Study:25% of Millionaires Pay Lower Tax Rates than Many Middle-class Americans

By: Lucy Madison, CBS
By: Lucy Madison, 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.

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  • by Georgia Boy Location: Cairo on Oct 15, 2011 at 07:21 PM
    No arguement Buffet pays a lower "tax rate" than his secretary, but the fact he earns many times more than she does, even taxed at a lower rate than she is, means he will pay more actual dollars in taxes than she does. How else can you explain the richest are paying a higher percentage of taxes than the middle class in this nation? If she earns $100,000.00, and pays at a 20% tax rate she will pay $20,000.00 in taxes. Highly unlikely with the deductions she could take. If Buffet earns $20,000,000.00 a year and pays at a 1% tax rate he would pay $200,000.00 in taxes. He would be paying a lower tax "rate" than his secretary, but more actual dollars in taxes.
  • by mike Location: tally on Oct 14, 2011 at 04:56 PM
    complete idiots lets raise capital gains to 75 percent!!!! oh wait that means my portfollia will be taxed more. oh well i reckon the government can take care of me when they get all.
  • by Zaggs Location: Tally on Oct 14, 2011 at 01:54 PM
    One major problem already, using 2006 data. Millionaires dropped by a third in the great recession which hadn't begun in 2006. But also if the reporting is correct, 25% of the millionaires pay more in tax than 90% of the modest households.
    • reply
      by GV on Oct 15, 2011 at 05:33 AM in reply to Zaggs
      You mean 75% of the millionaires pay more than 90% of the modest households.
      • reply
        by Anonymous on Oct 15, 2011 at 08:05 AM in reply to GV
        And all millionaries pay more in total dollars than any modest household.
  • by Anonymous on Oct 14, 2011 at 11:43 AM
    The more money you have the more you spend. The more you spend the further in dept you will get. The only way to get out of dept, it to stop spending. The is economics 101. If you hate capitalism. The only way to destroy a capitalist society it is to spend it so far into dept they will never recover. That is economic Marxism 101
  • by Democratic Darone on Oct 14, 2011 at 11:33 AM
    I'm a politician who's mentor was shown on tv screaming GD America, right before I won the most powerful office in that land. I don't like capitalism, so I think I will deliberately bankrupt their society and them impose my plan for change which is one world government. I don't like to cut my spending, because I am trying to bankrupt their society. I lied hard and earned my position of power. I want to spend it all until they are bankrupt and forced into my new society. But those darn capitalist are fighting me at every turn and now my people are begin to rise up against me. I must find an escape goat for the economic woes I have cause with all my spending, I know I will blame it on the capitalist and say they are greedy rich people who want it all for them selves and thus are deliberately trying to destroy capitalism by not spending and conserving what they got>>>>oh wait that does makes any sense. Oh now what do I do. I know I will try to raise taxes on them so they will take their business and jobs to other countries Who really wants power? Who really has a vision for change? Who really wants one world government and ultimate world dominance. The capitalist who help make this country what it is or the politician who mentor got on tv and screamed "GD America"
    • reply
      by Gerry on Oct 14, 2011 at 01:32 PM in reply to Democratic Darone
      Looking for an escape goat? Cool. The increase in spending was much greater under Bush than under Obama. I'm referring to absolute dollar amounts. Of course, the percentage increases under Bush were much, much greater because Bush started from much lower spending than Obama started from.
      • reply
        by M on Oct 14, 2011 at 06:20 PM in reply to Gerry
        What is an 'escape goat?' I think the description of our President was right on. Obama hates capitalism. I don't know why. His Indonesian step-father was a major player in Royal Dutch Shell's claim on Indonesian oil fields. Obama's childhood was fostered by the money of capitalism. Why does he hate it? Gerry, you can't disagree that the president wants to destroy our country. There is no other possible explanationM
        • reply
          by Gerry on Oct 15, 2011 at 01:50 AM in reply to M
          Was it too much trouble to read the post I responded to before reading my response? "Escape goat" is Darone's term.
  • by Leona H. Location: N.Y.C. on Oct 14, 2011 at 10:37 AM
    Only the little people pay taxes. I'm not little so I don't want to pay.
  • by Republican Randy Location: Tallahassee on Oct 14, 2011 at 10:35 AM
    I'm a millionaire but I don't like paying taxes. I worked hard and earned my money. I want to keep it ALL. Let the middle class carry the load. I like it that way. I like it when my secretary pays more in taxes than I do and I will vote to keep it that way!
    • reply
      by Reagan Republican on Oct 14, 2011 at 05:35 PM in reply to Republican Randy
      @ Liberal Randy: You need to do some more research in order to comment about facts not fiction.
      • reply
        by j on Oct 15, 2011 at 09:23 AM in reply to Reagan Republican
        the fact you are an republican is all i need to know about your attitude. the two of you, ugh!!!
    • reply
      by j on Oct 15, 2011 at 09:24 AM in reply to Republican Randy
      randy or slick rick don't fool me. get lost and leave the state.
  • by Anonymous on Oct 14, 2011 at 10:33 AM
    That's fine if they want to pay less in taxes but millionaires shouldn't pay LESS of a tax rate. They should pay the same percentage as anyone else.
    • reply
      by Anonymous on Oct 14, 2011 at 06:22 PM in reply to
      The upper level income tax rate is 35%, much higher than you pay. These stories by the media attempt to cause an uproar because they don't properly explain capital gains tax. Speak with your financial advisor and your tax consultant and you will see that you TOO pay low taxes on your captial gains.
