The Federal Reserve Probably Paid More to the U.S. Treasury than the Bottom Two-Thirds of Taxpayers Combined

Here’s a follow-up to an arresting stat I uncovered earlier this year. Bear with me, I need to explain this fully.

In 2010, the Federal Reserve made a profit of $81.7 billion. Only a very small portion of that is distributed to the Fed’s shareholders which are the member banks. The rest goes to the U.S. Treasury and last year that totaled $79.3 billion.

Technically, this payment isn’t a tax but a rebate. To quote David Merkel, “The Fed doesn’t pay taxes; they remit excess seigniorage revenue to the Treasury, which they gather through punishment of savers.”

It’s just about impossible for a central bank to lose money so if you’re ever offered the chance to become one, my advice is to do it.

How does the Fed’s contribution compare to what Americans paid in taxes?

That’s hard to say exactly. The Tax Foundation has the most recent numbers available which are from 2009 so we’re not comparing the same data. Please note that I’m aware of this.

Using some very rough interpolation, we can see how much the lower two-thirds of taxpayers paid. According to the 2009 numbers, the bottom 50% of taxpayers paid a total of $19.5 billion in income taxes. The third quartile (between 50% and 25%) paid $90.4 billion in taxes. Two-thirds of that is roughly $60 billion. In fact, it’s almost certainly less due to the progressive nature of the tax code.

One we add that to the lower half, we have a very good estimate of what the bottom two-thirds paid to Uncle Sam.

As I said, this isn’t an exact comparison but we can assume it’s a very good estimate of what taxpayers said in 2010. Those figures probably won’t be available for another 12 months.

Posted by on November 15th, 2011 at 10:11 am


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