Wealthy paid less in overall taxes in 2008, report shows

IRS receipts from that year show taxpayers earning at least $380,000 paid 38 percent of all taxes collected, down from 40.4 percent in 2007. 

Meanwhile, the top 50 percent of all taxpayers, who earned at least $30,000 and includes those in the upper brackets, were responsible for approximately 97 percent of all tax collected in 2008, a percentage that has remained about the same since 2004. 

“Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people have incomes that include significant capital gains that fluctuate wildly with the economy, causing their income tax liabilities to fluctuate wildly as well,” said Tax Foundation senior economist Gerald Prante in prepared remarks. “As the economy grew from 2003 to 2007, high-income people earned larger shares of income, increasing income inequality despite their payment of larger shares of tax. When the economy reversed course in recessionary 2008, income at the high-end shrank, reducing both federal revenue and income inequality.” 

The Tax Foundation notes the average tax rate in 2008 was around 2.6 percent for incomes at the bottom half of the salary scale and 23.7 percent for the top 1 percent. While wealthier taxpayers paid less in taxes overall, their tax liability actually increased in 2008 as a larger portion of their tax bill stemmed from income rather than returns on investments, and ordinary income is taxed at higher rates than investments.