High earners' take of tax expenditures proportional to tax liability


The breakdown of how income groups benefit from tax credits and deductions would seem likely to play a role in any discussion of an overhaul of the individual tax code. Officials on both sides of the aisle have said they believe that code needs revamping, but the Obama administration at least is more concerned with corporate taxes right now.  

Writing in Tax Notes, Williams also found that the middle class — the center 60 percent of income earners — basically pay a third of federal taxes and get the same amount of the tax expenditure benefits. The bottom 20 percent of earners get just less than 4 percent of the value of credits and deductions while paying around 0.5 percent of federal taxes.

In all, the top 20 percent makes 55 percent of all income, the middle class takes in just more than 40 percent and the bottom 20 percent make around 4 percent. 

Williams also wrote that, generally speaking, higher earners were more likely to get benefits from tax deductions and exclusions, such as for capital gains and dividends. The bottom 80 percent of earners take in most of the tax credit benefits.