Last Updated:October 25 @ 08:07 am

Fact Check - Are the rich taxed less than secretaries?

By Stephen Ohlemacher

WASHINGTON (AP) - President Barack Obama makes it sound as if there are millionaires all over America paying taxes at lower rates than their secretaries.

"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," Obama said Monday. "That's pretty straightforward. It's hard to argue against that."

The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.

In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the "Buffett rule," named for billionaire investor Warren Buffett.

The rule says, "People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.

Obama's claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.

With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress' official scorekeeper on revenue issues.

The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.

"People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out," said Roberton Williams, a senior fellow at the Tax Policy Center. "People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we're getting, which is also the case."

Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.

"So it really depends on what is your profession, where's the source of your income, what's the specific circumstances you face, and the averages won't really capture that," Geithner said.

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4 Comments

  1. onewildmanComment by onewildman
    September 20, 2011 @ 11:40 am

    Yeah you brought up how much Buffet pays in taxes is less than 20 people in his office. That is because Buffet only pays himself $100,000 a year and those top executives make way more than $100,000 and I would bet the secretaries make six figures too.
     I’ve noticed that all liberals continually lie with numbers by giving half truths of just leaving out basic information such as Buffet did.
     
    IMPEACH OBAMA NOW! ! ! ! !

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  2. martininsocalComment by martininsocal
    September 20, 2011 @ 12:26 pm

    FLAT TAX!

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  3. gringo_bobComment by gringo_bob
    September 20, 2011 @ 1:35 pm

    Everyone should pay the same percentage. Say 10% and apply it across the board from bottom to top.

    Get over all the tax B.S. and move on to the real problem here – government spending. This country is where it is due to government spending, not people paying to little in taxes.

    Obama is using the tax issue as a smoke screen to get people away from the true problem – spending and growth of government.

    Republicans are biting on this – taking the bait when we should be staying on message – replace Obama – cut spending – move country forward.

    ###

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  4. ter334Comment by ter334
    September 20, 2011 @ 3:36 pm

    How much in taxes did the people that sucked Solynanda dry pay?  Before they bankrupted the company?  Their fair share?  Or is this company the model O is using to follow in his drive to bankrupt America?   Or maybe we are already bankrupt and O is just waiting for the best time for personal political gain to announce it?  He of course could just say it is a good thing since now we don’t need all the taxes and just write off his trillions since he is not going to pay if Bush and the rest of those guys in the GOP don’t just quit their complaining and get with my program.  I am tired of having to pretend to negotiate and will, in the words of that union guy, have them taken them out.  And remember obl  if they think either me or that union guy are just kidding!  Or all the civilians in Libya that I had killed defending them? 

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