My post about Equality in Taxation earlier today has elicited several responses about how much the rich actually do pay, after deductions and loopholes. The real point of that post was the concept of whether government should be able to charge different groups of people different rates. I think that's a dangerous road, because once you start targeting different groups, where does it end?

This post is in response to how much the rich actually pay in taxes.

Data from Dec 2007 shows that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans.
  • The wealthiest 1% of the population earn 19% of the income but pay 37% of the total income tax paid (not including payroll taxes for Social Security and Medicare).
  • The top 10% pay 68% of the tab.
  • The bottom 50% pay just 3% of the taxes.

An analysis of the Actual 1998 Income Tax for Individual Tax Returns showed the following:

  • The richest 1.3% (those with Adjusted Gross Incomes of more than $285,321) earned 20% of all AGI and paid 36% of all income tax. On average, the tax amounted to 27% of their AGI and 30% of their taxable income.
  • The richest 6.5% (those with AGI of $95,216-285,321) also earned 20% of all AGI, but paid 24% of all income tax. On average, the tax amounted to 18% of their AGI and 23% of their taxable income.
  • The well-off 12.2% (those with AGI of $60,237-95,216) also earned 20% of all AGI, but paid 17% of all income tax. On average, the tax amounted to 12% of their AGI and 17% of their taxable income.
  • The upper middle 20% (those with AGI of $33,548-60,237) earned 21% of all AGI and paid 15% of all income tax. On average, the tax amounted to 10% of their AGI and 15% of their taxable income.
  • The remaining 60% (those with AGI of less than $33,548) paid 3-7% of their income in taxes.

Now, I'm not part of the "rich" class, so I have no inherent reason to defend them. But all the studies I read show that putting huge tax burdens on the rich just ends up hurting the economy. It de-incentivizes them from creating companies and providing jobs. It sometimes drives them to retire early and move to other countries and spend their money there. Eventually, all their wealth is gone, and then who is going to pay the taxes? A number of reports show that the number of millionaries is shrinking rapidly.


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