Do Rich Americans Really Pay Less Taxes Than the Middle Class?

Eat the rich!

Like all Leftists, Obama’s irrepressible impulse is to demagogue by fomenting class envy and exploiting our resentment of those who have more, especially in today’s hard economic times.

That’s the basis of Skippy’s proposal yesterday to combat the federal government’s gargantuan $15 trillion deficit — the equivalent of 101% of America’s gross domestic product — by taxing “the rich.”

He called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the “Buffett rule,” named for billionaire investor Warren Buffett — that “People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.”

Buffett wrote in a recent piece for The New York Times that “super-rich” people like him should gladly pay more taxes, and that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office, including his secretary. But Buffet left out a vital bit of information from his pious op-ed:

Super-rich Buffet’s super-rich company, Berkshire Hathaway, owes the government tens of millions in taxes and has been wrangling with the IRS over this for years.

Trafficking on Americans’ sense of violated justice, Skippy declared that “the rich” should at least pay as much in taxes — be in the same tax bracket — as middle class Americans like Buffet’s secretary. “There is no justification for it,” Obama said. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”

But are the rich really taxed less than secretaries? Here’s a fact check by the Associated Press.

Stephen Ohlemacher reports for the AP, Sept. 20, 2011:

The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.

[...] This year, households making more than $1 million will pay an average of 29.1% of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15% of their income in federal taxes. Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5% of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7%.

The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS. Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.

Obama’s claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15%. The top marginal tax rate for wages is 35%, though that is reserved for taxable income above $379,150.

With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress’ official scorekeeper on revenue issues.

The Tax Policy Center estimates that 46% of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.

Note that investment income is earnings that have already been taxed. It is money accrued from wages. In other words, investment income is actually income that is twice taxed!

Meanwhile, ever the hypocrite, mere hours after delivering his speech demonizing wealthy Americans, Skippy dined with some of these very Americans in New York. His haul last night is expected to exceed $2 million for his reelection campaign.

~Eowyn

18 responses to “Do Rich Americans Really Pay Less Taxes Than the Middle Class?

  1. Clearly a case of: Don’t confuse me with the facts!! :-/

  2. Thank you, Dr. Eowyn, for this immensely accurate, informative and clear definition of the taxing issue at hand. As usual, Obama twists the issues here in an effort to motivate a final incident of class warfare which he wants solely for the purpose of benefiting him in the upcoming election, so that he will appear like he is a champion for the poor and middle class. As you pointed out so competently in this post, 46% of low and medium income households don’t pay any taxes, and the tax rate at issue is on investment income, which is based upon income that has already been taxed!!!! I think, then, Obama should write a check to us as his personal donation to pay more taxes! Warren, you make me ill! Pay the United States what your corporation owes in taxes! That is really what the allleged ” Buffet Rule” should represent – pay the taxes you already owe!!!!

  3. Truth doesn’t matter to Skippy. Robbing us of our money and destroying this country is his only goal.

  4. I’m just surprised the AP went after the Dear Ruler like it did. ABC is getting on him pretty good, as well.

    Perhaps there is some validity to the scuttlebutt I have been hearing that the dems might just be gearing up to throw Obama under his own bus.

    That would be interesting to watch – if it actually happens.

    -Dave

  5. meh,don’t forget sales tax,license fees,fuel tax,property tax….
    and death tax (property transfer and probate fees and taxes) and
    most importantly ,the tax called INFLATION .

  6. Dennis H. Bennett

    I noticed in his picture, that while his head turned Left, his jaw dropped to the Right, Aside from TMJ-induced campaign meals, is this the origin of the “he speaks with forked tongue” saying?

