Federal Tax Burden

The Occupy protests sparked my curiosity yesterday with their "99%" slogan.  Specifically, it got me thinking about tax burden in the United States as it relates to income. I did some digging around this morning and came up with some data from the Congressional Budget Office and put together a chart that confirmed by suspicions.

The above chart splits the US population into fifths and shows the percentage of total federal tax dollars each group would be paying under two different taxation systems: a simple flat tax (outer ring) and the 2006 tax structure (inner ring).  Again, this is all about actual federal tax dollars, not about marginal tax rates.

The data on the 2006 tax structure comes directly from the CBO.  To calculate the (highly) theoretical flat tax revenues, I used the CBO numbers for average income for each income bracket  and population for each income bracket.  I chose to compare the actual 2006 data to a theoretical flat tax not because I am necessarily a proponent of such a system but because a flat tax is probably the simplest tax structure. Everybody pays a certain percentage of their income, no matter where the money comes from or how much they make. (Because of this fact, in doing my tax revenue calculations, the proportion each income bracket pays is unaffected by the flat tax rate.  The total number of tax dollars would be, though.)

Items of note:

1. Even under a flat tax, the richest 20% of tax-payers will provide over half the tax dollars the federal government collects.  The obvious reason for this is that the richest 20% make a lot more money; 10% (for example) of $1,000,000 dollars is a lot more than 10% of $10,000.
2. In 2006, the richest 20% paid ~70% of all the federal tax dollars.
3. The poorest 20% hardly paid any of the federal tax dollars in 2006 (~0.8%).  Under a flat tax they would pay ~4%; this would be a five-fold increase in their tax rate.
4. If we moved to a flat tax, everybody's tax rate would go up (each group would be expected to pay for a larger portion of the total tax revenue) except for the richest 20%; their's would do down.

I'll leave it to you to draw your own conclusions.