw her under the bus its all these Now where did racism come from?

  • paul

    Tax reform is needed not taxing the rich based on the facts. A flat tax or a sales tax in exchange for lower tax rates everything being at reached revenue neutral Reagan did it we can do it. Removal of caps on social security taxes and Medicare taxes in exchange for a slightly lower payroll taxes. Solutions not discussions about who is a freeloader. In addition, all federal, state, and local employees pay at least some of the normal social security and Medicare taxes currently if you are in the schools retirement system you do not pay these but if you become disabled or have had other jobs where you paid into social security you still get social security although you may not have paid into it for years. Right now the president is too busy chasing wind mills in the make believe world of police shooting at young black teenagers

  • Vernon Jackson

    well this does make a lot of sense don’t expect the slime sucking democRAT’S to admit it tho :-/

    • James

      Try to understand that it’s hard to have a reasonable conversation when your only imput references slime sucking and contributes nothing to the discussion

      • Vernon Jackson

        funny liberal’s are always dropping name’s like right wing NAZI,retard and others tell me have you called them on that?————————————————————————————————- no I didn’t think so Oh well :-/

        • James

          I tend to stay away from name calling except when the other person starts it. Than they leave me no other option but to give back what I get.

          • Vernon Jackson

            notice I didn’t call you any? that was because your post to me was civil unlike many of your fellow’s as well as when I looked your reply’s to others here you were just as civil still I ask again have you called your fellow’s on posting’s like you called me on mine? if not why not? a question to think about before you ask when I’ve seen someone closer to my side jumping down someone’s throat undeservedly I have called them on it and got chewed on for it however I regret it not and I’ll do it again

          • James

            To be honest I would rather have a civil discourse about our differences rather than get into name calling. Although I will admit that when folks who don’t know me or what I think get into both name calling and physical threats I tend to return the favor. I try to ignore folks both on the right and left who think anything can be resolved by insults and threats.

  • joão cezar

    You want “Fair Taxes”? Ok. Flat tax, say, 10%. If you make a dollar, you pay a dime in tax. Everybody pays. Every dollar earned. Corporations, companies, businesses, people, any income source, make a dollar, pay a dime. No loopholes. No tax shelters. Even welfare recipients. That’s where the “Fair” part comes in. It has to be everybody, or it’s just not fair…

    • James

      Interesting idea, read something the other day that corporations use to pay 35% of federal taxes and now only pay 9%. Kind of wonder what a flat tax would do to those numbers. So are you suggesting no deductions for things like mortgage interest, charitable contributions, etc?

      • rocky63

        In what fairy tale did you read that corporations pay only 9% in federal tax. The US has the highest corporate tax rate of any developed country and it’s many times bigger than 9%. A corporation whose income is between $335 thousand and $10 million pays 34%. A large corporation with income between $15 million and $18.3 million pays 38%.

        Get some facts.

        • James

          Please try and read what I said, my comment has nothing to do with the corporate tax rate. In the past 35% of federal income taxes collected came from corprations, they now only account for 9% of the taxes collected. And just something to contemplate. GE paid no taxes in a recent year and in fact got 1 billion dollar rebate, that doesn’t add up to 35% in my math class.

          • allanholtz

            Not sure what math class you took James. But tax revenue does NOT follow the rules of simple math. One MUST dig deeper. I do not argue with you that corporate tax revenue might now be only 9% (or whatever percent) of total tax revenue collected. The important question is what must US tax rates/policy be in order to bring more corporate operations back to America? That is NOT a math question, but I think it is the most important tax question that Congress and the US Executive Department NEEDS to address. If you want more high paying jobs in America, you need to lower corporate tax rates below that of competing countries – and in our now global economy that means ALL foreign countries, or at least it soon will. Now only those businesses that do NOT have the ability to move operations overseas get stuck paying our high corporate tax rates. Most of those are either start-ups or of a small local nature, hence they can’t move and find themselves at a huge economic disadvantage to those larger companies able to go to low tax rate countries. That is the real math reality and why how our comparably higher corporate tax rates lead to increasing economic disparity in America.

          • James

            Don’t disagree but in order to give those small corporations a lower tax rate, we need to change our tax code so folks like GE can’t hide their US profits in other countries.

