Well we're both wrong according to this document from the CBO, which is far more accurate than the previous link I sent you because it incorporates the negative effects of EIC. It is constructed with data from the CPS married to the SOI which is the most accurate way to map household income. The document doesn't support my claims that the bottom half only pays 5% of FICA, what it does show that even with FICA the bottom two quintiles of income don't rise above 5% for shares of total federal taxes paid even when you add in excise and corporate taxes (which, of course, have to be estimated). Nowhere does 15.3 get reached when you take the universe of those with low incomes. It doesn't even exist in the micro world because of the deductibility of half the payroll taxes.
You missed my earlier point that half of SE is deductable. You can easily see this if you look at the front of the long 1040 on line 27. How important that deduction is depends, of course, on the marginal tax rate. The marginal rate, thus the value of the deduction, can be much higher than the person normally would be allowed, due to a low income earner being married to a high income earner or by having other non-earned income.
The deduction for SS is more apparent for those that are self-employed, like me, because we've been allowed to deduct half the 15.3% we pay from the SE form for quite a few years, whereas those with employers are largely unaware of this deductibility because they don't make the payment nor take the deduction, it is indirectly passed to them from their employer.
cbo.gov Tables 1 and 2.
The tables won't come in correctly on SI, so you should open the document and look at the tables. Basically the bottom and second quintile contains a lot of unearned income because there are fewer wage earners in this quint. This is why a flat tax that includes both earned and unearned income to pay for social insurance hits the poorest people harder than the rich. The median number of wage earners in the bottom is zero. Statistically this is expressed by fractions below 1 when talking about households, whereas in the middle quint the median is 1. By the time you get up to 4-5 it is 2 with 77% of the top quint having two wage earners subjecting the wealthy households to much higher FICA than what you would think would be limited out by the FICA wage limits.
Summary Table 2.
Shares of Federal Tax Liabilities, 2004 and 2005
Source: Congressional Budget Office.
Notes: Income categories are defined by ranking all people by their comprehensive household income adjusted for household
size--that is, divided by the square root of the household's size. (A household consists of the people who share a housing
unit, regardless of their relationships.) Quintiles, or fifths, of the income distribution contain equal numbers of people.
Comprehensive household income equals pretax cash income plus income from other sources. Pretax cash income is
the sum of wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital
gains, cash transfer payments, and retirement benefits plus taxes paid by businesses (corporate income taxes and the
employer's share of Social Security, Medicare, and federal unemployment insurance payroll taxes) and employee contributions
to 401(k) retirement plans. Other sources of income include all in-kind benefits (Medicare, Medicaid, employerpaid
health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance).
Households with negative income are excluded from the lowest income category but are included in the totals.
Income Category
Lowest Quintile 20.8 4.1 4.9 0.9 -2.9 4.1 0.6 11.1
Second Quintile 19.4 8.9 10.0 4.4 -0.9 10.1 1.5 14.9
Middle Quintile 19.4 13.9 14.9 9.7 4.7 16.5 3.0 18.4
Fourth Quintile 19.7 20.4 21.2 17.6 13.8 24.9 6.5 22.1
Highest Quintile 20.3 53.5 50.1 67.2 85.3 44.3 87.3 33.1
All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Top 10% 10.3 38.9 35.5 52.5 70.8 26.2 81.4 20.2
Top 5% 5.2 29.0 25.9 41.4 58.5 14.8 74.7 12.6
Top 1% 1.0 16.3 14.0 25.4 36.7 4.0 59.5 4.8
Lowest Quintile 21.1 4.0 4.8 0.8 -2.9 4.3 0.6 11.1
Second Quintile 19.2 8.5 9.6 4.1 -0.9 10.1 1.4 14.4
Middle Quintile 19.3 13.3 14.4 9.3 4.4 16.7 3.0 18.1
Fourth Quintile 19.7 19.8 20.6 16.9 13.1 25.1 6.2 21.9
Highest Quintile 20.2 55.1 51.6 68.7 86.3 43.6 87.8 34.1
All Quintiles 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Top 10% 10.2 40.9 37.4 54.7 72.7 25.8 81.6 21.2
Top 5% 5.1 31.1 27.8 43.8 60.7 14.4 74.9 13.5
Top 1% 1.0 18.1 15.6 27.6 38.8 4.0 58.6 5.5
Taxes
2004
2005
Insurance Income Excise
Households Pretax After-Tax Taxes Taxes Taxes Taxes
Percentage of Share of Income All Federal Income
Share of Tax Liabilities
Individual Social Corporate
Summary Table 1.
Effective Federal Tax Rates, 2004 and 2005
Source: Congressional Budget Office.
Notes: Income categories are defined by ranking all people by their comprehensive household income adjusted for household
size--that is, divided by the square root of the household's size. (A household consists of the people who share a housing
unit, regardless of their relationships.) Quintiles, or fifths, of the income distribution contain equal numbers of people.
Comprehensive household income equals pretax cash income plus income from other sources. Pretax cash income is
the sum of wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital
gains, cash transfer payments, and retirement benefits plus taxes paid by businesses (corporate income taxes and the
employer's share of Social Security, Medicare, and federal unemployment insurance payroll taxes) and employee contributions
to 401(k) retirement plans. Other sources of income include all in-kind benefits (Medicare, Medicaid, employerpaid
health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance).
Households with negative income are excluded from the lowest income category but are included in the totals.
Effective Tax Rate (Percent)
Income Category
Lowest Quintile 23.6 15,800 15,100 4.3 -6.2 8.0 0.4 2.3
Second Quintile 21.9 37,200 33,500 9.9 -0.9 9.1 0.4 1.3
Middle Quintile 22.0 58,000 49,800 14.1 3.0 9.5 0.6 1.1
Fourth Quintile 22.3 84,500 69,900 17.3 5.9 9.7 0.8 0.9
Highest Quintile 23.0 214,500 160,400 25.2 13.9 6.6 4.2 0.5
All Quintiles 113.3 81,300 64,900 20.1 8.7 8.0 2.6 0.8
Top 10% 11.6 307,800 224,400 27.1 15.9 5.4 5.5 0.4
Top 5% 5.8 457,400 326,100 28.7 17.6 4.1 6.7 0.3
Top 1% 1.2 1,299,300 891,600 31.4 19.7 1.9 9.5 0.2
Lowest Quintile 24.1 15,900 15,300 4.3 -6.5 8.3 0.4 2.1
Second Quintile 22.0 37,400 33,700 9.9 -1.0 9.2 0.5 1.3
Middle Quintile 22.2 58,500 50,200 14.2 3.0 9.5 0.7 1.0
Fourth Quintile 22.6 85,200 70,300 17.4 6.0 9.7 1.0 0.8
Highest Quintile 23.1 231,300 172,200 25.5 14.1 6.0 4.9 0.5
All Quintiles 114.5 84,800 67,400 20.5 9.0 7.6 3.1 0.8
Top 10% 11.7 339,100 246,300 27.4 16.0 4.8 6.1 0.4
Top 5% 5.8 520,200 369,800 28.9 17.6 3.5 7.4 0.3
Top 1% 1.1 1,558,500 1,071,500 31.2 19.4 1.7 9.9 0.2
Average Income Individual Social Corporate
Millions of (2005 dollars) All Federal Income Insurance Income Excise
Households Pretax After-Tax Taxes Taxes Taxes Taxes Taxes
2004
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