CHICAGO - NOVEMBER 1:  Current federal tax forms are distributed at the offices of the Internal Revenue Service November 1, 2005 in Chicago, Illinois. A presidential panel today recommended a complete overhaul of virtually every tax law for individuals and businesses.  (Photo Illustration by Scott Olson/Getty Images)
The biggest tax changes you'll see
01:29 - Source: CNN Business

Editor’s Note: Scott Hodge is president emeritus and senior policy adviser at the Tax Foundation, a non-partisan tax research organization in Washington, DC. The opinions expressed in this commentary are his own. View more opinion on CNN.

CNN  — 

Tax Day has come and gone for most Americans, and a recent Pew Research poll shows that their frustration with the tax code is the highest it has been in recent years.

Scott Hodge

Some 56% of Americans say the amount they pay in taxes is “more than their fair share,” up from 51% who thought so in 2019. Unsurprisingly, nearly two out of every three Americans feel the wealthy don’t pay their fair share of taxes, and 61% said they would support raising taxes on households earning over $400,000.

But what constitutes a “fair share”?

While “fair” is subjective, most Americans might not understand how much of the tax burden the rich actually bear. The answer may surprise them.

According to the IRS, in 2020, the top 1% of taxpayers (about 1.5 million taxpayers), paid $722 billion in income taxes. That amount accounted for 42.3% of all income taxes paid, the highest percentage in modern history.

By contrast, the bottom 90% of taxpayers (about 142 million taxpayers) paid a combined $450 billion in income taxes, or just 26.3% of the total, their lowest percentage of the tax burden in decades. That means the top 1% of taxpayers pay a far greater share of the nation’s tax burden than 142 million of their neighbors combined.

Surely, the rich pay a larger amount because they earn the most money, right? Not exactly. In 2020, the top 1% of taxpayers earned 22% of all adjusted gross income; their 42.3% share of the income taxes is nearly twice their share of the nation’s income.

The opposite is true for the bottom 90%. They earned more than half, 50.5%, of the nation’s income but paid 26.3% of the taxes — roughly half of their share of the nation’s income.

This hasn’t always been the case. In 1980, the tax burden was much more evenly shared. The bottom 90% earned 68% of the nation’s income and paid 52% of the income taxes. The top 1% earned 9.6% of the nation’s income and paid 17% of the income taxes.

What led to our tax system becoming more progressive today than it has been since at least World War II?

One reason is the massive expansion of social programs delivered through the tax code over the past three decades. Some of the largest programs aimed at lower-income families and those with children are run through the IRS — the Child Tax Credit and the Earned Income Tax Credit. Collectively, they deliver roughly $180 billion worth of benefits each year, much of which is refundable — meaning a family gets a tax refund check even if they don’t owe any taxes.

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Since the mid-1990s, tax credits like these have multiplied like rabbits. There are tax credits for adoption, putting your kids in daycare or your grandparents in senior care, paying for college, buying an electric car, putting solar panels on your roof, and buying health insurance, to name a few. The IRS is now a super-agency delivering all manner of social services. These responsibilities are beyond the capacity of a tax collection agency. No wonder it can’t function.

If Congress believes that these benefits are important for families, another agency should provide them through a spending program, not through the tax code.

The result is that a record number of taxpayers pay no income taxes after claiming their credits and deductions. In 2019, pre-pandemic, 34% of tax filers — equal to 54 million tax filers — paid no income taxes because of the generous credits and deductions in the tax code. In 1980, just 21% paid no income taxes because of credits and deductions.

Despite the well-worn political rhetoric about “fair share,” the burden on top earners continues to climb. If the rich are using loopholes to avoid paying taxes as so many politicians allege, many of them need better accountants.