Who says the rich don't pay tax?

We hear it from the President, who wants to sew class envy. We hear it from the Democrats, who want more of our money to spend. We even hear it from the media, who want controversial headlines.

"The Rich Don't Pay Tax!"

The only bigger lie is, "I'm from the government and I'm here to help."

It's time to un-spin the politics of class envy and to do that, we'll turn to the source that knows most about who pays tax – the IRS. Each year, the IRS publishes a set of spreadsheets that break down personal income tax collections by income percentile.

The most recent collections data available is for the 2010 tax year and covers years going back to 2001. The chart at the top of this page is just the 2010 portion of the most recent data. As you can see, the top 1% of taxpayers earned 18.87% of all personal income, but paid 37.38% of all personal income tax collected. Do the math and you'll see that on average, the richest 1% of taxpayers are paying double their share of taxes, based on income.

Note too, that the top 10% of taxpayers pay more than 70% of all federal personal income tax. Then consider that since roughly half of Americans pay no income tax, the top 10% of taxpayers actually represent only 5% of all Americans. So what this means is that the richest 5% of Americans pay more than 70% of all tax collected each year. That's not exactly what you've heard from the media.

The "Soak the Rich" crowd digs up one or two uncharacteristic cases, where a rich individual pays much less tax than his peers and then attempts to paint all rich people with the same broad brush.

By contrast, this IRS data represents overall collections, itemized by income percentile. These are the totals for each income group; including those who pay much less tax than their peers and those who pay much more. In fact, since this data is based on collections, the totals are after all deductions, exclusions and other tax breaks were taken and even after any cheating. It represents dollars in the U.S. Treasury, itemized by the income percentile of depositors (i.e. taxpayers).

As long as we tax income, such disparity in taxation will continue to drive wealth offshore. Perhaps it's time to consider the FairTax (H.R. 25 text).