New IRS Data Show Federal Income Taxes More Progressive in 2004 than 2000

October 17, 2006

We have posted a new Fiscal Fact to the website looking at the degree to which federal income taxes have become more progressive from 2000 to 2004. Using recently released IRS data, we analyze the ratio of income share to tax share for various income groups. Every group with adjusted gross income (AGI) over $100,000 has seen their tax share outpace their income share, with the result that federal taxes became more progressive between 2000 and 2004. Those making $200,000 or more actually saw their share of AGI fall, while their share of total federal income taxes paid increased.

In a purely proportional tax system, any person or income group’s share of taxes would equal their share of the total income. If a group earned 10% of the income, it would pay 10% of the taxes. But in a progressive system, a higher income earner will have his/her share of the tax burden exceed his/her share of total income. We can measure changes in progressivity by looking at the ratio of an income group’s income share to its tax share and observe how that has changed over the course of the four years.

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