Fact Check: Do the top 1% pay 70% of taxes

Do the Top 1% Pay 70% of Taxes?

Introduction

The claim that the top 1% of earners pay 70% of taxes is a provocative assertion that raises questions about income distribution and tax policy in the United States. This claim suggests a significant concentration of tax responsibility among the wealthiest individuals, which merits a thorough examination of the available data and interpretations surrounding this topic.

What We Know

Tax Contributions by the Top 1%: According to the Tax Foundation, the top 1% of earners paid approximately 42.3% of federal income taxes in 2020, a figure that has fluctuated in recent years but has not approached 70% 7. In contrast, a report from USAFacts indicates that the top 5% of earners contributed about 66% of the total federal income tax revenue in 2021 4.
Income Tax Statistics: The IRS provides data that indicates the top 1% of income earners had a share of adjusted gross income (AGI) that rose from 20.1% in 2019 to 22.2% in 2020, with their share of federal income taxes paid also increasing during that period 7. However, this still falls short of the 70% claim.
Comparative Tax Burden: The National Taxpayers Union reported that the top 1% paid nearly 46% of all income taxes in 2021, which is significant but again does not support the 70% figure 9.
State-Level Data: A study by SmartAsset indicated that the top 1% of earners contribute about 45% of total personal income taxes nationwide, which includes state and local taxes 5. This broader perspective on tax contributions might suggest a higher overall burden when considering different tax types.
Tax Brackets and Rates: The IRS outlines that the federal income tax system is progressive, meaning that higher income brackets are taxed at higher rates, which contributes to the substantial share of taxes paid by the wealthiest individuals 1.

Analysis

The claim that the top 1% pay 70% of taxes appears to be an exaggeration based on the available data. While it is true that the top 1% bear a significant portion of the tax burden, the figures from reputable sources consistently indicate that their contributions are in the range of 40% to 46% of federal income taxes, not 70%.

Source Reliability

IRS Data: The IRS is a primary source for tax statistics and is generally considered reliable. However, its data can be complex and requires careful interpretation 1 3.
Tax Foundation: This organization is known for its analysis of tax policy and provides detailed reports on tax contributions by income groups. While it is a respected source, it may have a conservative bias, which could influence its interpretations 6 7.
USAFacts: This non-profit organization aims to provide factual information about government data, making it a reliable source for understanding tax contributions 4.
National Taxpayers Union: This organization advocates for lower taxes and limited government, which may introduce a bias in its reporting 9.
SmartAsset: This financial technology company provides data-driven insights but may also have an agenda related to promoting financial literacy and investment 5.

Methodological Concerns

The methodologies used in various studies can differ significantly. For example, some reports focus solely on federal income taxes, while others include state and local taxes, which can skew perceptions of the overall tax burden. The lack of clarity on what constitutes "taxes" in the claim is a critical factor that needs to be addressed.

Conclusion

Verdict: False

The assertion that the top 1% of earners pay 70% of taxes is not supported by the available evidence. Data from reputable sources indicates that the top 1% contribute approximately 42% to 46% of federal income taxes, which is significantly lower than the claimed figure. This discrepancy highlights the importance of critically evaluating claims about tax contributions, as they can often be exaggerated or misinterpreted.

It is essential to consider the context of tax contributions, including the distinction between federal income taxes and other forms of taxation, such as state and local taxes. While the top 1% do bear a substantial tax burden, the claim in question lacks accuracy and should be approached with skepticism.

Limitations in the available evidence include potential biases in the sources and the varying methodologies used to calculate tax contributions. As such, readers are encouraged to engage with this topic thoughtfully and to seek out diverse perspectives and data to form a well-rounded understanding of tax policy and income distribution.