Top 1% Pay Nearly Half of Federal Income Taxes
The top-earning 1 percent of Americans will pay nearly half of the federal income taxes for 2014, the largest share in at least three years, according to a study.
According to a projection from the nonpartisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014 -- up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available). The bottom 80 percent of Americans are expected to pay 15 percent of all federal income taxes in 2014, according to the study. The bottom 60 percent are expected to pay less than 2 percent of federal income taxes.
While the top 1 percent pay a larger share of taxes, they also earn an outsized share of income. According to the Center, they earned 17 percent of expanded cash income in 2014. Some studies have given higher estimates for this group's share of income depending on their different definitions of income.
Progressive Tax Code
The high share of taxes paid by 1 percenters is due partly to their share of income, but also to the progressive tax code, in which higher earners generally pay higher rates. The 1 percenters' share of taxes is 2.7 times their share of income in taxes.
There is no comparable historical data for the 1 percenter tax payments prior to 2012. Yet the Congressional Budget Office, using a different calculation than the center, found that the share of federal taxes paid by the top 1 percent of earners has increased dramatically since 1979 as the 1 percenter's share of earnings has also gone up. In 1979, the top 1 percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes. The CBO said that the average federal income tax rate paid by the top 1 percent has also dropped since 1979 -- falling from 22.7 percent in 1979 to 20.3 percent in 2011.
Whatever the measure, the numbers show just how dependent the U.S. has become on the earnings of the wealthy. The U.S. is more dependent on the income tax than other countries, with 37 percent of total government revenue coming from the income tax, compared with 24 percent in other countries. Those countries depend more on consumption taxes and other sources of revenue.
With U.S. income taxes more dependent on the wealthy -- and those incomes more dependent on the stock market -- the U.S. government should hope for a continued rise in stocks to keep its coffers full.
The story originally appeared on CNBC.