What the Numbers Show
The latest numbers from the IRS — based on 2008 tax returns — show that the top 1% of income earners paid 38.02% of individual income taxes paid. That’s a lot, but it’s actually a smaller share of the total tax bill than the top 1% paid in 2007. That year they paid 40.42%. We also learn from the IRS that, in 2008, the richest 1% of Americans made 20% of all the adjusted gross income reported. That’s almost twice the 12.75% of total income earned collectively by the lowest-earning 50% of workers. Yes, 1.4 million taxpayers earn 20% of all income reported while 70 million share just 12.75%.
But get this: When it comes to taxes paid, an even wider discrepancy shows itself — in reverse. Compared with that 38% of taxes paid by the top 1% of earners, the bottom 50% pay just 2.7% of the taxes collected.
[Audit Red Flags For the IRS]
These income and tax burden breakdowns come from information reported on 2008 individual income tax returns. Income categories are based on adjusted gross income (AGI), which is basically salary plus investment, rental and business income minus investment losses and expenses such as alimony paid, contributions to retirement plans, moving expenses and a few other costs.
(Note that these figures include only federal income taxes. According to one study, 56% of all wage earners pay more in Social Security and Medicare taxes than they do income tax and the percentage of those paying more payroll tax than income tax soars to 86% if you count both the employer and employee share of Social Security and Medicare taxes.)
For historical perspective, back in 1986, the top 1% of earners reported 11% of all income and paid 26% of the income taxes; the lower-earning 50% made 17% of the income and paid 6% of the nation’s individual income tax bill.