Picture an upside-down pyramid with its narrow tip at the bottom and its base on top. The only way the pyramid can stand is by spinning fast enough or by having a wide enough tip so it won't fall down. The federal version of this spinning top is the tax code; the government collects its money almost entirely from the people at the narrow tip and then gives it to the people at the wider side. So long as the pyramid spins, the system can work. If it slows down enough, it falls.
That's Ari Fleischer, the president of Ari Fleischer Communications, doing some communicating in today's
Wall Street Journal. The op-ed is, for the
WSJ, something of a genre piece: The poor don't pay any income taxes. The rich pay too many. "A very small number of taxpayers -- the 10% of the country that makes more than $92,400 a year -- pay 72.4% of the nation's income taxes. They're the tip of the triangle that's supporting virtually everyone and everything. Their burden keeps getting heavier."Income taxes do tilt upward. But they're the progressive bit of the federal tax wedge. Other federal taxes, like the payroll tax and the excise tax, are not progressive. (And we're not even going to get into state income, which are frequently regressive) That's why CBO
calculates something called the "effective federal tax rate." The EFTR is simply a households’ federal tax liability divided by its income. The four taxes that are included in the measure are the income, payroll, excise, and corporate taxes. And they give us a pretty good idea of whether the rich really are overpaying. The following graph matches each income quintile's effective federal tax rate with its percentage of the national income. See if you think the rich are getting a bad deal:
When you look at percentage of total tax liabilities, the rich do in fact bear a heavier burden.
But it's because they have so much more money. They are not bearing a heavier burden as a percentage of
their incomes. They're bearing it in relation to
everyone else's incomes. Indeed, it's only because the sheer levels of income inequality in this country are frankly unintuitive that Fleischer can even write this sort of dreck. People hear that the top 20 percent pay almost 70 percent of the country's income taxes and nod their head. That's unfair! But it mainly seems unfair because people don't know the top 20 percent accounts for almost 60 percent of the national income.
