Tax Foundation: Tax Burden of Top 1% Now Exceeds That of Bottom 95%
Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.
Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.
To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.
Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.
We are definitely overdue for some honesty in the debate over the progressivity of the nation's tax burden before lawmakers enact any new taxes to pay for expanded health care.
It is common to hear people talk about the divide between the rich and the poor. In fact, the divide has been between the top 1% and everyone else. Adjusting for inflation, changes in household size, and non-cash compensation, all quintiles of the population have seen significant growth in their income over the last thirty years. But the top 1% has risen much faster. It is unclear why, but the most convincing argument I've seen is that technological innovation disproportionately benefits those whose wealth is invested in the markets. It is unclear that the income of the top 1% rose enough to justify this graph, but it has to be factored in.
This post correctly points out that the Bush tax cuts made the system more progressive, not less so. See my post from last year, Taxing Questions.
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