08 October 2007

Tax Foundation: Rich Richer

The conservative tax foundation has released an analysis of IRS income tax information that shows just how much richer the rich have gotten in the past twenty-five years.

In 1980, the top 1% had 8.46% of the nation's adjusted gross income, and the next 4% had 12.55% of it.

Im 2005, the top 1% had 21.2% of the nation's adjusted gross income, and the next 4% had 14.55% of it.

Every income group in the bottom 95% of the population: those in the 6th to 10th percentiles, those in the 11th to 25th percentiles, those in 26th to 50th percentiles, and those in the bottom 50% saw their share of AGI decrease.

High income earners took hits in 1980, 1988-1990, 1992 and 2000-2001, but have otherwise relentlessly increased their share of the nation's income. The rich had a larger share of the nation's income in 2005 than at any other time in the 25 year period reviewed.

The average (as opposed to marginal) income tax rate for each income group was as follows:

Top 1% -- 23.13%
Top 2%-5% -- 17.36%
Top 6%-10% -- 12.37%
Top 11% to 25% -- 9.27%
Top 26% to 50% -- 6.93%
Bottom 50% -- 2.98%

The average tax figures seriously misstate the total federal tax burden of taxpayers. The earned income of those in the bottom 90% (and the bottom 90% overwhelmingly get their income from earnings rather than investments) is subject to a combined employee and employer FICA tax burden of 15.3%. Those in the top 10% are subject to a combined employee and employee FICA tax burden of 2.9% which is due only on earned income (a much smaller share of the income of high income earners).

Also, high earners, particularly those in the top 1%, receive a significant share of income from sources which are not included in AGI such as municipal bonds.

Adjusted for FICA the average tax burden is roughly:

Top 1% -- 26.03%
Top 2%-5% -- 20.26%
Top 6%-10% -- 15.27%
Top 11% to 25% --24.57%
Top 26% to 50% -- 22.23%
Bottom 50% -- 18.28%

Adjusted for unearned income not subject to FICA, federal unemployment taxes, excluded income such as municipal bonds, and excise taxes, the average tax burden is even more flat.

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