So I was reading the Congressional Budget Office Director's Blog (because that's what bloggers do, right?). CBO Chief Douglas Elmendorf wrote a really interesting post last month about the estimated average federal tax rates we all pay. These numbers fit with the Rachel Maddow report I discussed last April about how Americans under President Obama have one of the lowest federal income tax burdens in modern history. The CBO's numbers cover 1979 to 2007—nuts! no Obama comparisons yet! But they do offer a broader picture by looking at not just federal income tax, but every penny we send Washington-ward. The CBO even includes corporate income tax and employer share of payroll taxes, figuring those taxes all get passed on to households one way or another.
Cool! Hand me that data and let's make some charts:
|persons in household||lowest||second||middle||fourth||highest|
Table 1: Minimum adjusted income by quintile and household size
First, let's talk quintiles. The CBO numbers divide American households into five equal slices: lowest fifth of income earners, second, middle, fourth, and highest. The above chart shows the minimum amount a household has to make to be considered part of a given quintile.
CBO adjusts income based on the square root of the number of people in the household. Basically, the more people in a household, the more income they need to count as members of the richer group. My three-person family is currently in the second quintile. Add one more child, and we might well drop to the lowest quintile by CBO's count.
Now that you can figure out which quintile you're in, here's an idea of what the average federal tax burden is for folks in about the same household income situation as you (you'll want to click the chart to make it bigger):
We see that, as of 2007, overall federal tax burden as a percentage of household income was lower under the Bush Administration than under the Reagan Administration for everyone but the highest quintile (that is, the top-earning 20% of households). Again, as Maddow and real data suggested in April, if folks feel their taxes have been getting higher over the past several years, they can't blame Uncle Sam.
The overall tax rate is neatly progressive, with each quintile paying a larger percentage of its income than the one below it throughout the 28 years surveyed.
The richest fifth of American households have footed over half the federal tax bill throughout the period CBO surveys. Their share of the tax liability has increased from a minimum of 55.0% in 1982 to 68.9% in 2007. The biggest chunk the lowest 20% paid was in 1984: 2.4% of Uncle Sam's tab. Since 2004, the lowest quintile's share has been less than 1%.
Of course, you'd expect the richest fifth to pay a bigger chunk of the tax bill, since they have a bigger chunk of the money, right?
Indeed, but note, fellow Marxist plotters: the highest quintile has a smaller share of the nation's income than their share of the federal tax liability. That top fifth do take the lion's share, increasing their take from 45.5% of the nation's income in 1979 to 55.9% in 2007. Conversely, the bottom quintile earns a larger chunk of the national income than its share of the federal tax liability. but their share of the wealth has dropped from 5.8% in 1979 to 4.0% in 2007.
Interestingly, over the same span, the other three income quintiles have each seen their share of the national income drop by 2.7 percentage points. The difference may not be much, but the only people getting a bigger piece of the pie since the Reagan years are the richest Americans.
Consider also the percentage increases in average income for each quintile since 1979, adjusted for inflation:
- Lowest quintile: 11%
- Second quintile: 18%
- Middle quintile: 19%
- Fourth quintile: 29%
- Highest quintile: 89%
These numbers show that the recent historical trend is for a lower federal tax burden for everyone. As intended in a progressive tax scheme, the rich shoulder by far the greatest portion of those taxes. Their share of taxes exceeds their share of income, but the rich are claiming an increasing share of the national wealth, leaving every group beneath them with smaller slices of the American pie.