President Barack Obama talked a lot about taxes and fairness in his State of the Union speech last night. Like this bit:
But in return, we need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes. … We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. …Tax reform should follow the Buffett rule: If you make more than a million dollars a year, you should not pay less than 30 percent in taxes.
Are wealthier Americans really not paying their fair share? Here are some numbers on income inequality:
1. The top 1 percent pay 36.7 percent of federal income taxes and earn 16.9 percent of adjusted gross income (as of 2009).
2. The top 0.1 percent pay 17.1 percent of taxes and earn 7.8 percent of adjusted gross income.
3. The average income tax rate for the top 1 percent is 24 percent. The bottom 50 percent? Just 1.85 percent.
4. The bottom 50 percent pay just 2.3 percent of income taxes.
5. Buffett chose to leave most of his fortune to the Bill & Melinda Gates Foundation, avoiding a 55 percent estate tax.
6. Buffett actually pays 50 percent tax since capital gains and dividends taxes are a double tax on corporate income.
7. Taking half of yearly income from every person making between $1M and $10M would only decrease the nation’s debt by 1 percent.
8. Taking every dollar from everyone making more than $10M per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent.
9. IRS will give out roughly $110 billion in “refundable” tax credits this year to households that pay no income taxes.
10. If taxable income in the 35 percent bracket were taxed at 49 percent, federal income tax revenues would be just $78B higher (Tax Policy Center).
11. To get the deficit to 2 percent by 2020 using Obama’s budget baseline, it would take a 91 percent top rate by taxing just the rich.