“The Rich Don’t Pay Their Fair Share.” Nice Try.

The take

“The rich don’t pay their fair share.” In his February 7, 2023 State of the Union, President Biden put it this way: “no billionaire should be paying a lower tax rate than a schoolteacher or a firefighter.” (FactCheck.org)

The receipts

The top 1% pay almost half. In 2021, the latest IRS year the Tax Foundation has broken down, the top 1% of taxpayers (adjusted gross income of $682,577 or more) earned 26.3% of all income and paid 45.8% of all federal income taxes. (Tax Foundation)

The bottom half pays very little. The bottom 50% earned 10.4% of income and paid 2.3% of federal income taxes. Their average income tax rate was 3.3%. The top 1% paid 25.9%. (Tax Foundation)

The top 10% pay three-quarters. In 2021 the top 10% paid 75.8% of all federal income taxes. (Tax Foundation)

It’s not a one-year fluke. 2021 was a big year for capital gains: realizations were higher than in any year since at least 1979, which pushed up what the rich paid. (CBO) But go back to 2012 and the picture is the same: the top 1% earned 21.9% of income and paid 38.1% of federal income taxes. (Tax Foundation)

The famous number got inflated. The White House analysis behind Biden’s billionaire line estimated an 8.2% average rate for the 400 wealthiest families from 2010 to 2018, and only by counting the rise in value of stock they hadn’t sold as income, which the tax code doesn’t. Biden then repeatedly said the rate was 3%. (FactCheck.org)

The teacher comparison depends on the teacher. FactCheck.org traced it to a 2015 comparison by Sen. Bernie Sanders and found it holds in some cases but not others: a single person without children could pay less on investment income, while a dependent child or a nonworking spouse could flip the result. (FactCheck.org)

The other side’s best point

Income tax isn’t the only tax, and the very top is a different story from the top 1%:

• Payroll taxes, which hit wages, make up roughly 20% of all taxes paid in the US and are less progressive than the income tax. (Tax Foundation)
• The top long-term capital gains rate is 20%, while the top rate on wages is 37%. People who live mostly on investments can face lower rates than people who live on paychecks. (FactCheck.org)
• Gains on stock that’s never sold aren’t taxed as income. If you count them, as the White House did, the 400 wealthiest families’ 8.2% rate was below the average federal income and payroll tax rate for the top 60% of taxpayers. (FactCheck.org)

That’s a real argument about a few hundred families and how their wealth grows. It’s not an argument that “the rich” in general skate.

The verdict (opinion)

“Fair share” is a value, not a number, so you’re free to think the rich should pay more. But anyone who says it should know what they’re paying now: almost half of all federal income tax, from 1% of filers.

The honest version of this take is narrow: a small number of billionaires can grow their fortunes without selling, and the tax code doesn’t touch that until they do. That’s worth debating. Turning it into “the rich don’t pay,” and an 8.2% estimate into “3%,” isn’t debate. It’s a slogan.

Nice try.