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Detox for Tax Fact Cheats

| February 2, 2011

Rodin's Burghers of Calais (Les Bourgeois de Calais), 1889.

It’s one of those urban legends that keeps creeping out of suburban gutters like rodents on holiday: the old saw that the top 5 percent of earners pay over 50 percent of taxes, and that over half our citizens pay no taxes. Our right honorable friend who goes by the ironic handle of lawabidingcitizen just repeated both in a comment in the thread on the proposed closing of Washington Oaks and Bulow Creek state parks.

The factoids are not just false, but like so much of Reaganoized America has managed to do, they turn the rich into pitiable victims and the rest into leeching good-for-nothing union-lusting job-killing illegal-alien-marrying Muslim-children-birthing welfare-freebasing socialists. It’s good propaganda. It’s bad evidence and worse reasoning. Let’s set those two numbers straight.

Editor’s Blog

First off, the top 5 percent of wage earners do pay around 55 percent of federal income taxes, not all taxes. But income taxes in 2009 accounted for 43 percent of federal revenue, which means that the top 5 percent contribute only around 20 percent of federal tax revenue. That’s important in light of the figure the 5 percent half-story never points out, along with what taxes the top 5 percent do pay: the share of total wealth they own, which was 60 percent in 2007 (which also means the bottom 95 percent own just 40 percent of the nation’s wealth). So the reality is that the top 5 percent own 60 percent of the wealth but account for a measly 20 percent of federal revenue. Talk about lopsided.

And where does another 43 percent of federal revenue come from? Payroll taxes, which all wage earners pay, and which the rich disproportionately do not pay, since their contribution tops off at $106,800. Anything beyond that, no payroll taxes. Poor rich. Incidentally, the average after-tax income of the 5.9 million households in the top 5 percent bracket in 2007? $440,500. Must be tough.

The misconception (the obscenity, really, given its demeaning implications) that “half our citizens pay no taxes”  is further clobbered by the fact that everyone pays sales taxes–one of the most regressive taxes on the books–everyone pays utility taxes, franchise fees, and all sorts of other hidden taxes federal, state and local governments levy, and absolutely everyone, even non-home-owners, pay property taxes–especially non-homeowners, since landlords shift their property tax costs to renters, and then some.

For all that, let’s remember that we’re still the least-taxed (or close to it) industrial nation on the planet, with a top marginal tax rate set at 35 percent (compared to 90 percent in the Eisenhower years and 70 percent during the Kennedy-Johnson-Nixon years, when the country was at its most prosperous and least unequal). And still, the whining from the rich. The filth, of course, is not the wealth, but the cynical misinformation that still pops out of the rich’s woe-is-me echo chambers and drive the political agenda. Spare us.

—Pierre Tristam

17 Responses for “Detox for Tax Fact Cheats”

  1. Kyle Russell says:

    Excellent dose of reality. Also, it’s a bit ironic that the people who suggest that based on their “factoids” we should lower taxes on the rich are generally the same people shouting about how deficits caused by fighting unemployment hurt the economy.

    • Pierre Tristam says:

      Kyle, I kind of feel like I scooped you on this since you address those reactionary fantasies so well (we rely on you for fact-checking), but you must’ve been extra busy of late, being more scarce than we’re used to.

  2. Kyle Russell says:

    I try to help when someone gives me an opportunity, but the sheer amount of local rather than national news has given me fewer opportunities here than I would like; there are simply fewer sources to check things against at the local level, as you know. My new site has given me some room to address things as they happen, and I can use language a bit more ‘colorful’ than I feel appropriate here.

  3. Anne-Marie says:

    You may have your tax facts in totality correct, but you’ve tried to imply that the data you referenced as an “urban legend” is falsified. From NPR to Rush Limbaugh, there is no deception in the data. Everything I found says “income tax”.

    Additionally, the estimated sales tax deduction for Floridians is approx $1300 for a married couple. When someone who hasn’t paid income tax receives Earned Income Credits to the tune of $3000, sales tax paid becomes negligible. So, essentially, yes, there are people who don’t pay any income tax AND they get a “refund’ which negates any sales tax they paid.

  4. Tom Brown says:

    Pierre, thanks for giving us the bigger picture. Intuitively, I always thought that “5 percent pay 55 percent” was off-base. Thanks for the corrective. We also should consider how the byzantine tax structure will affect the latest “tax break stimulus” that the lame ducks handed us. The extra dose of local aid contained in the first stimulus act has run out. So those few extra dollars you may be getting because your Social Security tax has been cut most likely will be eaten up by higher property taxes, more user fees, etc. I doubt many of us will be buying more consumer goods. So far, I haven’t found an economic model from the Obama administration or the Federal Reserve that takes this into account. But any Joe Sixpack who does a household budget has noticed this already.

