Skip to content

Distribution of the Federal Individual Income Tax

2 min readBy: Patrick Fleenor

Download Special Report No. 92

Executive Summary The latest data from the Internal Revenue Service show that in 1997 the five percent of 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. payers who earned the most paid more than half of all 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, 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.