Middle Class–Not the Rich or the Poor–Pay Majority of Federal Taxes, Says CBO Data

(CNSNews.com) – Middle-class Americans–not the rich or the poor–pay the majority of annual tax revenues taken in by the federal government, according to data released in a new Congressional Budget Office study. Households earning less than $34,300 per year, meanwhile, actually pay a negative average federal income tax rate.
Middle-class households that earned between $34,300 and  $141,900 paid 50.5 percent of all federal tax revenues in 2007 (the most recent year analyzed), according to the CBO study released Thursday, and households that earned between $34,300 and $352,900 paid 66.7 percent of all federal taxes.
Households in the top 1 percent for annual income (those earning more than $352,900) paid a healthy 28.1 percent of all federal taxes, but households in the lower income brackets paid relatively little. Those earning less than $34,300 paid only 5.2 percent of all federal taxes, and those earning less than $20,500 carried almost none of the federal tax burden (just 0.8 percent of the total) in 2007.
The average overall federal tax rate (including income, Social Security, Medicare, excise and other taxes) for all American households was 20.4 percent in 2007. But the average rate rose dramatically as household income rose. Households earning less than $34,300 paid an average overall federal tax rate of 10.6 percent, while households earning more than $74,700 paid an average overall federal tax rate of almost two and half times that much–25.1 percent.
When it comes to the federal income tax alone (as opposed  to Social Security, Medicare, excise and other taxes) the lower income brackets actually paid a negative rate, thanks to programs such as the Earned Income Tax Credit that paid people a “credit” for income taxes they never paid. The average federal income tax rate for households earning less than $34,300, according to the CBO, was -0.4 percent in 2007, and the average federal income tax rate for households earning less than $20,500 was -6.8 percent.
Over the past three decades, according to the CBO data, taxation has been getting more progressive, as the tax burden has lightened on lower income households while increasing on higher income households. During those three decades, Presidents Ronald Reagan and George W. Bush signed laws cutting the top marginal income tax rates, but Presidents George H.W. Bush and Bill Clinton signed laws increasing the rates.
The CBO divided the 116.9 million American households of 2007 into five roughly equal parts (quintiles) graded by income. The income range for the lowest quintile was $0 to $20,500; the second quintile, $20,500 to $34,300; the third quintile, $34,300 to $50,000; the fourth quintile, $50,000 to $74,700; and the fifth quintile, $74,700 and above. The share of overall federal taxes paid by each of the first four quintiles decreased from 1979 to 2007, while the share of overall federal taxes paid by the highest-income quintile increased, meaning the overall tax burden was shifting away from that class of Americans making less than $74,700 per year in 2007 toward those earning more.

See full tax data on link.


I wear many hats but history, economics and political observance have always been a passion. I am a graduate of the University of Cincinnati College of Business with a degree in Information Systems and Digital Business with a minor in European History. I work for a small mom-and-pop IT consulting and software design company. We deal in servicing mostly government funded non-profit mental and behavioral health care agencies in the state of Ohio. In this I deal with Medicaid and Medicare funds and have a little insight on the boondoggles of government there. Thankfully the undemanding nature of my daily profession gives me ample time to read and stay aware of our current state of affairs which I find stranger than fiction in many instances. In addition to being in the IT field, I have also been self employed with a small contracting company so I might know a thing or two about the plight of small business that employs 71% of the American workforce. I however don't draw my knowledge from my day jobs, which I have had a few; I draw it from an intense obsession with facts and observation about the world in which I live. I do have formal education in things such as history, economics and finance particularly as it pertains to global issues, but I have come to find much of what I thought I knew from the formalities of a state university I had to unlearn through much time and independent research. I hope you enjoy what I bring you which is not often heard in the mainstream news outlets. I would like to think my own personal editorializing is not only edifying but thought provoking while not at all obnoxious. That last one may be a hard to achieve.

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