Memorandum to Reporters & Editors: Who Pays What Taxes

In light of the Administration’s $1.5 trillion tax hike proposal, we wanted to share several critical pieces of information on who pays taxes in the United States today and how a minority of Americans are supporting an ever increasing majority of Americans:

• For the first time this past Spring, the non-partisan Joint Committee on Taxation found that the bottom 51 percent of all American households are paying no federal income tax. Some point out that even this 51 percent of Americans who don’t pay income taxes pay payroll taxes. But consider this: 15.5 million households receive more in refundable credits than the employer and employee share of the payroll taxes on their income. And 23 million households receive more in refundable credits than the employee share of payroll taxes on their income.

• The Organization for Economic and Economic Development (OECD) ranked the United States with having the most progressive tax system in the world.

• According to the Tax Policy Center, “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.” (Associated Press, “Are rich taxed less than secretaries?,” Sept. 20, 2011)

• Implementing the so-called millionaires tax would be extremely difficult. From Bloomberg, “Writing the new “Buffett rule” proposed by President Barack Obama to snare more tax revenue from millionaires will prove to be logistically and mathematically difficult. The concept, named for billionaire investor Warren Buffett, would require Americans earning more than $1 million a year to pay at least the same tax rate as middle-class households. Such a rule would be problematical to craft or ineffectual because higher earners aren’t the only taxpayers benefiting from breaks; many middle-income families take advantage of deductions and credits that drive their rates below the 17.4 percent that Buffett pays.” (Bloomberg, “Millionaires Tax Easier Said than Done,” Sept. 19, 2011)

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