by Dale Coberly


I have been putting some information together for an article about the cost of paying the money borrowed from the Social Security Trust Fund, and I found a chart among my papers breaking down the effective tax rate among the different income levels. Unfortunately I don’t know where it came from, so if it’s interesting enough that you to want to know the source, you are going to have to look for it.

It is similar to information I found in Statistical Abstracts … though the information there was for 2007, with total AGI, for example, at 8.0 Trillion. The following link gives similar information for 2006

My chart shows for the year (2008 or 2009?) there were 141 Million income tax returns filed, reporting a total of 8.8 Trillion dollars in Adjusted Gross Income (AGI), and a total of 1.1 Trillion dollars in income taxes paid. This would put the “average” income tax for all income levels at 12.5%.

The breakdown:

The richest one percent of the population, who make more than 410 thousand dollars per year (AGI) pay an income tax rate of 22%. (Rdan…Does not include less taxed capital gains and estate income)

The next top 4% of the population, earning over 160k but less than 410k, pay an income tax rate of 18%

The 5% of the population earning over 113k but less than 160k, pay an income tax rate of 13%

The 15% of the population earning over 67k but less than 113k, pay an income tax rate of 9%

The 25% of the population earning over 33k but less than 67k, pay an income tax rate of 7%

The 50% of the population earning less than 33k, pay an income tax rate of 3%.

You don’t often see the breakdown in these terms. The people who get paid to confuse you want you to think of the top 10% of earners paying 50% of the taxes. Their numbers are meaningless because without knowing what percent of total income such earners get, you don’t even know if this is a flat tax. And of course it “sounds like” they are paying 50% of their income in taxes.

From my perspective, it does not look like any of these groups is “over taxed.” Of course no one, not even me, likes paying taxes. But only the truly simple minded think we can run the country without taxes, and until we can arrive at a consensus about what spending to cut, we need to pay the bills.

These tax rates are 3% lower at the top than they were in 2001, because it was argued that a tax cut at that time would “pay for itself.” It didn’t work out that way.

I will show in an upcoming paper that restoring the tax rate to what it was before the cut… that is, raising it about 3% on incomes over 100k from what it is today, would be sufficient to pay down the deficit that is the subject of so much political angst. Moreover, in order to pay back the money borrowed from the Social Security Trust Fund, these tax increases would only be needed for about the ten years between 2025 and 2035.

This is not onerous. It would result in a tax rate on the richest one percent of about 25%. The next richest 4% would pay a rate of about 21%, and the next richest 5%(those making more than 113k in the present chart) would pay about 16%.

The purpose of this tax raise would be to reduce the National Debt. It has nothing to do with paying for Social Security. It is repaying the money borrowed FROM Social Security that was used to pay FOR National Security. You would expect the high income earners to be glad to pay it in the spirit of patriotism.

Especially since they know that all along they have been effectively borrowing the money themselves in the form of tax cuts, which they have surely invested in growing the economy and increasing their own personal wealth.

(The hard copy Statistical Abstract has the same information, just not as clearly broken out:
129th Statistical Abrstact of the United States, 2010
table 471 on p3i2, and table 476 on p314 )