The National Association of Enrolled Agents recently released a warning that the Affordable Care Act Marketplace may complicate tax returns. The NAEA is an organization of tax professionals that are specially licensed...
- The Tax Policy Blog
- The Top 1 Percent Pays More in Taxes than the Bottom 90 P...
The Top 1 Percent Pays More in Taxes than the Bottom 90 Percent
The top 1 percent of taxpayers pay more in federal income taxes than the bottom 90 percent. As you can see in the chart below, this is a stark change from the 1980s and early 1990s. But since the early 1980s, the share of taxes paid by the bottom 90 percent has steadily declined.
In 1980, the bottom 90 percent of taxpayers paid 50.72 percent of income taxes. In 2011 (the most recent year the data is available), the bottom 90 percent paid 31.74 percent of taxes. On the flip side, the top 1 percent paid 19.05 percent of taxes in 1980 and now pay 35.06 percent of taxes.
An interesting piece of information from the chart below is that after the 01/03 Bush tax cuts, often claimed to be a tax cut for the rich, the tax burden of the top 1 percent actually increased significantly.
One reason for the decline in the bottom 90 percent’s tax share is likely the proliferation of tax credits. In the last 30 years, the number of tax credits has increased, specifically refundable tax credits. The combined cost of refundable and standard tax credits has gone from around $20 billion in 1990 to $176 billion in 2010, with refundable credits accounting for about $100 billion of that growth.
Beyond the unfairness of saddling an increasingly smaller number of taxpayers with an increasingly larger percentage of the tax burden (the top 50 percent of income earners paid 97 percent of all taxes in 2011), there are basic government finance issues with such a tax code. Tax structures that rely on such a small base (specifically a small income tax base) are more susceptible to the ups and downs of the economy.
The best solution would be to shift away from a tax code that punishes high-earners, savings, and investment and towards a tax code that collects revenue from a consumption base, which provides more stable revenue and mitigates the current code’s bias against savings, investment, and, correspondingly, economic growth.
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.