  5. Kyle Russell says:


    You have a good point about how higher state and local taxes will pretty much cancel out the “mini-stimulus” that came with the tax deal. Here’s a good example of how big the problem is:

  6. some guy says:

    This so called nations wealth does not belong to the nation it belongs to that person and that person alone.

  7. NortonSmitty says:

    Some guy, strangely that actually is starting to make sense since the Bush Supreme Court ruled that a corporation is now legally and rightfully a person. So our nations wealth does belong to them in proportion to the amount of the GDP they control. Now, what are you and I going to spend our $2.43 share on?

  8. Kyle Russell says:

    some guy,

    Way to miss the point. You think that’s it’s socially correct for a small minority to hold the majority of the wealth? I am in no way stating that we should go “From each according to his ability, to each according to his need” or anything, I’m just saying that the wealthy in American become so because they were able to sell their labor or products to the rest of us. Wouldn’t it make sense for them to help the society that has helped them get where they are?

    And before you say something about how the wealthy deserve their wealth because they are smarter/innovators/etc, let me remind you that reality isn’t like Atlas Shrugged. Without the lower and middle classes, the wealthy have no customers but themselves.

  9. Big Fish says:

    .Funny how the tax paying side is simply called “the rich”, no mention of their hard work and risk taking. Also thanks for leaving cooperate taxes out of the equation for total federal revenue. Even these distorted numbers (5% pay only 20%) proves the left demands successful people to pay far more than they should. Cutting government spending is not an option, instead a redistribution of wealth is required.

    Also, the argument has always been “5% pay more than 50% of income taxes”. Why couldn’t you write a non-partisan article explaining the break down of federal revenue and let people form their own opinion?
    Never mind, we know why……

    Nice work Pierre…

  10. some guy says:

    N.S. i am more concerned about my/our share of our national debt that is about 35k per person and more if you only count TAX PAYERS. Our polititions have done us wrong by speending us into such debt but most still vote for the one that says they will take from others to give to them.

    Kyle I think i hit the point as I do not get what you mean by “socially correct” is. It is nott RIGHT to have our government TAKE from one to give to others just to keep them in power and through crumbs to the masses.

  11. Kyle Russell says:

    Ironic that in America we have so many that fight for inequality.


    Does anyone understand exactly how many people who live in the USA that don’t only do not pay any taxes but get lots of money back each year when they file their income taxes….you can say whatever you want about the rich not paying enough but they pay a lot more the less than zero …plus it’s always us in the middle that pay the most!

  13. Kyle Russell says:

    Until we improve education in this country, there’s going to be plenty of people in that bottom tax bracket, with more coming each year. Of course, improving education isn’t an investment most conservatives are willing to make.

  14. Big Fish says:

    It is the left that fails to set standards for teachers and make real changes improving our education system. Obama is the President, maybe you should hold him accountable, although I do agree something needs to be done.

  15. palm coaster says:

    Kyle, I am glad that you representing our new generations, are not blinded by the distortions expressed by these conservatives. They blame the other side for all failures while cheering for more deregulation that actually has brought us down were we are now since 2001. For the past ten years corporations and the wealthy special interest have ruled us and the results are here for all to see. First time ever seeing in this county hundreds in line for jobs at two restaurants chains. Not even better standards for education will generate our needed jobs as long as we do not bring our manufacturing back home and the only way to do it, is by taxing imports. Example Apple new IPads in production soon to be marketed to us and produced in China and India…Tax them coming in and they will bring their manufacturing back here.
    How many high tech or professionals right out of college will get a job when the manufacturing that will need their administrative skills seats in India or China because “slavery is very profitable?”!5542527/undercover-report-from-foxconns-hell-factory. These Chinese workers can’t afford to buy these gadgets, they produce them for us…so tax these imports and recoup our jobs. Shame on greedy Apple and our pseudo free trade (one way….in only). Also when our youth has to spend fortunes in our paid colleges then they have to compete with Asian, Middle Eastern or European graduates that got their degrees thru free government funded colleges overseas and come here affording to be hired for less.
    They do not have the thousands in college loans on their backs to pay for, as the only thing they needed to do for their free higher education was to pass the minimum average point in their admissions test on their colleges back home. We can’t afford that here for our students, as among other things, we have to sustain a trillions budget for policing the world.

  16. Big Fish says:

    Once again, what is Obama doing about it?

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