  • by STOP SPENDING on Oct 14, 2011 at 10:08 AM
    You want more money stop spending. The problem with lack of funding are not the millionaires its the politician. Stop spending and start cutting. For one we do not need to be reimbursing and encouraging unwed mothers to have children out of wed lock by promising them government subsidies. That saving alone would put a big dent in our national dept.
  • by Pete Zahut on Oct 14, 2011 at 07:46 AM
    How many of you who post here are millionaires? Do any of you even have a close personal relationship with a millionaire?? I do, but the millionaires I know are NOT politicians, lawyers, or Wall Street/banker scum. They actually earned their money using their brains and talents and provide an actual product that can be used by millions. Guess what - like Buffet, they have NO objection to paying more - they can easily afford it and will never miss it. It is the scum that are essentially usurers, mobsters and deadbeat politicians that are objecting the most to paying any taxes (just look at put glorious governor). You idiot "conservatives" keep electing this scum that continues to write laws to ensure that this system continues - and then you have the nerve to criticize those who object to this system. Take the private money out of elections and you'll finally see a difference.
    • reply
      by Anonymous on Oct 14, 2011 at 09:07 AM in reply to Pete Zahut
      You are absolutely wrong.
    • reply
      by The Breeze on Oct 14, 2011 at 09:31 AM in reply to Pete Zahut
      So I guess you're including much of Obama's administration in your little group of "deadbeat politicians" who fail to pay their taxes?
    • reply
      by Reagan Republican on Oct 14, 2011 at 09:35 AM in reply to Pete Zahut
      @ Pete: Why did you not comment on 47% of Americans that pay $0 Federal taxes to the Government? Now that is a tax break!! We need to broaden the tax share base to all Americans. I have NEVER heard of anyone in this community rich enough to WANT to pay even higher percentages of their income towards Federal income taxes to the Gov., especially when their hard earned money is wasted in the prevailing winds of Washington. We DO need to update the tax code to bring it into the 21st century and end EICC that rewards out of wedlock children. Just curious, why do you deamonize people who disagree with you on a subject every time you post?
      • reply
        by Gerry on Oct 14, 2011 at 11:03 AM in reply to Reagan Republican
        47% pay $0 taxes to the federal government. Why do you keep saying this? It's obviously untrue. Nobody believes you and you have no credibility. FICA taxes are federal taxes. Are you considering children and/or people over 65 or 70 in your 47% I think you don't know what you're saying and don't know what you mean.
        • reply
          by Jack on Oct 14, 2011 at 12:13 PM in reply to Gerry
          Come on Gerry.. The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare.
        • reply
          by me on Oct 14, 2011 at 12:40 PM in reply to Gerry
          Speak for yourself. I agree with RR.
        • reply
          by Gerry on Oct 14, 2011 at 01:21 PM in reply to Gerry
          @Jack The correct statement is that 47% of families pay no federal income tax. Read the post I was replying to. A much smaller percentage will pay no federal taxes. Income above $107,000 is not subject to SS tax and dividend and capital gains are not subject to payroll taxes.
        • reply
          by Gerry on Oct 14, 2011 at 01:29 PM in reply to Gerry
          @me You're a low information voter. Who doesn't know that?
      • reply
        by Pete Zahut on Oct 14, 2011 at 01:29 PM in reply to Reagan Republican
        So, you've never heard of any rich people rich enough to pay more. As I said, I DO!! I'm not "demonizing" (note correct spelling) people who disagree with me - just ask my lovely wife - BUT it seems so many "conservatives" have no idea what "conservative" or "socialism" mean. As to the 47% that pay no taxes - that's a red herring - why don't you try to pay taxes when you make less than $20K/year? I AGREE we do need a totally new tax code - and not just one that doesn't reward out of wedlock children, but ANY children (NO deductions for "dependents"). A flat tax on ALL income would be just dandy - and treat corporations as corporations, not as "individuals". And take all private money out of elections!!!
        • reply
          by Reagan Republican on Oct 14, 2011 at 05:29 PM in reply to Pete Zahut
          What does socialism mean to you? What does being a conservative mean to you? Do some research on the percentage of individuals who pay zero Federal Income tax to the Govt. It is NOT a red herring, it is part of the problem. What if you charged for your product depending on how much a person could/should pay? I am amazed that you want the GOVT. to decide how to waste your hard earned money instead of using the money to improve your business or this community.
      • reply
        by Reagan Republican on Oct 14, 2011 at 05:07 PM in reply to Reagan Republican
        @ Gerry: I know you like to take cheap shots at others to make your argument seem more intelligent, but the truth is I have a lot of credibility and I am a respected member of this community. It is a mathematical fact that 47% of individuals pay ZERO percent to the Federal Government by the means of FEDERAL INCOME TAX. Thanks Jack for posting more figures to help others understand the Federal tax code and percentages.
    • reply
      by me on Oct 14, 2011 at 12:04 PM in reply to Pete Zahut
      I remember you stating in an earlier post that you own a business. What union are your employees affiliated with? And if not in a union, do you advise them that they have rights to more "ownership" of your business?
      • reply
        by Pete Zahut on Oct 14, 2011 at 01:31 PM in reply to me
        I am a sole proprietor (my boss is an idiot! :-)) Why bring up unions?
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