This month’s featured article from TEF.

Are the “Rich” Paying their “Fair Share” of the Federal Personal Income Tax?

 by Amy K. Frantz

“It’s only right that we ask everyone to pay their fair share.”  -President Obama, September 2011[1]

Our current President often asserts that those at the upper end of the income spectrum are not paying enough in taxes, to the detriment of those at the lower end and even the middle class.  Practically every new program is accompanied by a call to just raise taxes on the “rich” to provide the funding.  So just what percentage of federal personal income tax paid is paid by the “rich?”  National Taxpayers Union Foundation recently updated their research that has tracked the distribution of the federal income tax burden over time, “Who Pays Income Taxes?”  Let’s take a look at the most recent numbers:

TEF April 2015 chart 1

For the 2012 tax year, those with incomes in the top 1 percent of Adjusted Gross Income (AGI) pay close to 40 percent of the personal income taxes paid to the U.S. government.  If you include the top 5 percent, the percentage paid is more than half of the federal personal income tax paid, at nearly 60 percent.  Those in the bottom half of the rankings of AGI pay just under 3 percent of all federal personal income taxes paid.

Another argument often made by big-government enthusiasts in Washington, D.C. is that the rich are getting richer at the expense of the poor.  But how does the percentage of federal personal income taxes paid stack up for these two groups over time?  Let’s look at the numbers for the 1982 tax year, thirty years earlier than the previous numbers:

TEF April 2015 chart 2

As you can see, those with incomes in the top 1 percent of AGI paid close to 20 percent of the federal personal income tax paid for the 1982 tax year.  That means the percentage paid by this group has nearly doubled in thirty years.

For the bottom half of the AGI rankings, the percentage of federal personal income tax paid in 1982 was just over 7 percent.  That means the percentage paid by this group is less than half of what it was thirty years ago.

Are the “rich” paying their fair share of the federal personal income tax?  It depends on how much of that income you believe should go to the federal government vs. how much should be left in the pockets of those who earned it.

Amy K. Frantz is Vice President of Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.

[1] David Jackson, “Obama: Rich should pay ‘fair share’ to reduce debt,” USA Today, September 19, 2011, <http://content.usatoday.com/communities/theoval/post/2011/09/obama-unveils-3-trillion-plus-debt-cut-plan/1#.VQnxG7MtHcs > accessed March 13, 2015.