Today, President Obama is kicking off a road show campaigning for raising taxes on higher income earners to help reduce the debt. We'll no doubt hear a lot about how the rich need to pay their “fair share.” Yet an analysis of tax data shows that wealthier taxpayers already pay a disproportionate amount of taxes and that their share under the current Bush rates is actually slightly higher than at the end of the Clinton era.
In 2008, the most recent year for which full data is available, the infamous top 1% – those earning over $380,354 – paid 38.02 percent of federal income taxes, according to an analysis of IRS data by the Tax Foundation. Meanwhile, the bottom 50 percent of income earners – the group that, according to the liberal world view, is subsidizing tax handouts to the wealthy – shouldered just 2.7 percent of the federal income tax burden. And keep in mind, in 2008, the higher income earners share of taxes slipped from the previous year's 40.4 percent due to the economic downturn.
When you make this argument to liberals, they'll often respond that the only reason such a distribution exists is that there's a lot of income inequality in America. But even if you account for that, the wealthy are paying disproportionately. The top 1 percent, for instance, earned 20 percent of the nation's adjusted gross income in 2008 – yet their share of the tax burden was nearly twice that. Meanwhile, the bottom 50 percent earned 12.75 percent of the nation's income, while their share of the tax burden was about one-fifth of that. You can see this demonstrated in the chart below.
Another way of looking at this is the average tax rates paid by each income level. As you see below, it's much higher at the higher income levels.
Still, some might respond, surely the rich are now paying a smaller share under the Bush tax rates than they were back in the good old Clinton days? Actually, that's not true either. As you can see in the table below, the distribution of the tax burden across income levels was roughly similar in 2000 – the last year of the Clinton tax rates – then it was in 2008, after the Bush rates had been effect for years. In fact, the rich paid a slightly higher share in 2008.
How could this happen after the Bush administration spent a decade heaping benefits on the rich while squeezing the middle class? Mark Robyn, who co-authored the analysis for the Tax Foundation, noted that the Bush tax cuts were across the board. So when Democrats speak in aggregate dollar terms, they can make it seem as though wealthier Americans are getting a better deal. But that's only because they pay a lot more in taxes, so cutting taxes for all is going to result in a larger dollar figure for them. But if you analyze it as a share of taxes paid, the Bush tax cuts didn't change the distribution.
Of course, this doesn't tell the whole story. It doesn't account for payroll taxes, for instance, which do hit middle and lower income levels. But much of the current debate has focused on the need to raise marginal income tax rates on higher earners while keeping them the same for everybody else. The question is, though, if a society in which the top 1 percent already pay nearly 40 percent of the nation's income taxes (and when combined, the top 10 percent pay nearly 70 percent), then what would it take for liberals to be satisfied that the rich are paying their fair share? Should the top 10 percent pay 90 percent of the taxes? Should the bottom 50 percent pay zero income taxes? President Obama's vision to subsidize the ballooning social safety net by shifting even more of the tax burden on the wealthy – while increasing the percentage of people who are net takers in society – is simply unsustainable.