Unspinning the Right: the Rich Don't Really Bear Most of the Tax Burden

Anytime the subject of taxes comes up, we're sure to hear the standard argument from the conservative side: the wealthy pay most of the income taxes. Rush Limbaugh said it with great emphasis: "The top 1 percent is paying nearly ten times the federal income taxes than the bottom 50 percent!"

Indeed, according to the Tax Foundation, a 'nonpartisan educational organization,' the richest 1 percent in our country already pay more in income taxes than the bottom 90 percent. The U.S. Congressional Budget Office reports that the richest 20 percent paid nearly 90 percent of all federal taxes in 2005. On the surface it seems that this group pays more than its fair share of taxes. On the surface. And only when looking at federal income taxes in isolation -- there's the trick.

Let's take a closer look. According to a study by The Institute on Taxation and Economic Policy, the top 1 percent paid about 5 percent of their incomes in state and local taxes, while the bottom 50 percent paid approximately 10 percent  -- twice as much proportionally. Referring again to U.S. Congressional Budget Office figures, the top 1 percent pays just under 2 percent of their incomes toward social security, while the bottom 50 percent pays about 9 percent. The same source shows that the bottom 50 percent is paying about 2 percent of their incomes on federal excise taxes (e.g., tobacco, alcohol and gasoline), a negligible expense for the people at the top. The scheduled Bush tax cuts for 2009 and 2010 will chop another 1-2 percent off the taxes of the very rich. 

So while the top 1 percent of Americans paid 23 percent of their incomes in federal income taxes in 2006, and the bottom 50 percent paid 3 percent, when you look at all taxes a different picture emerges. At this point total taxes for the very rich are 29 percent of their incomes (23 percent + 5 percent + 2 percent - 1 percent). Total taxes for the poor are 24 percent of their incomes (3 percent + 10 percent + 9 percent + 2 percent).

But there's more. Few of us would disagree with the Leadership Conference on Civil Rights that home heating and water are essential services, or at the very least necessary expenses. The US Department of Housing and Urban Development and the American Gas Association concur that low-income households pay over 20 percent of their incomes for utilities, while high-income households pay less than 4 percent.

So total taxes and utilities for the very rich consume 33 percent of their incomes. Total taxes and utilities for the poor consume 44 percent of their incomes. The conclusion is similar to that reached by the National Bureau of Economic Research.

It's even worse if one considers the high-interest mortgage loans, auto loans, payday loans, refund anticipation loans, and medical debt loans that primarily burden low-income families.

And there's important context here as well: the richest Americans are grabbing an ever- larger piece of the country's economic pie. In 1972, the top 1 percent of Americans took in 8.7 percent of the nation's earned income, but that figure skyrocketed to more than 20 percent in 2006, while wages stagnated for nine out of ten U.S. tax-payers. Recently, The Wall Street Journal reported that "the richest 1 percent of Americans in 2006 garnered the highest share of the nation's adjusted gross income for two decades, and possibly the highest since 1929."

So who's paying the bills? Based on the cold facts of statistics and percentages, the poor are paying a greater than average share. Based on the struggle to stretch a paycheck to support a family, the lowest-income members of our country are being pushed to the limit.