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White House’s Own Data Contradicts Claims on Buffett Rule

1 min readBy: Scott Hodge

This week, President Obama re-launched his advocacy for a “Buffett Rule,” which maintains that no millionaire should pay a smaller share of their income in taxes than a middle-class family. On Tuesday, the National Economic Council issued a white paper justifying the Buffett Rule as a “basic principle of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. fairness.”[1]

Yet according to the NEC’s own white paper, millionaires and billionaires pay nearly twice as much of their income in taxes – both personal income and payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. es – than do middle-income taxpayers.

The nearby chart, found on page 3 of the NEC report, shows that while the average (or effective) tax rate for the top 1 percent and top 0.1 percent of taxpayers has clearly fallen over the past 50 years, it still hovers around 26 percent. By contrast, the average tax rateThe average tax rate is the total tax paid divided by taxable income. While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes. for the middle fifth of taxpayers was 14 percent in 2010, according to the NEC.

What the NEC data indicates is that the tax burden on the typical middle-income taxpayer is roughly half as much as the typical wealthy taxpayer; and this includes both personal income taxes and payroll taxes.

Not only do the wealthy pay a higher average tax rate, they pay the lion’s share of the tax burden too. IRS data for 2009 indicates that millionaire’s paid 20 percent of all income taxes that year. Newer data for 2010, shows that 46 percent of all income taxes were paid by taxpayers earning over $250,000. By contrast, the share of taxes paid by everyone earning under $100,000 was just 24 percent. Here is the breakdown for 2010:

Income Group (AGI)

Share of Income

Taxes Paid

$0 to $100,000 =


100,000 to $250,000 =


Over $250,000 =


The fact that Obama can continue to gain traction with a campaign that has no factual basis indicates that in Washington, poll-driven rhetoric will always trump the truth.