"The Rich Don't Pay Tax! …Or Do They?" IRS Data Update for 2012

Important FY2018 Tax Data Update

New IRS Data proves the rich really do pay tax… and lots of it.
(Released:  2020)

John Gaver - Author of "The Rich Don't Pay Tax! …Or Do They?"
John Gaver
The Rich Don't Pay Tax! ...Or Do They? Book Cover




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Surprise! The rich really do pay income tax?

If you're gullible enough to believe Joe Biden, Nancy Pelosi, the bartender from the Bronx, or any of the rest of the Democrats in Congress, you probably think that the wealthy take advantage of so many tax loopholes that they end up paying little or no federal income tax, leaving the rest of us to foot the bill. In fact, that is a myth that has been created by tax and spend politicians on the Left and fostered by a headline-hungry Fake News media.

OK, to be fair, there are also a handful of moderate congressional Republicans (RINOs - Republicans In Name Only), who have helped foster that lie. But you hear it universally from Democrats.

It has, in fact, become a mantra for Democrats. Almost every time one of them gets in front of a microphone, if they aren't berating President Trump or making excuses for something stupid that Joe Biden said or did, they are spreading lies about who does and does not pay federal income tax.

"The rich don't pay their fair share of taxes!"

"If you elect me, I'll impose a wealth tax!"

"I'll make those greedy rich people pay!"

In fact, that mantra has become a rallying call for all Democrats in Congress. The echo in the halls of Congress, of one Democrat calling for a "wealth tax", doesn't die out before another Democrat repeats it again. They tell us all the time that the rich get tax breaks that allow the richto pay little to no taxes at all.

But it's all a hollow lie.

And data from the IRS proves it!

The truth is that if you believe that the rich don't pay tax, you've been deceived through the use of a proven debate tactic referred to as "argumentum ad infinitum". Basically, what the means is, if you repeat a lie often enough and with enough conviction, that lie will eventually take on an undeserved air of truth.

The truth of the matter is clearly exposed in new IRS Collections Data, released in December of 2020. That official data proves beyond any doubt whatsoever, that the often reiterated mantra that "the rich don't pay tax," is an unqualified, "LIE!"

This most recent annual release of IRS Collections Data unmistakably shows that, not only do the top 1% of taxpayers pay tax at a higher average rate than those with lower incomes, but as in previous years and contrary to the popular narrative, the rich pay far more than their share of taxes, based on their share of income earned. To be more specific, the top 1% of income earners (income above $540,009) pay 92% more than their share of personal income tax.

You read that right -

The top 1% pay almost DOUBLE their share in income tax!

The new IRS Collections Data shows that in 2018 (the last year reported), the top-earning 1% of taxpayers earned 20.93% of all individual income earned in the USA, but paid 40.08% of all individual income taxes that were actually collected by the IRS. So do the math.

  40.08% of taxes  
20.93% of income  = 1.92 times their share

We're not talking about billionaires or even people who earn millions of dollars a year. While it's true that some of that top 1% will be really rich, this IRS Collections Data also shows us that the income floor, necessary to be in the top 1% in 2018, was only $540,009. Moreover, that top 1% is made up of just 1.4 million taxpayers.

For the top 5% of income earners, the tax numbers are not that different. To be in the top 5%, one must earn only $217,913 and that group pays 1.65 times their share of taxes, based on income.

But here are the really amazing numbers. To be in the top 10% of income earners one must earn a mere $151,935. Sure, that's a nice income. But it's not enough to call that person rich. Even IT directors can easily earn that much. A good new car salesman can make that much. Some New York City garbage collectors make over $100,000. Of course, every member of Congress makes well over that amount.

We're not talking about billionaires. Most of these people are just ordinary people who have worked hard and most would probably be surprised to learn that they're in the top 10% of income earners. But this group pays 1.5 times their share of federal personal income tax, based on their share of income earned.

If you've read "The Rich Don't Pay Tax! …Or Do They?" then you know that a good portion of the calculations in that book are based on annually published IRS Collections Data by Income Percentile. As mentioned in the book, the IRS releases new collections data by percentile every year, on a very loose schedule.

In December of 2020, the 2018 Collections Data, detailing the amount of personal income tax collected in that year, broken down by income percentile, was posted to the IRS website. This new data clearly demonstrates that the disturbing trends, concerning tax inequity, that you learned about in the book, "The Rich Don't Pay Tax! ...Or Do They" and even more in the second edition of that book, is continuing. While we all like to be right, this is one of the times when it really bothers me that I was right.

Before going into the implications of this new data, it should be pointed out that the following table represents just the 2018 portion of the multi-year data found in those new multi-year spreadsheets.

