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 Fact Sheet: Who Pays The Most Individual Income Taxes?


4/1/2004

FROM THE OFFICE OF PUBLIC AFFAIRS

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The individual income tax is highly progressive – a small group of higher-income taxpayers pay most of the individual income taxes each year. 

  • In 2001, the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.3 percent) of all individual income taxes, but reported roughly one-third (32.0 percent) of income. 
  • The top 1 percent of taxpayers paid 33.9 percent of all individual income taxes in 2001.   This group of taxpayers has paid more than 30 percent of individual income taxes since 1995.  Moreover, since 1990 this group’s tax share has grown faster than their income share.  
  • Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes.  In all years since 1990, taxpayers in this group have paid over 90 percent of all individual income taxes.  In 2000 and 2001, this group paid over 96 percent of the total.   
  • The President’s tax cuts have shifted a larger share of the individual income taxes paid to higher income taxpayers.   In 2004, when most of the tax cut provisions are fully in effect (e.g., lower tax rates, the $1,000 child credit, marriage penalty relief), the projected tax share for lower-income taxpayers will fall, while the tax share for higher-income taxpayers will rise.   
  • The share of taxes paid by the bottom 50 percent of taxpayers will fall from 4.1 percent to 3.6 percent.  
  • The share of taxes paid by the top 1 percent of taxpayers will rise from 30.5 percent to 32.3 percent. 
  • The average tax rate for the bottom 50 percent of taxpayers falls by 16 percent as compared to a 12 percent decline for taxpayers in the top 1 percent. 

Share of Individual Income Taxes and Income, 1990-2001
Share of Individual Income Taxes
[Share of Adjusted Gross Income]

 

Top 1%

Top 5%

Top 10%

Top 25%

Top 50%

Bottom 50%

2001

33.9

[17.5]

53.3

[32.0]

64.9

[43.1]

82.9

[65.2]

96.0

[86.2]

4.0

[13.8]

2000

37.4

[20.8]

56.5

[35.3]

67.3

[46.0]

84.0

[67.2]

96.1

[87.0]

3.9

[13.0]

1995

30.3

[14.6]

48.9

[28.8]

60.8

[40.2]

80.4

[63.4]

95.4

[85.5]

5.6

[14.5]

1990

25.1

[14.0]

43.6

[27.6]

55.4

[38.8]

77.0

[62.1]

94.2

[85.0]

5.8

[15.0]

Source:  Internal Revenue Services.  Percentiles based on adjusted gross income.

 

Projected Share of Individual
Income Taxes and Income in 2004
Share of Individual Income Taxes 1
[Share of Adjusted Gross Income]

 

Top 1%

Top 5%

Top 10%

Top 25%

Top 50%

Bottom 50%

With the Tax Cuts

 32.3

[15.3]

52.8 

[29.9]

64.8

[41.5] 

83.0

[64.6]

96.4

[86.4] 

3.6

[13.6] 

Without the Tax Cuts 

 30.5

[15.3]

50.2 

[29.9]

62.6

[41.5] 

81.8

[64.6]

95.9

[86.4] 

4.1

[13.6] 

Source:  U.S. Treasury, Office of Tax Analysis.

1Estimates of taxes paid ignore any behavioral responses to the tax cuts.

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