  7. These statistics are horribly mis-leading. Think people! Use your heads! Have you really ever heard of someone not paying taxes that you know?? Here are the real statistics(You can check them yourself). Of the 46% of Americas who arn’t paying federal income taxes:
    22% Don’t pay because they are senior citizens on social security incomes.(Why would the Gov. tax the money they are giving you?)
    50% Of those that don’t pay federal income taxes, standard deductions and personal exemptions are enough to counteract their taxable earnings. A couple with two children earning less than $26,400, for example, will pay no federal income tax in 2011 because their $11,600 standard deduction and four exemptions of $3,700 cuts their taxable income to nil.
    15% Are working families, many of them low-income, who qualify for one or all of the Earned Income tax credit, the Child tax credit, the Child and Dependent Care tax credit.
    The remaining 13% are a mix of mostly higher-income individuals with enough itemized deductions for items like mortgage interest, health payments, or charitable contributions, education tax credits, or tax exempt interest to zero out their income taxes.
    THIS IS WHY YOU ALWAYS HAVE TO RESEARCH YOUR FACTS EXTENSIVELY

    • I am a low income worker. I have 5 kids and I work 40 hours a week. My husband just got home form Afghanistan in July and is now enrolled in school. It is now October 21 and I have paid a total of $130.00 to federal income taxes. The only reason I have paid this much is because I received a bonus, and yes I will get it all back when I file my tax return, it doesn’t change the fact that I DO NOT PAY ANY FEDERAL TAXES ON MY REGULAR INCOME! So what part of the 46% of Americans that didn’t pay taxes last year do I fall into. What does your research say about that?

  8. when you gave tax %age for those earning over $1 million you showed a 29% tax rate including income AND payroll taxes. in the next paragraph when showing the tax rate for those under $75000 you show a 15% or less rate. the ss and medicare taxes payed by payroll equal 12.5% so you are saying they pay 2.5% and less in INCOME taxes? i don’t think so. i think you compared apples and oranges to make the million $ taxpayers look like bigger contributors. earning $85000 i pay about 11% net in federal INCOME tax PLUS ss and medicare for about 23.5%… very close to what a million+ earner pays.
    try being more honest.

    • Try to read more accurately. This post reproduced an AP article. If you dispute its accuracy, contact the author. While you’re at it, do try not to attribute evil intentions by accusing the author of dishonesty because if you do that, you’ll never get a reply. Just a little suggestion.

  9. With all things said and done,
    even if he wants to tax the income from investments, America, or any other country for that matter, cannot trouble any investor with more taxes in this economy. But making a nominal 2-5% surcharge on investment income that is over and above half-million might satisfy all parties concerned.

  10. I think the article is full of half truths. What about the people who make over a 100,000 dollars a yr combined dual income. Because lets be honest most familes have to have 2 incomes in order to make it. So those people should pay the same amount in taxes as millionaires??? Because I know my tax bracket is 30% and I am far from a millionaire.

    • If this article is full of half truths, I suggest you take that up with the author, Ohlemacher. Who says two-income families should pay the same amount in taxes as millionaires?

      As the article states above, millionaires pay taxes on investment income that is already taxed. We all pay taxes according to the rules written by the IRS. Don’t like the way it works out for you? Take it up with the federal government.

      I see your IP address indicates you are in Detroit, Michigan, with the ISP of “General Motors Corporation”. I hope you were one of the workers that greatly benefitted by the government bailout, you know, the $189M in profit-sharing that 48,000 workers shared in? Glad to know us taxpayers could help you out.

    • And what exactly is the definition of to “make it”? Is that making 2 new car payments, a new house payment? What exactly? Sorry off subject but I am sick of ppl thinking that “to make” it in life now means that luxuries are necessities too and by dang they deserve em! Some of the richest ppl I know, have always driven used vehicles until the wheels fall off….or have worked their way up the ladder. B/c they have learned how to make money or invest their money wisely, they should now be punished? I highly doubt that the occupiers have boycotted celebrities or pro athletes. But the majority of smart business ppl or ppl that have learned from past mistakes….let’s demonize them! My family makes it on one income….and it isn’t even half of $100,000 a yr, and yet we own our home, both of our vehicles and we actually have a savings! Go figure…..

  11. Yeah ok then, who were the majority of people in office from 1980 to now who got us in all this debt?

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