President Obama this week re-launched his advocacy for a “Buffett Rule,” which maintains that no millionaire should pay a smaller share of their income in taxes than a middle-class family. On Tuesday, the National Economic Council issued a white paper justifying the Buffett Rule as a “basic principle of tax fairness.”
Yet according to the NEC’s own white paper, millionaires and billionaires pay nearly twice as much of their income in taxes — both personal income and payroll taxes — than do middle-income taxpayers.
A chart on page 3 of the NEC report shows that while the average (or effective) tax rate for the top 1 percent and top 0.1 percent of taxpayers has clearly fallen over the past 50 years, it still hovers around 26 percent. By contrast, the average tax rate for the middle fifth of taxpayers was 14 percent in 2010, according to the NEC.
What the NEC data indicate is that the tax burden on the typical middle-income taxpayer is roughly half as much as the typical wealthy taxpayer; and this includes both personal income taxes and payroll taxes.
Not only do the wealthy pay a higher average tax rate, they pay the lion’s share of the tax burden too. IRS data for 2009 indicates that millionaires paid 20 percent of all income taxes that year. Newer data for 2010 show that 46 percent of all income taxes were paid by taxpayers earning more than $250,000. By contrast, the share of taxes paid by everyone earning under $100,000 was 24 percent.
Here is the breakdown for 2010 for income groups:
- $0 to $100,000: 24 percent share of income taxes paid
- $100,000 to $250,000: 30 percent share of income taxes paid
- Over $250,000: 46 percent share of income taxes paid
The fact that Obama can continue to gain traction with a campaign that has no factual basis indicates that in Washington, poll-driven rhetoric will always trump the truth.
Scott Hodge ([email protected]) is Tax Foundation president.