Published: December 22, 2010
I read Edward Ericson Jr.’s “Top 10 Financial Outrages of 2010” (“The Year In. . . ,” Feature, Dec. 8) and was disappointed to see blatantly inaccurate reporting. Outrage No. 2, according to Mr. Ericson, is the revelation that income tax rates for the wealthiest are lower than “yours”—which I assume to be most of us regular folks. I then followed the link to the story he wrote in March for details.
This statement, and most of his March story, is patently inaccurate. The most recent comprehensive figures on this topic are readily available on the Congressional Budget Office’s web site.
According to the CBO, the top 1 percent of households had an effective federal income tax rate of 19 percent. Those in the middle quintile had an effective federal income tax rate of 3 percent. The bottom 40 percent of households actually had negative income tax rates. Furthermore, the top 20 percent of households paid over 86 percent of all federal income taxes collected. It might be more appropriate to call this one of the Top 10 Financial Myths.
Edward Ericson Jr. responds: Mr. Smith’s point is well taken. But talking about low or “negative” federal income tax rates for poor and working folks—a common gambit of the wealthy and their spokespeople—overlooks the large bite taken by Social Security taxes, which are applied flatly only up to the first $104,000 of earned income. Leaving them out understates the tax burden on regular people—and the tax break enjoyed by the wealthy. Also, the top 1 percent of earners starts at about $400,000 per year, but much of the interesting action occurs in the upper strata of that top 1 percent. If one is unconcerned or considers it just and reasonable that a few hundred Americans receive more than $1 million per day in income and pay less than 17 percent of that in federal taxes, one can accept those baser CBO figures sanguinely. However, if one is concerned, or merely curious, about the doings of the nation’s benevolent plutocrats, one must turn one’s attention to the IRS Statistics of Income, which disaggregate the top 1 percent for better analysis. This I did (after David Cay Johnston). My figures are the IRS’ own, and they are correct.