The Congressional Budget Office has released its annual report on “The Distribution of Household Income and Federal Taxes”. This report shows that 60% of households in the U.S. receive more in benefits from the federal government than they pay in taxes.
…almost the entire burden: a) of all transfer payments made to American households and b) of all non-financed government spending, falls on just one group of Americans – the top one-fifth of US households by income.
That’s correct, the CBO study shows that the bottom three income quintiles representing 60% of US households are “net recipients” (they receive more in transfer payments than they pay in federal taxes), the second-highest income quintile pays just slightly more in federal taxes ($14,800) than it receives in government transfer payments ($14,100), while the top 20% of American “net payer” households finance 100% of the transfer payments to the bottom 60%, as well as almost 100% of the tax revenue collected to run the federal government.
The CBO defines Government transfers as
cash payments and in-kind benefits from social insurance and other government assistance programs. Those transfers include payments and benefits from federal, state, and local governments.
and Federal taxes as
individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. In this analysis, those taxes for a given year are the amount a household owes on the basis of income received in that year, regardless of when the taxes are paid. Taxes from those four sources accounted for approximately 92 percent of federal revenues in fiscal year
And finally, here is the CBO definition of households:
A household consists of people sharing a housing unit,
regardless of their relationships. Each income quintile (fifth) contains approximately equal numbers of people but different numbers of households. Similarly, each percentile (hundredth)
contains approximately equal numbers of people but different numbers of households. If a household has negative income (that is, if its business or investment losses are larger than its other
income), it is excluded from the lowest income group but included in totals.
Here are some nifty graphs that illustrate what the CBO found:
As you can see, the top 40% of taxpayers pay more in taxes than they receive in benefits. The bottom 60% receive more in benefits than they pay in taxes. The link between payment for government benefits and receipt of those benefits has been broken.
Just a different spin on the first graph. The top 40% of taxpayers receive less than a dollar in benefits for each dollar that they pay in taxes. The bottom 60% of taxpayers are ‘tax eaters’ who get more back from the government than they pay in.
And finally, here’s the comparison by average tax rates before and after government transfers:
Negative tax rates just mean that those people are getting more back from the government than they are paying in taxes. One of the three of you reading this may be thinking, “So what, those greedy rich bastards should be paying more in taxes.” So for that person, I am including this table that shows exactly how much you have to make before the government decides that you are ‘rich’:
$83,300. That’s how much you have to make for the government to call you ‘rich’. And to be ‘really rich’ you need to make $234,700 and up. Note that those numbers are not for one income, they are for one household. So if you and your spouse both work at a job that pays between $40,000 and $45,000, you are considered rich by the U.S. government when in actuality you are only middle class.
If you live in an area of the country with a high cost of living, like New York City or San Francisco, $234, 700 isn’t rich either. That doesn’t take into account the effect that the tax code has on getting married and having children. Let’s not forget that many these ‘rich’ people probably achieve this level of income from owning small businesses that are responsible for creating most of the new jobs.
Remember these things the next time you hear some liberal idiot tell you that we need to ‘tax the rich’. The ‘rich’ are already paying more than their ‘fair share’.