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InsiderOnline Blog: October 2008

Who Pays Their Fair Share?

The U.S. tax system is still progressive, reports The American’s Duncan Currie:

According to the latest Internal Revenue Service (IRS) data, the top 1 percent of income earners paid nearly 40 percent of federal individual income taxes in 2006, compared to roughly 19 percent in 1980. Between 1980 and 2006, the share of federal income taxes paid by the top 5 percent jumped from under 37 percent to over 60 percent. During that same period, the share paid by the top 10 percent went from around 49 percent to almost 71 percent.

To be sure, the share of income earned by the top groups has also increased substantially. The IRS says that in 1980, the top 1 percent of income earners collected less than 8.5 percent of all adjusted gross income (AGI), compared to more than 22 percent in 2006. Between 1980 and 2006, the share of AGI earned by the top 5 percent grew from about 21 percent to nearly 37 percent. During that same period, the share earned by the top 10 percent swelled from roughly 32 percent to over 47 percent.

But when we compare the figures for 2006, it is clear that the percentage of federal income taxes paid by the top earners was considerably higher than the percentage of AGI they received. For the top 1 percent, the difference was almost 18 percentage points. For both the top 5 percent and the top 10 percent, the difference was nearly 23.5 percentage points. For each of these groups, the difference between percentage of federal income taxes paid and percentage of AGI earned grew significantly larger between 1980 and 2006.

Posted on 10/28/08 11:35 AM by Alex Adrianson

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