The Tax Burden Across Varying Income Percentiles

The following charts are the second in a series on the US federal personal income tax system by Mercatus Center senior research fellow Veronique de Rugy.

 The first chart uses the most recent data from the IRS to compare individual marginal federal income rates in varying income quintiles. Marginal rates are what taxpayers in a given bracket pay for the portion of their overall income that falls within that bracket’s range, not their entire income.

 Americans earning higher incomes have higher marginal rates relative to lower earners regardless of marital status or join filing. Based on marginal tax rates, the current structure of the income tax system is clearly progressive.

The next two charts use data from the IRS Statistics of Income tables to reveal the disproportionate burden of taxation among varying income percentiles. This first bar graph breaks down total federal income tax revenues by the earnings percentiles of the Americans who paid them. This second bar graph includes the share of total earnings based on adjusted gross income (AGI) paid for income taxes among various income percentiles.

The top-earning 1 percent of Americans (those who turn in 1.4 million returns making more than $369,000 annually) paid 37.4 percent of federal personal income taxes. However, they earn only 19 percent of income. The top 5 percent of income earners pay almost 60 percent of income taxes while earning almost 34 percent of all personal income.

The Americans at the lower half of the income spectrum (or 70 million returns) paid 2.4 percent of the federal personal income tax revenue. The second chart also shows that almost all federal personal income tax revenues are collected from one half of taxpayers. As these charts suggest, the wealthy disproportionately fund the US federal government through personal income taxes.