Who's paying the taxes?

Posted: Apr 01, 2007 12:00 AM

Last week, the Tax Foundation released a 12-page Special Report entitled “Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?” (Available free here.) Based upon 2004 IRS information, released in September 2006, it reveals some startling facts. For the sake of simplicity, brevity and clarity, I’ll just highlight federal taxes and spending, but the same analysis holds true for both state and local taxes and spending as well. But you should really download the report for yourself and take a look.

President Scott Hodge (who I’ve just had on my show) and his team at the Tax Foundation, created five quintiles based upon household income, each corresponding to roughly one-fifth of the population, about 58 million people. That’s the first column below. The second column shows the average federal taxes paid per household, while the third shows the average federal spending per household. The fourth column is the most revealing. It divides the third column by the second column to show what a single dollar of federal tax paid by that household yields in federal spending for that household.

Federal Taxes
Federal Spending
Federal Spending
Per Dollar of Taxes Paid
< $23,700
$23,700 – $42,305
$42,305 – $65,001
$65,001 – $99,502
> $99,502

For every dollar of federal taxes paid, those in the highest quintile received $14.76 dollars of government spending, while those in the lowest quintile received just $0.32. In investment terms, the lowest 60% of all households – those making less than $65,000 – are getting a terrific return on their investment, while the highest 40% of all households are giving more than they’re getting.

As the Tax Foundation report states, “Government spending targeted at the lowest-earning 60 percent of U.S. households is larger than what they paid in federal, state and local taxes. In 2004, between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending policy.”

Redistribution of wealth is alive and well in America. Households with incomes less than $65,000 per year are tax consumers, while those making more than $65,000 per year are tax payers.

In an earlier report, entitled “Summary of Latest Federal Individual Income Tax Data” (available free here), the Tax Foundation analyzed more closely who actually shoulders the tax burden in America. The IRS data for 2004 (the most recent available) is listed below.

Tax Rate
Share of
Total Federal Income
Share of
Total Federal Tax
Top 1%
> $328,049
36.89% or 1/3
Top 5%
> $137,056
57.13% or 1/2
Top 10%
> $99,112
68.19% or 2/3
Top 25%
> $60,041
Top 50%
> $30,122
Bottom 50%
< $30,122


The top 1% pay over ten times what the bottom 50% pay in federal income tax. Since the vast majority of those voting for increasing the amount of government benefits are not those who actually pay for those benefits, it’s the classic problem of “the many” sticking it to “the few” just because they can. I’m okay with that, but at least some acknowledgement, appreciation, and gratitude might be nice once in a while instead of all the anti-capitalist, class-warfare rhetoric we often hear from the left. How about a little less collective contempt for the golden goose, eh?

Those making $60,000 or more a year pay 85% of all federal taxes, but receive just $0.66 per tax dollar in federal spending. When liberals say “we want to raise taxes on the rich” in order to “provide increased benefits to the poor and the middle class,” keep in mind they’re talking about both raising your taxes and reducing your benefits. They want you to both pay more and get less.

Contrary to popular mythology, the rich are paying more and getting less, while the poor are paying less and getting more. The historic trend has been for the highest quintiles to shoulder more and more of the tax burden under our progressive tax system while the lower quintiles receive more and more of the spending. For more details, download the report.

So, when you write that check to the IRS this month, you now know whether you’re a tax payer or a tax consumer.

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