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November 28 2012

Doing the Math on the “Fair Share” Tax Myth

Vicki E. Alger

At a recent press conference with the president, House Minority Leader Nancy Pelosi (D-CA) insisted, “Voters sent a clear message to Republicans in the election: we must stand up for the middle class and ensure the wealthy pay their fair share.”

Somebody should have checked her math. Even CNBC (widely considered to have a left-leaning bias) is tiring of this “fair share” trope, admits wealthier Americans pay the highest tax rates:

According to new data from the IRS, people who make $1 million or more had an average tax rate of 20.4 percent in 2010. Tax filers who earned $30,000 to $50,000 paid an average rate of 4.8 percent, while those who made between $50,000 and $100,000 paid 7.7 percent. Those making under $30,000 had a negative effective rate, meaning they paid no federal income taxes after deductions and credits.

Put another way, millionaires pay a rate that’s more than four times that of the middle class.

One caveat: Rates go up as income goes up — but only to a point. Once you hit a certain magic number among super-high earners, your tax rates start to fall slightly.

According to the IRS, average tax rates increase as income increases — until you get to around $1.5 million in annual income. Once you make $2 million, average tax rates start to decrease. The average tax rate peaks at 25.1 percent for those making between $1.5 million and $2 million.

After that it starts to go down, and falls to 20.7 percent for those making $10 million or more.

So the millionaires who pay the highest average tax rates in America are those who make between $1.5 million and $2 million. …

Rates don’t fall all that much once you get above $10 million. Even among the top 400 earners in America, whose average income is more than $200 million, the average rate is 18 percent — still more than three times the rate paid by the middle class.

One thing’s for certain. If the president gets his way, whether you earn $30,000 or $200 million, you’re going to be paying a lot more in taxes without making much of a dent in the national debt.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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