Per the release of income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. data by AGI percentile yesterday by the IRS, the Tax Foundation has updated its popular “Summary of Federal Individual Income Taxes” page. The data recently released is for tax year 2005 (same as calendar year).
The report highlights the fact that both the tax share and AGI share of the top 1 percent reached all-time highs in 2005. In 2005, the top 1 percent of tax returns earned 21.2 percent of adjusted gross incomeFor individuals, gross income is the total pre-tax earnings from wages, tips, investments, interest, and other forms of income and is also referred to as “gross pay.” For businesses, gross income is total revenue minus cost of goods sold and is also known as “gross profit” or “gross margin.” and paid 39.4 percent of the nation’s federal individual income taxes. This indicates that the federal individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. is highly progressive as under a purely proportional system, the two shares would be identical.
Furthermore, in 2005, the top 1 percent of tax returns paid nearly the same amount in federal individual income taxes as the bottom 95 percent of tax returns, a group which was responsible for 40.4 percent of the federal individual income taxes paid.
(Note: This data does not include the refundable portions of the child tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. or the Earned Income Tax Credit, which if included, would make the share of taxes paid by the top 1 percent even greater as those items would significantly lower the tax bill of the bottom income groups.)
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