by Mitch Kokai
Senior Political Analyst, John Locke Foundation
President Biden’s effort to pass the largest tax increase in U.S. history is based on the verifiably false claim that Americans with high incomes don’t pay their “fair share.” In no other country do the rich bear a greater share of the income-tax burden than they do in the U.S.
Organization for Economic Cooperation and Development data show that the top 10% of American households earn about 33.5% of all earned income but pay 45.1% of all income taxes, including Social Security and Medicare payroll taxes. That progressivity ratio of 1.35 is far higher than in any other country. The ratio in France is 1.10. In Germany it’s 1.07, and in Sweden an even 1. In the last OECD study, in 2015, the top 10% of earners in the U.S. paid 45% of all income taxes. In France, the top 10% only paid 28%. In Germany they paid 31% and in Sweden 27%. Conversely, the bottom 90% of earners in the U.S. paid 55%. The bottom 90% of earners in France paid 72%. In Germany it was 69% and in Sweden 73%.
The Joint Committee on Taxation and the Congressional Budget Office found that the 2017 tax cuts made the American tax system more progressive and, according to the CBO, the “highest quintile’s share of federal taxes was 0.5 percentage points higher in 2018 than in 2017.”
Comparing total federal, state and local taxes with total income including government transfer payments in 2017, the bottom quintile of income earners in the U.S. paid 7.5% of their total income in taxes. The second quintile paid 14.1%, the middle quintile paid 22.7%, the fourth quintile paid 28.4%, and the top quintile paid 35.2%. The relative tax burden continued to rise to a 40.9% average before dipping to an average of 32% for the top 400 income earners, who earn more than $400 million a year.
Why a lower rate for the top 400 filers? Because they make use of the same types of tax-advantaged investments that the Democrats are now trying to expand massively in their Build Back Better tax bill.