The estimate of the taxes paid by the 400 top taxpayers was calculated by a Harvard University professor who asked not to be identified. The estimate, from the IRS's Statistics of Income database, was derived from a 1995 microdata file of 401 taxpayers with the highest taxable income, the last year for which such information is publicly available. The database is used by the Congressional Budget Office and other agencies for research on the individual tax burdens.
The picture changes somewhat when payroll taxes for Social Security and Medicare are included. About 80 percent of American workers pay more in payroll taxes than they do in income taxes, according to the Congressional Budget Office. The bottom 40 percent of the taxpaying population, who contribute about 1 percent of income tax revenues, pay about 14 percent of overall payroll taxes. The top 1 percent pay only 4 percent of all payroll taxes.
There is a cap on the amount of earnings subject to Social Security payroll taxes; in 2000, all wages above $76,200 were exempt from payroll taxes. In 1993, however, as part of President Bill Clinton's deficit-reduction plan, the cap was lifted on payroll taxes for Medicare hospital insurance, so even the very rich pay Medicare taxes on all income.
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