Taxes paid and income made in the US, by quintile

Recently, I created a boring graph tracing the federal tax burden over a 15 year period by income quintile. The story has been and will likely continue to be steady as she goes. There are no intended polemical points in that post or in this one--they're just outgrowths of my ignorance and curiosity.

The following table shows the share of federal tax burden as a percentage of total money income (defined here, a couple of pages down) by quintile in 2010. The bottom quintile, for example, pays 1.1% of all federal taxes and 'earns' 3.3% of total income, for a tax-share-as-a-percentage-of-income-share of 33.3%:

Quintile	Tax:Income
Bottom	33.3%
Second	60.0%
Third	70.5%
Fourth	82.1%
Top	127.7%

Tax planning aside, the federal income tax is still clearly an extremely progressive one in absolute monetary terms. For it to be regressive, the ordering by income quintile would have to be exactly reversed, which would require a seismic shifting in the current tax code that is almost unimaginable. Even a truly "flat tax", where tax burdens and income shares are perfectly aligned, is contemporarily unthinkable.

Graph of federal tax liabilities by income quintile

In a post where he presents a table from the CBO showing the share of federal tax liabilities by income quintile in the US from the beginning of the 21st century to a few years into the future, Randall Parker points out how much taxes would have to increase on the top 20% of income earners to close the 2012 federal deficit:

How much would taxes have to increase on the top 20% to balance the budget? For 2012 the projection is for $2.627 trillion total revenue, $3.729 trillion total expenditures, and $1.01 trillion deficit (and I think it will be worse than that due to Peak Oil Recession II). Well, if the top 20% really pay 63.1% of total federal taxes (see table above 2012 column) then they are paying 0.631*$2.637 trillion or $1.66 trillion. Their total taxes paid would have to rise about 66% in order to close the federal budget deficit.

Making the same calculation for the other 80% of the population, we find that their collective tax contributions would have to increase 104%--that is, more than double--to close the single year deficit. That, of course, wouldn't get us out of the financial hell hole (of debt) the country is in, it would just mean we'd momentarily set the shovel down. And, in actuality, such enormous increases in tax liabilities would lead to shrinkage in the private sector, lower incomes, and thus a smaller economic base to tax from.

Randall also comments on how little the tax burden has shifted by income over a decade and a half. Even more apparent than the table he presents makes it, the following graph shows the stasis:


So, the top 20% does most of the vast majority of the heavy lifting. Those in the second quintile from the top, in the 60%-80% range, pull their own weight, and the bottom 60% are dragged along by those earning more than they do.