2018 IRS Collections Data
Number of
Group's %
Share of
Total AGI
Group's %
Share of
Total Taxes
Avg. Tax
Rate (%)
Floor for
Top 0.1%
Top 1%
Top 5%
Top 10%
Top 25%
Top 50%
Bottom 50%
* 3.36
(* Taken from a related IRS spreadsheet)

Please note that the above table reflects only taxpayers. Fully half of Americans don't earn enough to pay tax! According to a statement from the Joint Committee on Taxation, “of all tax units (roughly equivalent to households), including filers and non-filers… approximately 49% will have a positive tax liability.” So that means that in the above table, if a taxpayer falls the Top 10% of "taxpayers", he is actually in the Top Economic 5% of "all Americans". It that taxpayer falls in the Top 1% of "taxpayers", then he is actually in the Top Econimic 1/2% of "all Americans". It also means that if you pay any US income tax at all, then you are in the Top Econimic 50% of all Americans. This table represents only the 49% of Americans who actually pay US income tax.

The primary source file for the above table contains data starting in 2001 and continues through 2018. It can be found on the IRS website at:

This spreadsheet is decreasing cumulative percentiles (top-down).

Certain data for the bottom 50% comes from a related IRS spreadsheet that can be found at: http://www.irs.gov/file_source/pub/irs-soi/18in02etr.xls
This spreadsheet is increasing cumulative percentiles (bottom-up). Such data is marked with an asterisk, above.

It should be noted that beginning with the 2010 IRS Collections Data, the IRS began a new methodology of reporting this data. In particular, all individual income tax returns except returns of dependents are now used in the computation, whereas previous releases were based on only returns with positive AGI. The resulting data shows very slight changes in the actual percentages. For example, the 2009 data shows a very tiny 0.1% difference in tax versus income inequity. In other words, the changes are largely insignificant. But you should be aware of this change, nonetheless.

The trend continues.

Once again, this data shows that the top income earners pay a far greater percentage of the total tax load than justified by their percentage of total of US personal income earned. As mentioned above, the top 1% of income earners pay almost double their share in taxes (183%), based on their share of income earned. So compare that with the bottom 50% of income earners, who earned 11.25% of the income, but paid only 3.11% of the taxes collected. In other words, they paid just 28% of their share of tax, based their share of total income.

But let's take it one step further. An examination of both spreadsheets reveals that the top 1% of taxpayers, in 2018, paid significantly more in U.S. income tax ($615,716 million) than was paid by the bottom 90% of taxpayers ($439,835 million) and only slightly less than the bottom 95% of taxpayers ($609,811million).

Crocodile Tears

Don't shed any crocodile tears for the wealthy. If your attitude is, "Who cares about the rich? They can afford to pay more tax", then you need to re-think your position. That's because the rich can also afford to live wherever they want. If you punish them for success, they'll just take their money and the jobs it creates, to a more success-friendly jurisdiction and leave behind their share of the tax load, to be paid by those of us who remain.

Let me reiterate this important point. When the people who pay the lion's share of taxes and who create almost all of the jobs leave, those who remain will be expected to make up the difference in taxes… and do so with fewer jobs and less income. They (we) will be saddled with a National Debt that will be north of $25 Trillion and nobody left with money enough to pay it off. That's a real fiscal cliff.

If you think that can't happen, think again. Based on quarterly reports, published in the Federal Register, in just one year, near the end of Barack Obama's term and after he had fully implemented his "Soak the Rich" agenda, 2015 Renunciations of Rich U.S. citizens exceeded that of all 8 years under Bush and it got even worse the next year.

That flight of wealthy taxpayers continued unabated for all eight years of the Obama Administration. Wealthy U.S. citizens, in record numbers, walked into U.S. embassies and consulates all over the world and handed in their passports, paying the Bush Exit Tax (part of the Heroes Earnings Assistance and Relief Tax Act), and leaving behind all future U.S. tax liability on non-U.S. sourced income. For the record, the renunciation rate for the wealthy, in 2016 (the last year Obama was in office), was more than 2,300% that of the renunciation rate Obama inherited.

There is however, some good news relating to the renunciation rate of the wealthy. Although the IRS has not yet published the Collections Data for the last two years that President Donald Trump was in office, we do know that, as a result of dismantling much of the Obama-era attacks on wealth, during his first two years in office, the renunciation rate has begun dropping. It is likely that his drop in renunciations of the wealthy probably continued through 2019. But we won't know for sure, for another year. What happened in 2020 is anyone's guess, since the Wuhan virus disrupted everything.

Unfortunately, since the November election and Biden's public threats of higher taxes on wealth, indicators now suggest that even more wealthy citizens are considering renunciation, as a future option.

