Income Tax Inequality: Do the Rich Pay Too Much?

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Recently, concerns about economic inequality have risen to the forefront, as minimum-wage protests against McDonald's , Walgreen , and other employers have highlighted the tension between the rich and the poor. But when it comes to income taxes, one report suggests that the highest-income Americans bear more than the entire income tax burden for the nation.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the Congressional Budget Office report, which says that the the 40% of Americans with the highest income paid 106% of the total income tax burden in the most recent year for which data were available. Dan explains how that's even mathematically possible, as the lowest 40% of income-earners actually get net money back on their income taxes because of the earned income tax credit. When you look at other taxes like payroll withholding from paychecks, even the poor end up paying something. But Dan notes that the top 40% still pay 86% of the tax, further observing that those disparities make sense given similar disparities in the total amount of income each group earns.

Be smart about your taxes
Income tax inequality is a contentious issue, but one thing everyone agrees on is that it doesn't make sense to pay more tax than you have to. In our brand-new special report " How You Can Fight Back Against Higher Taxes How You Can Fight Back Against Higher Taxes," The Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here Click here to get your copy today -- it's absolutely free.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Stocks

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