Tax Distribution: Buffett v. The Data
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
The implication is that the federal tax system is regressive, such that Buffett & others at his income level have lower effective federal tax rates than the rest of us. Or, at Buffett might put it, our tax system (unnecessarily) “coddle[s]” “super-rich” individuals such as himself. However, it appears that Buffett’s anecdotal evidence is not representative of the federal tax system as a whole. From a recent CBS news story:
This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
The latest IRS data is a few years older and it’s limited to federal income taxes but it shows much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.
Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.
For those so inclined, the sources for the above can be found in this Tax Policy Center table, and on p. 23, Fig. 4 of the IRS’s Statistics of Income–2009 Individual Income Tax Returns. (See also this report from Citizens for Tax Justice, which gives similar results.)