25% of millionaires pay lower tax rates than many middle-class Americans, study says

CBS

Roughly 25 percent of American millionaires pay a lower tax rate than millions of middle class earners, according to a new study by the nonpartisan Congressional Research Service.

According to the report, which was based on 2006 data, about a quarter of millionaires (about 94,500) paid less than 26.5 percent of their income in federal taxes, while about 10 percent of moderate-income taxpayers (about 10.4 million taxpayers) paid more than 26.5 percent in taxes. Moderate-income taxpayers were defined as those with an adjusted gross income less than $100,000.

The study validates claims recently touted by billionaire investor Warren Buffett, that the percentage he paid on his taxable income in a given year was "a lower percentage than was paid by any of the other 20 people" in his office. Buffett argued in an August opinion piece that lawmakers in Washington should raise taxes on the "mega-rich" who have been "coddled long enough by a billionaire-friendly Congress." 

His comments inspired the so-called Buffett Rule, an Obama administration initiative that endeavors to change the tax code so that "no household making over $1 million annually should pay a smaller share of its income in taxes than middle-class families pay."

According to Thomas Hungerford, who authored the report or the Congressional Research Service, Buffett's claims of disparity in the tax code are not without basis.

"The current U.S. tax system violates the Buffett rule in that a large proportion of millionaires pay a smaller percentage of their income in taxes than a significant proportion of moderate-income taxpayers," he writes.

The study points out that the while, on average, millionaires do pay more in taxes than middle-class earners (about 30 percent compared to about 19 percent), the use of average tax rates in discussions surrounding the issue "hides a great deal of variation in the tax rates that taxpayers actually face."

"The primary reason for this is the higher-income taxpayers with low tax rates receive a very high proportion of the income from long-term capital gains and qualified dividends, which are taxed at low tax rates and not subject to payroll taxes," Hungerford says.

Lower-income taxpayers, however, earn most of their income from wages - which are subject to payroll taxes.

Congressional Republicans have argued that the proposed Buffett Rule is just one example of Democrats waging "class warfare" against wealthy Americans.

Mr. Obama has flatly rejected that notion while pushing his jobs bill - which contains a version of the Buffett Rule -in appearances across the country.

"This is not class warfare -- it's math," Mr. Obama said in a September speech attempting to rally support for his bill. The money has to come from some place... If we're not willing to ask those who've done extraordinarily well to help America close the deficit... the math says everybody else has to do a whole lot more, we've got to put the entire burden on the middle class and the poor."

The Senate on Tuesday blocked Mr. Obama's jobs bill, but the president has vowed to push its measures through Congress piecemeal.

[jynyc77]

This is probably the most misleading article I've seen on this topic - Ms. Madison must either be brain dead or your typical liberal media member standing at the ready to justify our president.

All this says is that the bottom 25% of millionaires pay less than the wealthiest 10% of "moderate income" Americans, which would be upper middle class people making probably $95-$100K...not exactly the working poor. It also compares "federal taxes" of millionaires to "taxes" or the upper middle class - which means they are probably comparing apples and oranges to justify Obama's baldfaced lies about who really pays income taxes in this country.

[RantingLoons]

I hope all the people going after these "rich" folks are ready to pay more in property taxes. I would bet that a portion of this lower-tax income from these millionaires comes from tax-free municipal bonds (ie: towns issue bonds to fix schools, build buildings, etc). If those bonds are no longer "tax-free", investments will go elsewhere so the cities will have to pay a higher rate.

[Bandofotters]

"According to the report, which was based on 2006 data, about a quarter of millionaires (about 94,500) paid less than 26.5 percent of their income in federal taxes, while about 10 percent of moderate-income taxpayers (about 10.4 million taxpayers) paid more than 26.5 percent in taxes."

There is so much seriously wrong with this statement! No one who earns less than $100,000 pays more than 26.5% in federal income tax so the statement must be comparing all taxes to the federal tax of the millionaire. (apples to oranges people! I know, they're both fruit, close enough)

[hdc77494]

Compared to the rest of the world, the UShas very high corporate tax rates and high capital gains rates. Those millionaires you're talking about actually paid almost punitively high taxes, first paying 35% on their corporate profits, and then 15% capital gains on the same money when it passed from the corporation to the individual. The idea that those people aren't paying enough is a non-starter. Do you really want to drive them out of the US? People with that kind of money can live anywhere they want.

