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.
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.