Do the Rich Pay More or Less Taxes? It’s So Confusing!

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I spend my time solving people’s tax problems. I don’t follow politics but I can’t help but notice all of the speeches and headlines regarding the so called “rich” and what they pay in taxes.

We all know the government is in debt and our different theories about what to do about that. I don’t want to take sides I just want to know the facts. So I did a little research and I found a chart which is produced and prepared by the Congressional Budget Office who are supposedly non-partisan. This chart shows all federal taxes, not just income taxes. The information examines all of the taxpayers in the entire country and puts them into five different group, the lowest one-fifth in income up through the highest one-fifth.

Remember, it’s an average of everyone. There are always exceptions. Here are some observations:

1. Folks in the top one-fifth of wage earners paid about 25% of their income in federal taxes, while those in the bottom one-fifth paid about 5%. (Date from 1979-2007).

2. Rate of tax for the people in the top one-fifth has been very steady for the last 30 years, about 25%.

3. The rates for the lowest four-fifths have actually taken a trend down. In fact, for those folks in the bottom one-fifth the rate has dropped from 10% in 1984 to about 4% in 2007.

Just some food for thought,