Some politicians claim that the rich “don’t pay their fair share” of taxes and take advantage of lower income Americans. They insist that the rich should take on more of the tax burden and that that society would be better off if the rich gave more of their money to the government to be spent by politicians and bureaucrats.
This does not match reality. The rich already pay higher federal tax rates. Those with higher income pay a larger share of the tax burden than their share of national incomes.
The five charts below show just the facts.
Unless otherwise specified, all data is for 2021 (the most recent data available) and sourced from the non-partisan Congressional Budget Office (CBO).
The Rich Provide Most of the Federal Government’s Revenues
In 2021, the highest quintile earned 58.8% of American incomes (before transfers and taxes) but paid 83.6% of federal taxes.
The share of the tax burden on the top 20% was more than four times higher than the middle 60% of taxpayers. The lowest quintile (bottom 20% of earners) effectively does not pay federal taxes because they receive tax credits over any amount that they would owe such that they face a “negative” tax rate.
The Rich Pay Higher Tax Rates
The top quintile of earners faces significantly higher tax rates than the lower four quintiles with an average federal tax rate of 23.9%. The top 1% pays nearly a third (29.8%) of their earnings to the federal government. The lowest quintile effectively gained 22.9% income on average due to tax credits.
The Rich Pay a Lot of Taxes
In 2021, the average household in the top 1% paid more than $931,000 in total federal taxes. The typical middle-income family paid a total of $6,700 in federal taxes, including $7,700 of payroll taxes and $1,100 of other taxes, while receiving $2,100 in refundable tax credits for a negative income tax burden. Those in the bottom quintile received an average of $5,200 in refundable tax credit payments, for a negative total federal tax burden.
The Federal Government Already Redistributes Wealth
When the federal government taxes and spends, it transfers wealth from those who earned it to a group who did not. Households in the top 1% lost nearly a million dollars ($913,600) in 2021 through transfers to the bottom four quintiles and funding the federal government. Meanwhile, those in the bottom quintile received $33,300 through tax credits and other
welfare programs.
The Share of Taxes Paid by the Rich Is Growing
Over the last 42 years, the share of federal taxes paid by “the rich” has grown steadily. However, in 2020, the highest quintile jumped from 68.7% in 2019 to 80.4% in 2020 and then to 83.6% in 2021. At the same time, the share of taxes paid by all other quintiles dropped from 31.3% in 2019 to 16.4% in 2021.
