Claim That Rich Don't Pay Enough Based on Perception, Not Fact

About Jason Fichtner:

Jason J. Fichtner is a senior research fellow at the Mercatus Center, a university-based research center at George Mason University and the world's premier university source for market-oriented ideas. Previously, he served in several positions at the Social Security Administration including deputy commissioner of Social Security (acting), chief economist, and associate commissioner for retirement policy. Prior to the Social Security Administration, he was a senior economist with the Joint Economic Committee of the United States Congress.

In politics, perception often counts more than reality. First, for argument sake, let's classify "the rich" as those in the top 1 percent of income earners. For 2009, the most recent data available, to be included in the top 1 percent you had to report Adjusted Gross Income (AGI) of just under $344,000.

That same year, the top 1 percent paid 37 percent of federal income taxes. The top 10 percent (this would include a public school teacher and a police officer each making $56,000 a year who are married and filing a joint tax return) paid 70 percent, and those in the top half paid almost 98 percent of all federal income taxes. That means the bottom half paid about 2 percent. In fact, according to the nonpartisan Tax Policy Center, 47 percent of households pay no federal income taxes. Does it seem fair that the top 1 percent pays only 37 percent? Or does the fact that the top 1 percent pays over one third of all federal income taxes seem unfair to the rich?

[Read the U.S. News debate on the flat tax.]

Perhaps fair means that the top 1 percent should pay an equal share in taxes as they have in income. The top 1 percent reported 17 percent of income, well below the 37 percent share of federal income taxes paid. The top 10 percent reported 43 percent, and the top half reported about 87 percent of AGI. So by this measure of fairness, the rich might be paying too much.

We've all heard Warren Buffet say the rich pay a lower average tax rate than their secretaries. Hence, true fairness would mean the rich pay more of their income in taxes. Again, according to the IRS, the top 1 percent had an average tax rate of 24 percent; the top 10 percent 18 percent; and the top half of taxpayers had an average tax rate of 12.5 percent.

OK, but what about millionaires? Surely they can't be paying their fair share? Well, according to the IRS, this group accounts for just over 9 percent of the total income reported, but pays over 20 percent of all federal income taxes.

[Read 10 things you didn't know about the Bush tax cuts.]

Bottom line: The claim that the rich do not pay their fair share, and pay less in taxes than those at lower income levels, is completely inaccurate. In politics, perception often counts more than reality. As the late Democratic Sen. Daniel Patrick Moynihan famously stated: "Everyone is entitled to his own opinion, but not his own facts."

• Read the U.S. News debate on the payroll tax cut.
• See a collection of political cartoons on the economy.
• Read about 7 groups with reason to protest.

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income tax