Who has the money, and who pays taxes?

We’re constantly hearing that “50% of Americans don’t pay any income tax.”  You just know that it isn’t true, and you know that everyone pays sales taxes and most everyone has payroll taxes deducted. But still, it sticks there.

It isn’t true, except for one year, 2009, after the recession hit. That was a very tough year, so it’s no surprise that the number of people exempt from income tax because of low income went way up. The info is from the Center on Budget and Policy Priorities’ report, Misconceptions and Realities About Who Pays Taxes. 

CBPP points out that there were also some special tax credits that year that pushed the number even higher. According to CBPP, “In a more typical year, 35% to 40%” owe no taxes.  And federal gas taxes aren’t counted.

According to a study by the Institute on Taxation and Economic Policy, “the bottom fifth of households paid 16.3% of their incomes in taxes, on average, in 2010.  The second fifth paid 20.7%.” 

Here’s how the recession affected taxpayers:

Who Has All the Money?

No doubt, the top fifth almost have it all.  According to a PBS report in 2011, the top fifth now holds 84% of US wealth.  That’s not a typo, 84%.  The next fifth has 11%, the middle fifth 4%, the next fifth has 0.2% and the bottom fifth has 0.1%.   And, surprise, it is becoming more uneven all the time.

“Wealth” is assets minus liabilities, or things like land, stock, bonds, houses, and factories.  It is not the same as income, which is the number usually used by the right-wingers when complaining about taxes.  So, a look at income.

Doesn’t look good, does it. What it says, in plain terms, is that the rich get richer and the poor stay poor. And the middle class stays poor too.

In 1915, the Robber Baron days, the top 1% got 18% of the income.  Today, they get 24%.  For comparison however, I use quintiles, and offer the following from the US Census for 2010.

The lowdown?  The top fifth gets 50.2% of the income, and the next fifth gets 23.4%.  Income in the fourth quintile was from $61,736 to $100,065 and the top fifth was everyone above that. For the record, the third quintile is $38,044 to $61,735, the second, $20,001 to $38,043. One fifth of us had incomes of $20,000 or less in 2010.

The top fifth paid 64.3% of federal, state, and local taxes out of their 50.2% of the income.  Doesn’t sound like a big price to pay.

I hope that answers some questions.