Is Gov Robbin' the 'hood or is Gov Robin Hood? Do the Rich Pay Their Fair Share?

Quick Takes
  • The top 40% of households pay 84% of all the nation's taxes.

Rich people largely foot the bill of government; poor people pay relatively little. Is it fair? Whether in so doing, government is sticking it to the little guy or stealing from the rich to give to the poor is not determined by an objective standard. You are the judge.

The Congressional Budget Office (CBO) reports that in 2004 the bottom 20% of income earners paid 4% of their income in federal income taxes. The top 20% paid 25% of their income in federal taxes.

The same report says the top 40% of income earners paid 85% of all federal taxes. These people produced 74% of all the income. The lowest 40% paid 6.4% of all federal taxes in 2004. These folks generated 13% of all income. The middle fifth paid 10% of all federal taxes, and earned 14% of all income1.

Note: the CBO's numbers do not include state and local taxes, which are more equally shared across income groups.

Including federal, state, and local taxes together, our estimates indicate that the 20% of taxpayers with the highest incomes pay 69% of all taxes. The bottom 20% pay 2% of all taxes. Even that 2% may be generous as it does not include the Earned Income Tax Credit (EITC) or other government subsidies, which further reduce the contribution of the poor to the Treasury.

It seems reasonable that a balanced look at differences among taxpayers' income would address an individual's stage of career, preference for leisure, education, and a host of other factors. Again, fairness is a legitimately debatable point.

notes:

1 Congressional Budget Office, December 2006, Historical Effective Federal Tax Rates: 1979 to 2004, Table 2, pg 6 available at http://www.cbo.gov/doc.cfm?index=7718