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Pay Your Fair Share, Ya Wanker

Photo of Gene Wunderlich

So a few weeks back I was in the hospital and, as such, was a ‘captive audience’ for the most recent high volume, high speed, rant and rave euphemistically referred to as the ‘State of the Union’. I must admit I watched it for all the wrong reasons based on a drinking game posted on social media. However, the nurses, kind as they were, would not provide me with the requisite libations, but since I was not the only one apparently medicated that night, we made it through the event none the worse for wear.   

But I did make some mental notes to follow up on, first and foremost the repeated trotting out of that old chestnut, TAX THE RICH. You remember, “No billionaire should pay a lower federal tax rate than a teacher, a sanitation worker, or a nurse”. According to the Prez, with the exception of the Democratic Congressional delegation and a few close friends and family members, NO millionaires or billionaires PAY THEIR FAIR SHARE of taxes! 

And it makes for a great sound bite, especially to folks struggling to buy food and pay the rent right now, who already know they pay way too much in taxes as it is. Heck, you just got through tax season, is it accurate? Inquiring minds want to know. 

So I tapped a few sources that you’d think the President would also have access to and low and behold, some inconvenient truths emerged from just a cursory review. For example, a quick look at 2021 IRS data showed me that the top 1% of Americans reported some 26% of the country’s adjusted gross income yet paid a whopping 46% of the total income tax! In fact according to the Tax Foundation analysis of the data, the top 10% of earners paid nearly 76% of the total tax revenue.  Altogether, the top 50% of filers earned nearly 90% of all income and paid nearly 98% of all income taxes in 2021. The other half of earners, those with incomes below $46,637, collectively paid 2.3 percent of all income taxes, while 40% of Americans paid no income tax at all. And no, those weren’t the millionaires and billionaires. 

Of course it’s easy to cherry pick individual situations wherein a billionaire may have paid a minimal amount, or nothing at all in a given year. They won’t tell you that that person may have suffered substantial business or personal financial losses in that year, or that the person made substantial investments in a business qualifying for tax breaks, or any of the other myriad legal reasons a person of means may have paid at a lower rate than you. After all, it’s not about how much you make, but how much you keep. Anybody, ANYBODY, that makes even minimum wage wants to keep as much of it as they are legally entitled to, and maybe a skosh more. 

So let’s dig a little deeper, shall we? Setting aside the 40% who pay zippo, the bottom half of earners, about 77 million returns, reported income of up to $46,000 in tax year 2021. They earned 10.4% of the country’s total income and paid 2.3% of all income tax at an average rate of 3.4%. Next up, between the bottom half and the top 25%, 38.4 million returns, posted income between $46,000 and $94,000. They reported income totaling 17% of the total while paying 8.4% of the tax at an average rate of 7.2%. 

Between the top 25% and top 10%, income topped out at $170,000, 19.5% of the income of the country, 13.4% of all taxes paid at an average rate of 10.3%. Next group paid an average rate of 14.3%, next group paid 18.9%. Are you noticing a trend? That’s called a progressive tax. The more you make, the more you pay. 

How about the top 1%? There’s about 1.5 million folks out there that make over $682,000 a year, but they paid 45.8% of all taxes at an average rate of 25.9%, more than 7 times higher than the rate paid by the bottom 50%. And the billionaires? Those folks that supposedly pay nothing at all. Well, the top 0.1% of returns, those 154,000 individuals making in excess of $3,775,000 a year, paid an average tax rate of 25.7%. 

Hardly a negligible amount by any measure. And their ‘fair share’ is rising. In 2001 the top 1% paid 33.2% of the total tax tab. Last year that was 45.8%. During that same period the bottom 90% share of the total went from 36.3% to 24.2%. Apparently in the real world, that one inhabited by most of us regular folks, the tax burden falls almost entirely on the top half of earners, with a disproportionate share borne by the top 1%. 

By the way, in case you’re still curious, individual income taxes account for 42.1% of total tax revenue for the U.S., this is over and above what we pay in payroll, property, consumption and the plethora of additional taxes we face daily. Finally, according to the Tax Foundation, Congress has less than two years to prevent tax hikes on the vast majority of Americans from taking place. That’s because the Tax Cuts and Jobs Act (TCJA) of 2017, a tax reform law that simplified individual income taxes and reduced tax rates across the income spectrum, is set to expire. If Congress does nothing, most Americans will face higher taxes, worse incentives for work and investment, and a more complicated tax system starting in 2026. Whooops, that didn’t fit the narrative we heard either. According to Joe, the TCJA only benefitted the wealthy and corporations. 

So, remember folks, the next time you hear some talking head blathering on about paying their fair share, ask them where they got their info. Because it doesn’t come from real life statistics and it’s certainly not borne out by the facts. They should know better and now you do too. 

Written by Gene Wunderlich, Sr. Staff Writer

Prior to his retirement in 2021, Wunderlich served on a number of local non-profits and boards. He spent the past decade as a legislative advocate for the housing and real estate industries as well as a coalition of local Chambers of Commerce advocating on behalf of small and local businesses.

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