          • allanholtz

            The ONLY (decent) way you can get GE to not “hide their US proifits in other countries” as you put it, is to lower the US corporate tax rate for ALL corporations. Then their is no INCENTIVE to leave or move profits to other countries.

            I said “decent way” is that you could somehow pass legislation to try to force companies to stay in the US while taxing them at high rates. But I believe that would ultimately prove counter productive in some unforeseen way.

            You either make the rules so as to support free markets or you pay the consequences of using force to try to “improve” free markets.

            Remember the laws of physics…For every action there is an equal and opposite reaction. (Or put another way – No such thing as a free lunch). Likewise the first law of thermodynamics teaches you can’t win. The second law teaches you can break even.

            Pardon my scientific approach to thinking – It is in my DNA coupled with my 37 years as an R&D engineer prior to my retirement.

          • James

            Problem is that those large corporation buy many of our elected officials with their campaign contributions and I don’t see Congress passing the laws that would achieve your goals. Meaning lower corporate tax rates but everyone pays not just the small guys.

          • allanholtz

            Yeah…Welfare to the poor buys votes and welfare to the rich buys the money to finance campaigns. Which is why I do NOT see “what I would like to see” (a free market economy with no welfare for rich or poor, no minimum wage, open borders and limited regulations) ever happening…I currently receive social security, a pension from my first employer (of 30 years), my wife gets half as much as I get from social security based on my work experience. She started Medicare the first of this month and I start the first of February. Even though we now “get” more from the government than we pay in, for 37+ years that was not so. I do wish FDR had not been successful in implementing social security and that Johnson had not implemented Medicare. But given they DID, I would be a fool not to now claim what they are willing to give me, even knowing it can’t last forever for everyone. I also hope to live long enough to get back more than I paid into each. To that end I at least exercise (a lot) and eat mainly unprocessed foods and try to minimize ingesting poisons and try to enjoy each and every day. Now if I could just get my wife to do the same…But I never was a very successful leader (someone with a lot of other people following their lead).

          • James

            About 3 years ahead of you on the SS & Medicare train. Not sure I can agree with your thoughts about a free market economy. Considering that the banks and Wall Street almost put us into a depression several years ago, I would lean towards a limited amount of government regulation.

  • tom2

    Proves the resilience of permitting even a bit of free enterprise in a socialist system.

  • ddearborn

    Hmmm

    Right of the bat the numbers coming from this right wing economic terrorist front group (American Enterprise Institute)are not representative of 2014. The latest “figures” show that the richest 1% are taking home over 20% of the income. And within that group the richest 10% (1/10 of 1% of the total) are taking home half of that) AND THAT GROUP HAS AN EFFECTIVE TAX RATE WELL UNDER 5%. In many cases the richest Americans, like the most profitable US corporations PAY NO FEDERAL TAXES! Simply put a huge percentage of the income is shielded offshore. Another large percentage is shielded by the thousands of tax laws written specifically for that purpose. The effective tax rate is miniscule. Pay attention the numbers they quote are 3 years old. And they have gotten much more skewed in favor of the rich in the last 3 years.

    In short the entire article is a fraud. Which is hardly surprising considering the source. The fraud or deception here is that this article implies that the rich are paying their fair share of taxes because they are paying a lot of FEDERAL taxes (not as a percentage of income just total dollars). However FEDERAL taxes are only a portion of the total tax burden placed on Americans. There are hundreds of local, country, state and Federal taxes beside income tax. As a percentage of total income (another words not “adjusted” to shield wealthy incomes) the working poor are paying many times as much of their earnings as the rich. This coupled with the FED’s all out attack on destroying the purchasing power of the dollar is why the poor are actually a lot poorer than they realize and the rich a lot richer. You will find that the rich (1/10 of 1% in particular) do not expose their holdings to the ongoing devaluation of the US dollar) The working poor in America of course have no choice.

  • ernaldin

    The media still misreports the facts, or are simply STUPID. There is a difference between the “rich” and the high income earners. The former aren’t taxed until they die in most states, and the latter are taxed HEAVILY, by feds and most states. You dopes in the press need to get a clue!