Providing journalists, taxpayers, and policymakers with the latest data on taxes and spending is a cornerstone of the Tax Foundation’s educational mission.
As a nonpartisan, educational organization, the Tax Foundation has earned a reputation for independence and credibility. Our federal tax policy team regularly provides accessible, data-driven insights from sources such as the Internal Revenue Service (IRS), the Organisation for Economic Co-Operation and Development (OECD), Congressional Budget Office (CBO), the Joint Committee on Taxation (JCT), and others. For more insights on the latest federal tax policies, explore the Tax Foundation’s general equilibrium Taxes & Growth (TAG) Model
The IRS recently released the new inflation adjusted 2023 tax brackets and rates. Explore updated credits, deductions, and exemptions, including the standard deduction & personal exemption, Alternative Minimum Tax (AMT), Earned Income Tax Credit (EITC), Child Tax Credit (CTC), capital gains brackets, qualified business income deduction (199A), and the annual exclusion for gifts.
The latest IRS data shows that the U.S. federal individual income tax continued to be progressive, borne primarily by the highest income earners.
How do current federal individual income tax rates and brackets compare historically?
Reviewing reported income helps to understand the composition of the federal government’s revenue base and how Americans earn their taxable income. The individual income tax, the federal government’s largest source of revenue, is largely a tax on labor.
Although the U.S. has a progressive tax system and a relatively low tax burden compared to the OECD average, average-wage workers still pay more than 30 percent of their wages in taxes.
Different taxes have different economic effects, so policymakers should always consider how tax revenue is raised and not just how much is raised.
How do current federal individual income tax rates and brackets compare historically?
Reviewing the sources of personal income shows that the personal income tax is largely a tax on labor, primarily because our personal income is mostly derived from labor. However, varied sources of capital income also play a role in American incomes. While capital income sources are small compared to labor income, they are still significant and need to be accounted for, both by policymakers trying to collect revenue efficiently and by those attempting to understand the distribution of personal income.
CBO data shows that the TCJA reduced federal tax rates for households across every income level while increasing the share of tax paid by the top 1 percent.
In 2020 and 2021, Congress enacted three rounds of economic impact payments (EIPs) for direct relief to households amidst the pandemic-induced downturn. Survey data from the U.S. Census Bureau indicates that households increasingly saved their EIPs or used them to pay down debt rather than spend them.
The redistribution of income from the Biden administration’s tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031.
Last week, an analysis by Reuters suggested that U.S. firms pay less income tax than foreign competitors, in part because “the U.S. tax code is unusually generous with tax breaks and deductions,” also known as corporate tax expenditures. However, the Reuters analysis is at odds with other data and studies indicating that U.S. corporate tax expenditures and effective tax rates are about on par with those in peer countries in the OECD.