For the record, in order to be included on one of the Federal Register lists of those wealthy citizens who renounce U.S. citizenship, from which the count of expats is taken, one must meet the IRS definition for a "Covered Expatriate". For those citizens who renounced in 2020, that definition specifies that a "Covered Expatriate" must have had an average tax liability of more than $171,000 per year, for each of the previous five years or have had a net worth of more than $2,000,000 at the time of renunciation. Then consider that, if we calculate backwards, an individual who has an income tax liability of $171,000, probably has an income well in excess of $700,000 per year.

That would place such a person in about the top one-half percent (1/2%) of taxpayers. In other words, that 2,000%+ increase in formal renunciations that occurred under Obama, represents almost exclusively those who make up the top one-half percent (1/2%) of taxpayers.

But for every formal expatriation, thousands of Americans just "drop out." They become what is popularly termed, "Practically Transparent" (PT). They don't renounce. They just don't tell the U.S. government where they're going. They just acquire citizenship in some more success-friendly jurisdiction, move themselves and their money offshore and stop paying U.S. taxes. Sure, under U.S. law, if they have not formally renounced, then what they're doing is considered to be illegal. But people who do that have no intent of ever returning to the USA and since they're taxpaying, job-creating citizens of another country that won't extradite them for failure to pay U.S. taxes, they don't seem to be particularly concerned. Furthermore, as clearly demonstrated in "The Rich Don't Pay Tax! …Or Do They? — Second Edition – Revised and Expanded", there are millions of them.

Remember too, as also detailed in the book, Zogby reported that more than 3 million US citizens "relocate" offshore every year. Of course, since the poor can't afford to leave all of our social programs behind, we have good reason to believe that most of those 3 million people who are relocating offshore are at least upper middle class taxpayers.

Many of those who move offshore, initially do so, with the full intent of returning. Many move for work, as my family did, when we lived in London. Most such expats, fully expected to return. Others are fleeing exorbitant taxes on the wealthy. They may or may not have planned to return. But whatever their reason for moving abroad, many of those 3 million U.S. citizens abroad are finding that, due to the Foreign Accounts Transaction Compliance Act (FATCA), U.S. citizens can no longer open a bank account in the country where they live and work. That situation is not as prevalent as it was, shortly after FATCA was enacted. But it is still a considerable problem for U.S. citizens, who live abroad.

U.S. citizens, living around the world have been told by their banks, that their money is no longer wanted in the bank, because eliminating their U.S. citizen customer base is the only way the banks can comply with FATCA and retain their reputation for banking privacy that the rest of their customers expect. So FATCA is exacerbating this expatriation among all U.S. citizens abroad, across the income spectrum.

But think about it… What percentage of U.S. citizens abroad do you think are poor. Certainly, not all are rich. But since poor people can't afford to move abroad, it means that when many of these Americans abroad choose to renounce their U.S. citizenship, their income level is probably skewed toward upper and middle income taxpayers, which only makes matters worse.

All of this means that the middle class and the poor will have to pick up the slack in taxes and job creation in the USA, as more and more of the rich leave. Now before you dismiss that as a problem, just ask yourself this very important question:

"When was the last time you heard of anyone getting a job from a poor person?"

Put this all together and you have the makings of an economic disaster of epic proportions, for "Main Street," USA. Make no mistake. "Soak the Rich", whether it comes from Democrats or Republicans, will hurt the middle class and the poor far more than it will hurt the wealthy, IF it hurts the wealthy at all.

President Trump began dismantling Obama's "Soak the Rich" schemes. But he has had the Democrats fighting him all the way. But with Joe Biden now in the Oval Office, we can expect a return of Obama's "Soak the Rich" agenda.

One way to end "Soak the Rich", would be to pass the FAIRTax into law, since it cannot be tweaked every two years, to favor a different bunch of rich donors. But even passing the FAIRtax will take time.

I remember my karate instructor telling the class that the only thing better than blocking a blow, is to avoid it entirely - to not be where the blow is aimed, when it arrives. This works for the wealthy, concerning taxes, as well. The wealthy have the means to simply avoid any overly aggressive attack from our tax-hungry government and, as these numbers so strongly indicate, many are already doing just that. They're avoiding being a target, by taking their money, their jobs and themselves to a more success-friendly jurisdiction. The result is that the tax blow aimed at the rich, ends up missing the rich targets and landing largely on the chin of the poor and middle class.

If you don't entirely grasp the severity of what you just read, then you probably haven't read, "The Rich Don't Pay Tax! …Or Do They? — Second Edition – Revised and Expanded."

Click one of the links on the left or below, to order your copy now.

All of this is explained in the book, in much greater detail than we have room for here, along with lot's more statistical information. After reading the book, you'll understand even more clearly, just how severe the problems are that face this nation. Of course the book also provides a thoroughly vetted solution for this problem and more.

Order your copy now.

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