In the latest issue of our local left-wing weekly, the Monterey County Weekly, David Cay Johnston has an article, "Tax Facts Hardly Anyone Knows." He lists and discusses 9 purported tax facts. Many of them are right. But I want to focus on one that, although correct, he presents in a misleading way, as if his goal was to mislead.
It's true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.
The top 1 percent of wage earners paid 38 percent of the federal income in 2008. But the income tax is less than half of federal taxes and one-fifth of taxes at all levels of government.
Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That's because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.
All true statements. But if he wanted to inform the reader without misleading, he would have presented the data on the percent of all federal taxes paid by the top 1 percent. In their book, Public Finance, 9th edition, Harvey S. Rosen and Ted Gayer, give a table showing that in 2005 [and things haven't changed much since then] the top one percent paid 27.6 percent of all federal taxes.
Oh, and the same table in Rosen and Gayer shows that the average tax rate (all federal taxes) on the bottom quintile is 4.3% and on the top 1% is 31.2%. The top 1% pays a bigger percent of its income in federal taxes than any other part of the income distribution. But David Johnston doesn't tell you that.