You might have heard that the top 50% of wage earners pay 96% of the taxes. That is ridiculously unfair. They should be paying much **more**. And if you don’t instantly see why that is the case, then you have been bamboozled by statistics.

Since big numbers confuse people, let’s look at a “toy” example of an imaginary country called MiniLand. This year, MiniLand had a population of exactly 100. Sixty-five of these people are adults of “employment age” or higher, and the entire population is grouped into forty-seven households of varying sizes. (A “household” can be a single adult, or any combination of adults and children.) Miniland has 74 white people, 12 black people, and 1 Asian. (His name is Branden.)

This is how much these households made this year:

- 4 families made exactly $10,000
- 4 families made exactly $15,000
- 4 families made exactly $25,000
- 6 families made exactly $35,000
- 9 families made exactly $50,000
- 8 families made exactly $75,000
- 7 families made exactly $100,000
- 4 families made exactly $200,000
- 1 family made exactly $10,000,000

The total gross income of the entire country is $12,960,000.

10 of the households in MiniLand live in poverty. Four of them have a single head of household who made $10,000, two of them are two-parent households with multiple children who made $25,000, and the others are in-between.

The family that made $10 million is the Mussberger family, consisting of two parents and a child. The child’s name is Cindy-Lou.

What is the most fair way to tax these people? The absolutely most conservative (and, I think, absurdly naive) notion of “fairness” out there is the idea of the *flat tax*. Let’s imagine that MiniLand has implemented a flat tax of 30%.

With a flat tax of 30%, the total tax revenue of the country is $3,888,000.

The amount of tax paid by the top 50% of households (that’s 24 out of 47 households) is:

- 4 of the families who made $50,000 pay $15,000 each for a total of $60,000
- the 8 families who made $75,000 pay $22,500 each for a total of $180,000
- the 7 families who made $100,000 pay $30,000 each for a total of $210,000
- the 4 families who made $200,000 pay $60,000 each for a total of $240,000
- the Mussberger family pays $3,000,000
**the grand total: $3,690,000**

Can you do the math? Divide $3,690,000 by $3,888,000 to get the percentage of the total tax revenue paid by the top 50% of households.

That’s right: top 50% of households pays 94.9% of the total tax revenue of the country.

That’s with a **flat tax**.

Let me repeat that: That is with **the** **most** **conservative** **tax** **weighting** **system** **out** **there**.

What MiniLand and the United States have in common is that the income distribution is extremely skewed. To put it quite simply: the top 50% of wage earners should pay **at least** 95% of the taxes in this country, because the top 50% of wage earners makeĀ 95% of the wages in this country. That’s just a fact of life in a country where the income distribution is skewed so severely.

Now, what if MiniLand has a deficit of $1,000,000? How could we solve that problem.

Raising the tax rate by 10% on the lowest 10% of wage-earning families (the 4 families at the bottom) will increase the tax revenue by (drum-roll please): $4000. It will solve less than 1% of the deficit problem.

On the other hand, raising the tax rate by 10% on the *top* 10% of wage-earning families (the 4 families at the top) will increase the tax revenue by over a million dollars: it will actually *solve *the deficit problem.

Those are the statistics that actually *matter*: income tax gained as a percentage of the deficit. That’s a *functional* statistic. Talking about income tax distributions in terms of the percentage of total tax revenue is an absolute scam, and a meaningless statistic. Don’t let it fool you. Don’t let it fool other people, either.