The wealthy pay a large share of taxes

July 30, 2003

Free Market Foundation

There is substantial mobility in and out of the ranks of the very wealthy, a fact documented by Forbes magazine in its annual survey, notes Bruce Bartlett of the National Centre for Policy Analysis in the USA.

According to a recent study by the Federal Reserve Bank of Boston, between 1988 and 1998, 47 percent of those in the lowest income quintile in America rose to a higher quintile, and 47 percent of those in the top quintile fell to a lower one.

Furthermore, although the average tax rate on the top 400 fell, one has to go to the original IRS report to discover that their share of total income taxes paid rose by 50 percent, from 1.04 percent in 1992 to 1.58 percent in 2000.

In other words, the richest of the rich paid more and everyone else paid less, explains Bartlett.

This information is not surprising to those who know that the top 1 percent of taxpayers have increased their tax share almost annually, from 19 percent in 1980 to 27 percent in 1988, despite the Reagan tax cuts, and to 37 percent in 2000. Interestingly, the same pattern holds in other countries.

In the United Kingdom, the top 1 percent of taxpayers paid 23 percent of income taxes this year.

In Canada, the top 1 percent paid 24 percent in 2001.

In Australia, the top 5 percent of taxpayers paid 27 percent of income taxes in 2000.

In all countries for which Bartlett can find data, the percentage of taxes paid by the rich is rising, he says. Yet this fact does nothing to diminish demands that they pay even more.

Source: Bruce Bartlett, The Rich are Already Paying Their Fair Share, National Center for Policy Analysis, July 14, 2003.

For text http://www.ncpa.org/edo/bb/2003/bb071403.html
For more on Tax Burden and Fairness http://www.ncpa.org/iss/tax/

FMF Policy Bulletin/22 July 2003