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As U.S. Rep. Steve Rothman recently told workers at a small business in Bergen County, the middle-class must pick up the tab for wealthy Americans paying their lowest income tax rate in 80 years.
The congressman pointed to that reduced tax rate during a campaign video posted Feb. 13 on YouTube, where he is seen talking to employees of Lanzo Plumbing in Hackensack.
"If these guys and gals making over a million dollars a year...won’t pay their fair share because the Republicans are protecting them, that means working people and the middle-class and seniors have to pick up the tab for them. It’s crazy," Rothman (D-9th Dist.) said. "They're paying a less rate of tax -- these richest people in America -- than they have in the last 80 years."
As PolitiFact New Jersey found, Rothman’s claim is off, but not by much.
The federal income tax rate for the top income bracket stood at 35 percent in 2011, marking a lower statutory rate than during most of the last eight decades. But for five tax years -- 1988 to 1992 -- the top rates were lower than they are today, according to data from the Internal Revenue Service.
Now, let’s trace the evolution of the top income tax rate.
In 1931, the top rate was 25 percent on taxable income greater than $100,000. The following year, the top rate increased to 63 percent on income above $1 million, and then grew in 1936 to 79 percent on income greater than $5 million.
The top rate remained at 70 percent or greater through 1980 -- and exceeded 90 percent during World War II and from the early 1950s to the early 1960s.
By 1988, the top rate fell to 28 percent and stayed there through 1990. For 1991 and 1992, the top rate rose to 31 percent, and then increased to 39.6 percent for tax years 1993 to 2000. In 2003, the top rate reached its current level of 35 percent.
So, for most of the last 80 years, the top statutory rate has been higher than it is today, with the exception of tax years 1988 to 1992.
Since various tax deductions can reduce an overall tax bill, we also looked at actual taxes paid as a percentage of one’s income.
According to a June 2010 report by the nonpartisan Congressional Budget Office, the top 1 percent of households, on average, paid 19 percent of their income in federal income taxes in 2007. That figure was lower than amounts paid in 25 of the 28 years between 1979 and 2006, according to the budget office.
It’s worth noting that as a group, the top 1 percent were covering a larger share of federal income taxes in 2007 than they did in 1979.
Still, based on taxes paid as a percentage of income, Rothman’s claim is mostly on target.
Paul Swibinski, a consultant to Rothman’s campaign, told us the congressman’s statement was "‘close enough.’" But he argued that Rothman was "speaking off the cuff" and said scoring him as "‘partially truthful’" would send the wrong message.
"Steve was being completely genuine and completely honest," Swibinski said in an e-mail. "Do we want our politicians to parse every single word they say -- just go around repeating the same words over and over because it's ‘safe’ ??? That would seem to me to contradict the purpose of Politifact."
In a YouTube video, Rothman claimed the wealthiest Americans are paying a lower tax rate "than they have in the last 80 years."
We looked at two measures -- the top statutory income tax rates and taxes paid as a percentage of one’s income. In both cases, Rothman’s statement is slightly off, but his overall point about current income tax rates is solid.
The top statutory rate is lower now than during most of the last eight decades, and the top 1 percent of households were paying a smaller percentage of their income in federal income taxes as of 2007 than in nearly all of the previous 28 years.
We rate the statement Mostly True.
To comment on this ruling, go to NJ.com.
Who are the real ‘Job Creators?’, a video posted on YouTube by Congressman Steve Rothman’s campaign, Feb 13, 2012
PolitiFact Florida, Debbie Wasserman Schultz says tax rates lowest since the 1950s for wealthy Americans, Sept. 13, 2011
PolitiFact, Barack Obama says tax rates are lowest since 1950s for CEOs, hedge fund managers, June 29, 2011
PolitiFact, Geithner says the top 1 percent have a tax rate in the low 20s, July 12, 2011
Tax Policy Center, Historical Effective Federal Tax Rates for All Households, April 4, 2011
Tax Foundation, Federal Individual Income Tax Rates History, 1913-2011, Sept. 9, 2011
Internal Revenue Service, Personal Exemptions and Individual Income Tax Rates, 1913-2002, accessed March 7, 2012
Internal Revenue Service, Further Analysis of the Distribution of Income and Taxes, 1979-2002, accessed March 7, 2012
Journal of Economic Perspectives, How Progressive is the U.S. Federal Tax System? A Historical and International Perspective, Winter 2007
Internal Revenue Service, Number of Returns, Shares of AGI and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates: Tax Years 1986-2009, accessed March 7, 2012
Congressional Budget Office, Average Federal Taxes By Income Group, June 1, 2010
Tax Policy Center, Historical Highest Marginal Income Tax Rates, Jan. 31, 2011
Phone and email interviews with Paul Swibinski, a consultant to Congressman Steve Rothman’s campaign, March 7-8, 2012
Wealth for the Common Good, Shifting Responsibility: How 50 Years of Tax Cuts Benefited the Wealthiest Americans, April 12, 2010
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