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CBO GRAPH: The Rich Pay More Taxes…and Higher Tax Rates

Posted by FactReal on September 27, 2011

FACT: The Higher Your Income, the Greater Your Federal Tax Rate
The American Thinker debunks the lies perpetuated by the Left that “the rich pay lower tax rates” or that “the Bush’s tax cuts only benefited the rich.”
  These lies are rebutted by a single graph produced by the Congressional Budget Office, below:
  The taxes included in this chart are for all federal taxes, not just income taxes.  Each quintile is one fifth of taxpayers, based on income.  The top quintile is the one with the highest incomes.

From just this one graph, several observations can be drawn.

  • The most obvious observation is that the higher your income, the greater your federal tax rate is. Taxpayers in the top quintile paid about 25% of their income in federal taxes, while those in the bottom quintile paid about 5% in 2007.
  • The rate for the top quintile has been very steady for the last thirty years: about 25%. In fact, the rate since the Bush cuts went into full effect (2003-07) was about the same as twenty years before (1983-87).
  • The same cannot be said for the lower quintiles; they have trended downward, especially since the Bush cuts in 2003. For the lowest quintile in particular, the rate has drifted downward since 1984, from about 10% of income to about 4%. That is a cut in the tax rate of about 60% for the lowest quintile, versus no cut in rate for the top quintile.
  • Changes in these rates cannot be explained by changes in income. The rate is taxes paid divided by income. If your taxes went up only because your income went up, then your rate would not change.
  • Reagan’s tax cuts became fully effective in 1983. But look at the trend in average tax rate for the highest quintile of earners after that. It went up. That upward trend on the richest Americans went up for seventeen years after Reagan’s tax cuts.
  • The same cannot be said for the lower quintiles. Tax rates for the lower 80% of taxpayers remained virtually flat, or trended downward, from 1983 to 2000.
  • A cut on the capital gains tax rate became effective in 1997. Do you see any kind of accompanying dip in the average tax rate for the highest quintile in that year or shortly after? Nope. The rate is pretty flat from 1993 to 2000.
  • The Bush tax cuts did cut tax rates — for all income groups. The cut was about 2%-3% of income for all quintiles. But since the lower income groups were paying lower rates in the first place, the constant cut across income groups meant that tax rates were cut proportionally more for lower income groups. For example: the top quintile was cut from about 27% to about 24%, which is a cut in the rate of 11%. But the bottom quintile was cut from about 7% to about 4%, a cut in the rate of over 40%.
 Read entire article.

One Response to “CBO GRAPH: The Rich Pay More Taxes…and Higher Tax Rates”

  1. […] Not Enough to Pay U.S. Deficit ● Confiscation of Wealthy Americans’ Money Will NOT Work ● The Rich Pay More Taxes…and Higher Tax Rates ● 47% Pay no Federal Income tax (CNN report) ● Bill Clinton’s Tax Increases Slowed Growth ● […]

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