As part of this massive debt ceiling debate, I’ve been wondering how much income tax revenue is actually taken in by the Treasury and how much of that is paid by each income group.
Found a chart from the Tax Foundation that shows this.
Original source: TaxFoundation.org
This is awesome stuff. If you combine it with other data, you know that the group most vilified by the media are the folks in the Top 1%. These are the guys who make over $250,000 a year (top 1-5% make on avg $211K, top 5-10% make $127K).
So let’s look at the Top 1%:
- 1.4M households
- $1.6T aggregate annual income
- $392B total income tax paid (38% of total income taxes)
- 23.3% aggregate tax rate
So the gov’t debt is running at $1.2T+ per year (varies by year and actual data seems fuzzy) and the left seems to argue that we can close this gap by simply taxing the wealthy more.
Can we really cover that gap with higher taxes on the Top 1% as they suggest? I think this data shows we can’t. We’d have to tax the Top 1% at about 75% to cover the debt. I’m sure liberals would love it, but that doesn’t seem feasible to me – or it isn’t feasible for long.
Here’s why: if you take 75% of their income, then their average annual after-tax earnings fall to ~$285K / year. That’s a darn good income, of course, but it isn’t real wealth and it means they’ve not got the kind funds needed to make the types of investments we need wealthy folks to be making in new companies, new technologies, etc. It would also reduce the amount they could give to their foundations to near zero, so you can write-off all the great work that these groups do.
So maybe we can’t do 75%, but what if you were to double their taxes? That would bring in only another ~$400B per year. That’d be helpful, for sure, and maybe even fair, but we still would have a shortfall of ~$800B per year, every year. That’s a lot.
Note: all math is back of the envelope and may or may not be accurate.
Update: here’s a new chart I came across by the Heritage Foundation. Actually, they present 2 versions of this data that don’t seem to agree – not sure why. The pattern and the message are the same, however.