[memphispiano]

Don't you love how CBS & the media have it both ways?
They claim in this article that the rich basically don't pay as much taxes as lower earners.
Then in another article on this same site, they try to act like the rich pay 35% and would get a cut if Cain's plan was enacted at 9% (no deductions etc).
If the rich are not paying as much as the lower wage earners, then Cain's plan would force them to pay their share by making everyone pay 9% and dropping loopholes.
Which is it, CBS?

[bileven]

I love the fact they play on words.. The rich pay a lower "rate" but only say less than 26.5%.. but they only briefly shine past the fact the same individual actually pay more (about 10% more) and the difference is long term investments. Those same investments sustain middle class business' and allow for other employers to keep employees.

IN OTHER WORDS.. those "loopholes" are meerly incentives to invest in American Workers. If they take away any incentives, then it is the "Investments", not the Invested business' NOT the Investors that will lose. They will just find other "Out of US" Investments that will provide tax shelters.

Also, keep in mind, if they change the Tax code to control those Tax Shelters, it won't take much to adjust them to have an advert effect on others tax shelters, including the middle class...

[rini10]

Sorry not that I like rich people but 10% of a million is a lot more than most of us pay or make. And thats not the problem the problem is us we do not car pool or combine trips which would cut the 35 million of oil imports a month. Two we go to the store and buy imports so there goes our jobs overseas. If the 308 million people would buy 1 dollar of american products and half of that products cost was labor that would mean we would have 7,000 people with a job for a year at 12 dollars an hour. If they did it for a year we would have 2.6 millon jobs created. So it is not up to the government its up to us to look for Products made in the USA.

[Smokey75]

by RetiredArmy_Nurse October 14, 2011 9:09 AM EDT
I am constantly amazed at how repuglithugs demonize the working poor. These people do all the dirty work the rest of us will not do and hold the country together. Most people do not choose their life path. Those of us born to privilege remain privileged and those born poor stay poor. The reality is that few of us ever manage to break out of the class we were born in. It is immoral, unamerican, and unchristian to demonize the working poor, but that now seems to be the repug tactic to go after groups of people who cannot defend themselves. Shame on you.

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OHHHHHHHHHHHH So it's ok to demonize the rich and call them bad evil people and thats ok. But pointing out facts about poor of how they make poor life choices that keep them poor is somehow a bad thing and makes me heartless and mean. Is a rich person less of American in your eyes then a poor person? Just curious does our constitution have somewhere in it where it says after a certain income this document no longer applies to you?

So I guess instead of looking for root cause of poverty and finding out why the poor are poor. Which is mean and cruel we should just continue to turn our money over to the government no questions asked so the government can continue the handouts to poor and never really try to fix the problem.

Maybe you should look at the mirror and say "Shame on you" for doing everything you can to keep the poor down so the Democrats can have a solid voting base. Because after all if everyone was successful, what need would there be for a democrat party?

[rini10]

I agree with that keeping the poor down to control them

[RetiredArmy_Nurse]

Wow, thanks for repeating all that I said. Is a rich person less American? We are ALL Americans and the rich need to pay their fair share. Our wealthy pay lower taxes than any other upper class in the world. They take advantage of all the opportunities this nation offers and give back much less than the rest of us in proportion to their great wealth. How many rich people did I see serving with me in the Army? In combat? Saving Lives? Over nearly 30 years service, I don't remember any. Yes, shame on you again. I'm proud to be a liberal democrat who has given a lifetime of service.

[billmelater59]

So if you think the econmy is bad now, go up on capital gains taxes and dividend taxes and make interest on municiple bonds taxable and see what happens.

[helloall34]

Great, hopefully you speak for the entire republican party and you agree to try it!

[iamproteus]

I can tell you what would happen. The rich (those that profit from these investments) would continue to make money on those same investments. This crap about the rich would stop investing if they had to pay higher taxes is just that: crap! It is ludicrous to think that they would refuse to invest just because they had to give up 30% of their profit to taxes instead of only 25%. Paying 90% back in the 1990s didn't stop 'em. Why should they balk at much less than half of that?

[karek40]

Surely everyone realizes our current tax system is broken and no amount of patching will fix it. The only candidate to offer a different solution is Mr. Cain. I am ready to try it, just think April 15 could be just another day.

[Smokey75]

by anamenooneuses October 14, 2011 8:34 AM EDT
"95% of millionaires are millionaire's because they earned it."

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Give us some links or facts to back up your claim --- smokey
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Hear you go maybe you should learn what a millionaire is na dhow they live.

http://www.nytimes.com/books/first/s/stanley-millionaire.html

http://www.nytimes.com/books/first/s/stanley-millionaire.html