Top 40 Percent of Earners Pay Nearly All Federal Income Taxes

By Dominic Pino

Tuesday, April 15, 2025

 

In response to the urging of Steve Bannon and others to raise taxes on the rich, Representative Max Miller (R., Ohio) told National Review’s Audrey Fahlberg in today’s Morning Jolt, “I believe the wealthy already get taxed at a pretty high rate.” He’s correct, and Republicans must not cave to the left-wing caricature of the U.S. tax system.

 

The current rate for the highest bracket, individuals who make over $626,350 in 2025, is 37 percent for the federal income tax. That was a reduction from the 39.6 percent that the top bracket faced before Trump’s tax cuts took effect. So raising the top rate would be undoing one of Trump’s accomplishments, which should make Republicans not want to do it.

 

There’s also the fact that Kamala Harris’s campaign promise was essentially to extend the Trump tax cuts for everyone except those making more than $400,000 per year. So keeping the tax cuts for nearly everyone but raising taxes on the rich was, quite literally, the Democratic income tax proposal at the last election, and she lost.

 

Audrey also mentioned the possibility of adding a new tax bracket for millionaires. That would mean Republicans at the federal level copying the brilliant tax policy ideas of . . . New Jersey, which passed a millionaire’s bracket in 2020.

 

The 37 percent top rate doesn’t fully express the income tax rate that the rich pay right now. The average top state income tax rate is about 5 percent, so the rich already face a 42 percent income tax rate. Then, there’s considerable variation between states. A billionaire in California faces an income tax rate of 50.3 percent (37 percent federal + 13.3 percent state), and a billionaire in New York City pays 51.8 percent (37 percent federal + 10.9 percent state + 3.9 percent local).

 

Republicans’ message to those billionaires in the two most populous blue states has been that they are overtaxed. Republicans in Texas and Florida, which have no income tax, gloat over attracting wealthy residents from California and New York. To turn around and raise the top tax rate at the federal level doesn’t make sense.

 

Separate from their tax rate is the wealthy’s share of the tax burden. That, too, is very high. According to 2021 tax data analyzed by the Economic Policy Innovation Center, the top 20 percent of income earners pay 83.6 percent of federal taxes. That’s far in excess of their share of income earned, which is 58.8 percent.

 

Despite constant refrains from Democrats about how evil Republicans keep cutting taxes for the rich, the wealthy’s share of the tax burden has been steadily increasing for decades. The top 20 percent of income earners 40 years ago only paid 54.5 percent of federal taxes. So if you think the tax code was more “fair” 40 years ago, that would mean reducing the wealthy’s share of the tax burden today, not raising it.

 

As for helping the poorest, the bottom 20 percent of taxpayers make money from doing their taxes due to tax credits and deductions. Their share of the tax burden is -4.3 percent. Taxpayers in the second quintile effectively pay no income tax at all; their share of the tax burden is 0.1 percent.

 

Taxpayers in the fourth quintile pay 15 percent of federal taxes. That means, when combined with the top quintile’s 83.6 percent, the richest 40 percent of American taxpayers pay nearly all federal income tax, at 98.6 percent of the total burden.

 

Republicans also need to remember that many of those wealthy tax filers aren’t individuals; they’re small businesses that pass through the individual income tax code. “Pass-through businesses account for over half of business income in the United States and employ over half of the private-sector workforce,” according to the Tax Foundation. Jacking up their taxes is the opposite of what Republicans say they want to do for small businesses.

 

The belief that the rich are undertaxed in America is a lie from the left. Raising taxes on the rich even further would be giving in to that lie, with the unintended consequence of hurting a lot of small businesses along the way. Representative Miller had it right, and Republicans need to squash any talk of raising the top rate.