Friday, April 14, 2006

Are the Rich Paying Enough?

Now that it is tax season, there is sure to be a bunch of articles and op-eds on the question of whether the rich are paying their fair share in taxes.

Before one starts expressing opinions, it is good to look at the facts. The Congressional Budget Office is one place to look for the data on such issues. Here is the Total Effective Federal Tax Rate (all federal taxes divided by income) for different income groups, according to a CBO report, for 2005:

Lowest quintile 5.5 percent
Second quintile 12.0
Middle quintile 15.6
Fourth quintile 19.6
Highest quintile 26.3

Top 10 percent 27.8
Top 5 percent 29.0
Top 1 percent 31.1

Does the average tax rate not rise sufficiently with income? Or does it rise too much? Or is it just right? Economics alone does not provide the answer. But when thinking about the issue, these are the key numbers that people should focus on.