The Federal Reserve Pays More in Taxes than the Bottom Two-Thirds of American Earners Combined

Here’s a look at three sources of revenue for the federal government: individual income taxes, corporate income taxes and payments from the Federal Reserve. The chart is in billions of dollars and the numbers come from President Obama’s budget.

What’s fascinating is that the Fed’s payments are getting to be a hefty share of the government’s revenue (although the White House projects it will fall off soon). For 2010 and 2011, the Fed’s share is equal to 8.4% and 8.3% of individual income taxes respectively.

Given the heavily skewed nature of income taxes, the Federal Reserve pays more in taxes than a hefty slice of America.

We don’t yet have the income tax distribution figures for 2010. The latest are from 2008 and they show that the bottom 50% of taxpayers paid 2.7% of all income taxes. The second quartile (25% to 50%) paid 10.96% of all income taxes.

Assuming that same distribution held in 2010 and will hold in 2011, and by using some very rough interpolation, we can estimate that the Federal Reserve will probably pay more in taxes this year and last year than the bottom two-thirds of all Americans combined.

Update: David Merkel helpfully tweets: “The Fed doesn’t pay taxes; they remit excess seigniorage revenue to the Treasury, which they gather through punishment of savers.”

Posted by on February 14th, 2011 at 10:28 pm

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