The top 1 percent of earners’ pre-tax income dropped 36 percent between 2007 and 2009, while the four lowest quintiles saw a loss of only about 5 percent, according to the Congressional Budget Office. During those years, the average pre-tax income for all earners dropped.
The top 20 percent of earners — the top quintile — bore 67.9 percent of the federal tax burden in 2009. The middle quintile paid 9.4 percent, while the lowest paid .03 percent of the federal tax burden.
As the CBO study points out, average tax rates depend both on tax laws and economic conditions. The average federal tax rate was 17.4 percent in 2009 — the lowest since 1979, when the United States was also in a recession.
Earlier this week, the Congressional Budget Office reported a federal spending deficit of $900 billion for fiscal year 2011.
Economists and policy makers continue to debate the ideal tax rate — and who should pay for the growing deficit.
President Barack Obama and fellow Democrats maintain that joint-filers making more than $250,000 should pay their “fair share.” On Monday, he urged Congress to extend the Bush tax cuts for those making less than $250,000. Those making more than this arbitrary threshold, however, would see their taxes increase.
According to analysis by the Tax Policy Center, presumptive Republican nominee Mitt Romney’s plan would reduce taxes for three-fourths of taxpayers by an average of $4,700. Obama’s plan, on the other hand, would lower taxes for just 12 percent of filers, while raising taxes for about 27 percent of filers — those making more than $250,000, ABC News reports.
The last time the CBO looked at these numbers, released last fall, was for 2007. The results showed the top one percent of earners experiencing huge income growth and caused a stir over rising inequality.
According to William McBride of the Tax Foundation, those numbers were hugely misleading: “2007 was the peak of the business cycle. The income growth experienced by the top earners that year was abnormal to most years,” McBride told The Daily Caller News Foundation.
The most recent data shows that the top earners actually lost income over all.
“This means that income inequality dropped dramatically,” said McBride, who also suggested that Robert Reich and fellow advocates of the “rising inequality” narrative will be quiet on these most recent numbers.
The Internal Revenue Service’s total revenue went down from 2007 to 2009, while the tax rate for the top earners went up, increasing from 19.4 percent to 21 percent. Meanwhile, McBride said, the tax rates for the bottom two quintiles’ — -5.8 percent of income in 2007 and -9.3 percent in 2009 — means the IRS actually paid them.
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