December 21, 2017

High Earners Pay the Bulk of Income Taxes

When it comes to federal income taxes, are the rich paying their fair share? To address this question one can use IRS historical data to compare the share of federal income taxes paid by Americans in the top 10 percent to the share paid by Americans in the bottom 90 percent since 1980. The top 10 percent of income earners have historically paid more than half of the entire federal income tax burden. Alarmingly, the share of the top 10 percent of earners has been rising consistently, climbing to about 70 percent, while the share of the bottom 90 percent of earners has fallen to about 30 percent.

Despite being one of the smallest demographic groups in America, filing 0.28 percent of tax returns, people earning over $1 million paid 28 percent of income taxes in 2014. Over the past 10 years, millionaires (individuals earning more than $1 million in a given year) have paid 17 to 28 percent of total income taxes each year. The progressivity of the US tax code does not end there: the top 1 percent of income earners pay 38 percent of all income taxes while earning just over half that proportion of income (20 percent).

The number of millionaires in America has increased since its drop during the recession. In 2009, because of the financial crisis, the number of people reporting earnings over $1 million dropped from 0.23 percent of income tax filers to 0.17 percent (160,000 people). As the economy has recovered from the recession, the number of seven-digit earners in America has risen to a new high of 0.44 percent of all income tax filers.