As the tax reform debate begins to heat up, businesses and investors are beginning to pay closer attention to the House GOP Tax Reform Blueprint, a tax plan released last June by Speaker Paul Ryan and House Ways and...
- The Tax Policy Blog
- White House Overstates Middle Class Tax Rate, Fails to Me...
White House Overstates Middle Class Tax Rate, Fails to Mention Payroll Tax Holiday
Scott Hodge recently commented on how the White House has used the chart below to bolster their claims that high-income earners pay too little tax, when in fact it indicates the top 1 percent pay about twice what middle-income households pay.
But this data only goes through 2010, and the payroll tax holiday that's been in place ever since means middle-income households pay even less - about 2 percentage points less. So the middle class pays not 14 percent, as the White House claims, but 12 percent, counting both payroll and individual income taxes. That's lower than at any time since 1960.
The payroll tax holiday barely affects the average tax rate of high-income earners since social security payroll taxes apply only to wages, not investment income, of up to $110,100 this year and $106,800 last year. That means high-income earners continue to pay about the same as they did in 2010 - around 26 percent - which is more than twice the rate that middle income households pay. It is likely even higher, since high-income earners derive much of their income from investments and business profits, which are both up since 2010.
Follow William McBride on Twitter @EconoWill
Get Email Updates from the Tax Foundation
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.