The rich pay absolutely positively no taxes - except for the taxes they do pay

Every time the topic of taxes comes up the liberals talk about how the rich aren't taxed enough and the conservatives counter with the 47% that pay no taxes as well as the following chart.

The chart shows the number of tax returns that have a positive Adjusted Gross Income (AGI) and their percentage of the overall income and taxes paid. The typical take away is that the top 1% only earn 16.90% of the wages yet they pay 36.70% of the taxes. This of course indicates that the super rich not only pay their fair share but they cover some of your share as well.

The problem I have with this table is that it uses AGI as its starting point. 23% of tax returns owe no federal taxes not because of extravagant loopholes and credits but due to standard deductions. In all of the debates over tax rates I have never heard the argument that the standard deduction is the problem. This probably stems from the fact that everyone who pays taxes receives the standard deduction. While the standard deduction does vary it is essentially fair across all income levels.

So if everyone takes advantage of the standard deduction and it is not one of the areas of concern regarding tax inequality then why would you use a data set that doesn't take the standard deduction into account?

If you use everyone with a positive return after standard deductions as your starting point instead of everyone with a positive return at the AGI it has a dramatic affect on the percentages.

Using this method the Top 1% ($450,000 and above) earn 31.65% of the income but only pay 21.83% of the taxes. Similarly the next category of the top 1-5% ($175,000 - $450,000) earn 18.46% of the income while paying only 14.29% of the taxes while the top 5-10% (125,000 - 175,000) earn 17.45% of the income and pay 12.96%. The bottom 50% ($50,000 and lower) on the other hand earn 9.49% of the income and pay 14.82% of the taxes. This leaves the remaining 40% ($50,000 - $160,000) earning 23% of the income and paying 36% of the taxes.

If looked at this way the data shows that the bottom 90% pay a far higher percentage of their income than the top 10%. Does this mean that liberals are right and the rich don't pay their fair share? Maybe. Maybe not. But the real point is that it all depends on how you look at it. It seems to me that starting at AGI gives you the biggest slant towards the rich while starting after the deductions gives the biggest slant towards the poor and middle class. In the end neither analysis proves anything by itself because there are multiple ways to analyze the same data set.

Unfortunately, all too often, our desire to be right trumps our desire to find the truth so we end up using one narrow interpretation simple because it supports our beliefs. This makes for good debates but terrible solutions.