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Whether it’s the so-called "99 percenters" occupying Wall Street, Berkshire Hathaway CEO Warren Buffett publicly suggesting that billionaires like himself should pay more taxes, or President Obama calling for tax hikes on households earning more than $250,000, the share of taxes borne by the nation’s wealthiest Americans remains a hot topic.
Freshman GOP Rep. Jim Renacci - a self-made businessman who is among the wealthiest members of Congress - explored the subject with a group of constituents who attended a Town Hall meeting he hosted Feb. 13, 2012, in Medina.
At the meeting, Renacci attempted to shoot down a "misconception on wage earners and income taxes paid," citing the percentage of the nation’s taxes paid in 2009 based on income levels.
"The top 1 percent (of income earners) paid 36.7 percent (of the taxes). The top 5 percent paid 58.7 percent, and the top 10 percent paid 70.5 percent."
Renacci continued as the figures were projected onto a screen: "The top 25 percent pay 87.3 percent of the taxes paid in this country. The top 50 percent pay 97.7 percent. So, it’s interesting when you hear the story that the wealthy need to pay more of their share."
Trackers from a Democratic Super PAC called American Bridge recorded the meeting and sent some video highlights to reporters. The data Renacci presented to his constituents piqued PolitiFact Ohio’s curiosity, so we decided to learn more.
Renacci cited Internal Revenue Service taxation data compiled by the Tax Foundation in Washington, an organization that calls itself non-partisan but is widely regarded as conservative. Its board of directors includes Douglas Holtz-Eakin, the top economic advisor to Republican John McCain’s presidential campaign in 2008, and former congressman William Archer, a Texas Republican who chaired the House Ways and Means Committee.
We consulted the Tax Foundation report he used as well as articles on the same subject from sources such as Kiplinger.com, a personal finance website.
The numbers were consistent between sources, identifying the top 1 percent of taxpayers as those with an adjusted gross income of at least $343,927. That group, roughly 1.4 million taxpayers, reported 16.9 percent of the nation’s income and paid 36.7 percent of the taxes in 2009.
The top 5 percent, those with adjusted gross incomes of at least $154,643, earned 31.7 percent of the nation’s income and paid 58.7 percent of the taxes. Those in the top 10 percent made at least $112,124. They earned 43.2 percent of the nation’s income and paid 70.5 percent of the taxes.
The income cutoff for the top 25 percent in 2009 was $66,193. Folks with that income or higher earned 65.8 percent of the nation’s income, and paid 87.3 percent of the taxes. To be in the top half of all taxpayers, one had to make $32,396. That group’s share of total earnings was 86.5 percent and its share of taxes was 97.7 percent.
That means those in the bottom 50 percent of income earners accounted for 2.3 percent of taxes paid.
Since Renacci publicly mused about whether the "top 10, 25 or 50" percent pay their share under the current system, we also decided to examine why the top half of the households pay such an overwhelming percentage.
According to National Journal magazine, the Earned Income Tax Credit is a big reason why. The program allows working families making under $49,000 (with three children) or $41,000 (with one child) to get a refundable tax credit whose size depends on marital status and family size. The refunds, by design, can sometimes exceed what people pay in taxes, it says.
Before 1986 tax reforms adopted under GOP President Ronald Reagan expanded the Earned Income Tax Credit, low-income Americans paid 0.02 percent of individual income taxes while the top one percent paid about 24.6 percent. The share of income taxes borne by the highest Americans rose to its current levels, while the share of income taxes paid by the poor dropped.
Nearly two thirds of low-income taxpayers who don’t pay income taxes do pay payroll taxes, according to a report by the non-partisan Tax Policy Center. More than half of those who pay neither tax are elderly. More than one third are non-elderly with yearly incomes under $20,000.
The statistics Renacci cited to his constituents were accurate. The top 1 percent of the nation’s taxpayers do pay 36.9 percent of its income taxes and the top half of earners do pay 97.7 percent of the nation’s income taxes.
On the Truth-O-Meter, Renacci’s claim rates True.
American Bridge, "Rep. Jim Renacci on Taxes, Part 1, 02-13-12," posted to YouTube Feb. 14, 2012
The New York Times, "Stop Coddling the Super Rich," by Warren Buffett, Aug. 14, 2011
Center for Responsive Politics, Ranking of Congressional Wealth, Nov. 16, 2011
Tax Foundation, "Summary of Latest Federal Individual Income Tax Data," Oct. 20, 2011
Kiplinger.com, "Where Do You Rank as a Taxpayer," Oct. 13, 2011
National Journal, "The 51 Percent," Feb. 11, 2012
International Dairy Foods Association, "The 51%: Half U.S. Households Pay No Federal Income Tax," excerpt from Executive Insight Briefing produced by the National Journal, Feb. 16, 2012
Congressional Budget Office, Trends in the Distribution of Household Income Between 1979 and 2007, Oct. 2011
Tax Policy Center, "Who Doesn’t Pay Federal Taxes?," accessed Feb. 21, 2012
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