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Top Five Percent of Taxpayers Pay Over Half of Total Federal Individual Income Taxes

1 min readBy: Patrick Fleenor

Download Special Report No. 83

Executive Summary

The latest data from the Internal Revenue Service show that more than half of all federal individual 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. es—50.8 percent—are paid by the five percent of taxpayers who earn the most. In 1996, the latest year for which data are available, this top five percent consisted of 6.0 million earners whose adjusted gross incomes (AGI) were higher than $101,202.

Even among this prosperous group, the highest earners paid the lion’s share. The top one percent of earners in the country are paying close to a third of all the taxes collected. That’s approximately 1.2 million earners who paid 32.3 percent of 1996’s 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. es.

A time series analysis of the data shows that since 1980 the share of federal individual income taxes borne by the top five percent has increased markedly. In 1980 these individuals paid 36.8 percent of federal individual income taxes, a hefty share but significantly less than their 50.8 percent share in 1996. Naturally, this has resulted in a corresponding decline in the share of the tax burden shouldered by the remaining 95 percent of taxpayers.