Average Tax Rate 2009

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Was Buffett Wrong?

Mark Perry writes:

We now have a proposal for a tax policy - the "Buffett Rule" - based on Warren Buffett's anecdotal "evidence" of his and his employees' tax burdens. But that "evidence" seems pretty far-fetched and not consistent with: a) average federal income tax rates available from the IRS, nor b) average tax rates for all federal taxes paid, from the CBO. Buffett's anecdote has to be an outlier or exception, because under the current federal tax system, the average "super-rich" taxpayer pays taxes at a rate 2-3 times the average secretary. Instead of raising tax rates, we should probably figure out what kind of loopholes allow Warren Buffet to pay taxes of only 17.4% on his $40 million income last year.

Update: Steve Moore on The Kudlow Report tonight said in reference to myth that secretaries pay taxes at higher rates than the "super-rich," (and citing some of the same tax data that appear above) "It's almost as if Barack Obama and Warren Buffett made those numbers up."

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Tax Rates by Income

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Historic Tax Rates

Over the years, changing the amount of taxes people pay was accomplished not just by changing rates but by changing the income limits of the tax brackets. Just looking at the top rates does not give the whole picture about who is paying taxes. Before the 1986 tax reform, the income tax had 15 brackets. In the 1930s, there were more than 50. The Wealth Tax Act of 1935, applied the top rate to income over $5 million and had only a single taxpayer: John D. Rockefeller, Jr.

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Social Security Taxes v. Income Taxes

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2005 Federal Tax Rates

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Tax Rates: Bush v Clinton

great charts and commentary from Carpe Diem

My thoughts: Lower taxes are always good. Let people keep more of what they earn. We can't tax ourselves into prosperity.

Tax Rates by Quintiles

from Mankiw

Effective Middle Class Tax Rate in 2005: 14.2%

In 2005, the CBO data indicate that in the middle fifth, the total effective tax rate -- the share of federal taxes as a percent of income -- was 14.2 percent, while the effective individual income tax rate was 3.0 percent. These figures compare to 2000 levels of 16.6 percent and 5.0 percent, respectively. Between 2003 and 2005, the total effective tax rate for the middle fifth edged up, but still remained far below the levels of the previous 24 years.

source and source

(HT: Greg Mankiw)

Who Pays Federal Taxes?