Distribution of the Federal Individual Income Tax
Special Report No. 92
Executive Summary The latest data from the Internal Revenue Service show that in 1997 the five percent of taxpayers who earned the most paid more than half of all federal individual income taxes, 51.9 percent. This top five percent consisted of 6 .1 million earners whose adjusted gross incomes (AGI) were higher than $108,048. 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 this prosperous group paid 36.8 percent of federal individual income taxes, a hefty share but significantly less than its 51.9 percent share in 1997. Naturally, this has resulted in a corresponding decline in the share of the tax burden shouldered by the remaining 95 percent of the nation’s taxpayers.
Even among the top five percent, the highest earners paid the lion’s share. The top one percent of earners in the country are paying almost a third of all the taxes collected. That’s approximately 1.2 million earners whose AGIs are higher than $250,736-paying 33.2 percent of 1997’s federal individual income taxes. This is a considerably larger share than the 24.8 percent paid by the top one percent in 1987.
In 1997, 63.2 percent of federal individual income taxes was collected from individuals in the top 10 percent of income earners-those with adjusted gross incomes higher than $79,212. In 1987, 51.6 percent of all federal individual income taxes were collected from filers in this percentile.
Dividing all tax returns in half by AGI, the vast majority of 1997’s federal individual income tax burden, 95.7 percent, was borne by the top half-individuals with AGIs over $24,393. In 1987, the top half paid 93.9 percent of total collections.
The shift in the tax burden onto the top five percent has lightened the relative load on lower-income filers. In 1987 individuals in the lower half of income earners paid 6.1 percent of total federal individual income taxes. By 1997 this figure had dropped to just 4.3 percent.