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The Real Story of Who Pays Federal Taxes
The claim that “the top 1% pay 40% of all taxes” is deeply misleading. It cherry-picks income tax data while ignoring payroll taxes, which make up a huge share of federal revenue and disproportionately burden low- and middle-income earners. Let’s break this down with the actual numbers.
Federal Tax Breakdown
The federal government collects $2.2 trillion in income taxes and $1.63 trillion in payroll taxes each year.
While employers nominally pay half of payroll taxes, economists widely agree that this cost is passed on to workers in the form of lower wages. This means workers effectively pay the full $1.63 trillion in payroll taxes, which must be included in any honest discussion of tax burdens.
Who Pays What?
Bottom 50% (Under $50K):
Income tax: $22 billion (largely offset by credits like the EITC).
Payroll tax: $652 billion (including both employee and employer shares).
Total: $674 billion, or 18.6% of all federal taxes.
Middle Income ($50K-$200K):
Income tax: $650 billion.
Payroll tax: $815 billion.
Total: $1.465 trillion, or 40.4% of all federal taxes.
Top 1% (Over ~$540K):
Income tax: $880 billion (a significant share of income tax revenue).
Payroll tax: $33 billion (due to the Social Security cap and reliance on investment income).
Total: $912 billion, or 25.2% of all federal taxes.
The Truth About Tax Burdens
The full picture shows that low- and middle-income earners bear the brunt of federal taxes, while the wealthiest pay far less as a percentage of their income and total federal tax revenue. Here’s why the “40% of all taxes” claim is flawed:
Payroll Taxes Are Excluded: Payroll taxes bring in $1.63 trillion—nearly as much as income taxes—yet they’re completely left out of the “40%” narrative.
Payroll taxes are flat taxes that hit wages up to $160,200, meaning middle- and low-income workers pay the same rate on every dollar they earn. High earners, however, stop paying Social Security taxes once they exceed the cap.
Middle-Class Americans Pay the Most:
The $50K-$200K brackets contribute 40.4% of total federal taxes, far more than any other group. They pay heavily into both income and payroll taxes, carrying the system on their backs.
The Bottom 50% Contributes More Than It Seems:
While often dismissed as “not paying taxes,” this group contributes $674 billion annually through payroll taxes, even if their net income tax liability is small or negative due to credits.
The Top 1% Is Not Overburdened:
The top 1% contributes 25.2% of total taxes—far less than the commonly cited “40%” figure. This is because they pay little in payroll taxes, with much of their income coming from investments (capital gains, dividends) taxed at lower rates.
The Big Picture
When you include payroll taxes, the federal tax system looks very different:
The middle class ($50K-$200K) pays the largest share of federal taxes, contributing over 40% of the total.
The bottom 50% still pays nearly 19% of all federal taxes, driven by regressive payroll taxes.
The top 1%, while significant income tax contributors, pay far less in payroll taxes and only account for 25% of total federal taxes.
Why This Matters
The “40% of all taxes” myth is a convenient tool to push back against reforms that would make the tax system more equitable. It obscures the reality that the federal tax system is regressive for the working class, who pay a significant portion of their income in payroll taxes, while the wealthiest benefit from wage caps and lower tax rates on investment income.
It’s time to stop cherry-picking statistics.
When we look at the full tax system—income taxes, payroll taxes, and beyond—it’s clear that the middle class and working Americans are carrying the heaviest burden, while the wealthiest pay far less relative to their income and economic power.
11:24 PM · Dec 26, 2024
@SenSanders
Our country is rapidly evolving into two Americas.
One, where the vast majority live, consists of millions of working class families struggling to get by. The other: less than a thousand billionaires who have never had it so good.
That is not democracy. That is oligarchy.
Elon Musk’s charitable foundation ballooned to $9.5 billion in assets last year while handing out $237 million in gifts — most of which went to other entities,… controlled by him
https://www.bloomberg.com/news/articles/2024-12-13/musk-s-foundation-sent-most-of-its-millions-to-his-own-entities
What Is Charity Washing And How Can We Spot It?
Charity washing, broadly, involves companies hiding their less-than-savory investments and practices underneath their charitable donations.
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