Useful Facts on Who Pays the Nation’s Taxes March 5, 2009 Scott Hodge Scott Hodge Since the release of President Obama’s FY 2010 budget, which calls for raising the top two income tax brackets, we have received quite a number of requests for data on the share of taxes paid by the so-called rich. I thought it would be helpful to post the most recent IRS figures on the distribution of the income tax burden. As the first table below shows, in 2006 Americans filed more than 138 million tax returns totaling roughly $8 trillion in adjusted gross income (AGI). However, nearly 46 million tax filers (one-third of all filers) had no income tax liability after benefiting from the credits and deductions available to them. Among the lowest income groups, more than half of the filers had no liability at all. More than $2.5 trillion in AGI (one-third of all AGI) was not subject to income taxes that year. As the second table shows, the government was reliant on the remaining 92 million tax filers for raising the necessary amount of income taxes to pay for government programs. In 2006, these actual tax payers had roughly 5.4 trillion in AGI and paid more than $1 trillion in income taxes. The average tax payment was $11,044 and the average effective tax rate was 19 percent. In 2006, there were roughly 4 million taxpayers with incomes above $200,000—the target group for Obama’s higher taxes. These taxpayers account for 39 percent of total AGI among actual taxpayers but pay 53 percent of all income taxes. The vast majority of these upper-income taxpayers—91 percent—earn between $200,000 and $1 million. These taxpayers account for half of the AGI and roughly half of the taxes paid by the “rich.” There were about 353,000 taxpayers with incomes above $1 million. They had a total AGI of $1 trillion and accounted for $273 billion in income taxes in 2006, 27 percent of all income taxes. Just 15,911 taxpayers had incomes above $10 million. They paid $91 billion in income taxes, 9 percent of all income taxes. Their average tax payment was $5.7 million. Adjusted Gross Income 2006 Total Number of Tax Returns Total Adjusted Gross Income Number of Returns with No Tax Liability Percentage of Filers With No Liability AGI Not Subject to Income Tax ($Thousands) ($Thousands) Total 138,394,754 8,030,842,945 45,681,047 33.0% 2,570,375,819 $1 — $5,000 11,633,370 31,004,475 10,776,846 92.6% 30,044,572 $5,000 — $10,000 11,786,747 87,992,646 8,420,656 71.4% 81,398,821 $10,000 — $15,000 11,711,680 146,357,710 5,937,012 50.7% 121,565,899 $15,000 — $20,000 10,937,694 191,038,095 5,218,904 47.7% 144,946,319 $20,000 — $25,000 9,912,261 222,862,623 4,059,849 41.0% 155,442,187 $25,000 — $30,000 8,749,761 240,252,128 2,972,741 34.0% 149,085,576 $30,000 — $40,000 14,151,824 492,158,138 2,996,264 21.2% 254,394,467 $40,000 — $50,000 10,687,193 478,795,699 1,358,116 12.7% 211,557,557 $50,000 — $75,000 18,854,917 1,158,386,347 1,040,366 5.5% 432,049,603 $75,000 — $100,000 11,140,408 960,841,319 160,992 1.4% 303,938,561 $100,000 — $200,000 12,088,423 1,606,322,715 52,168 0.4% 426,274,710 $200,000 — $500,000 3,121,485 895,151,023 8,527 0.3% 164,073,641 $500,000 — $1,000,000 589,306 399,608,986 1,840 0.3% 52,000,745 $1,000,000 — $1,500,000 150,431 182,043,576 437 0.3% 20,699,934 $1,500,000 — $2,000,000 64,007 110,211,789 255 0.4% 12,202,441 $2,000,000 — $5,000,000 98,724 295,129,497 347 0.4% 30,348,767 $5,000,000 — $10,000,000 24,975 171,407,703 91 0.4% 17,774,019 $10,000,000 or more 15,956 452,475,087 45 0.3% 53,774,610 Source: http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133521,00.html Adjusted Gross Income 2006 Total Number of Taxable Returns Remaining Taxable Income Total Taxes Paid Share of Total Taxes Paid Average Tax Payment of Those With a Liability Effective Rate of Those With a Tax Liability ($Thousands) ($Thousands) Total 92,713,707 5,460,467,126 1,023,920,139 100% $11,044 19% $1 — $5,000 856,524 959,903 88,684 0.01% $104 9% $5,000 — $10,000 3,366,091 6,593,825 654,390 0.1% $194 10% $10,000 — $15,000 5,774,668 24,791,811 2,373,130 0.2% $411 10% $15,000 — $20,000 5,718,790 46,091,776 4,759,278 0.5% $832 10% $20,000 — $25,000 5,852,412 67,420,436 7,501,691 0.7% $1,282 11% $25,000 — $30,000 5,777,020 91,166,552 10,396,566 1.0% $1,800 11% $30,000 — $40,000 11,155,560 237,763,671 27,293,090 2.7% $2,447 11% $40,000 — $50,000 9,329,077 267,238,142 32,509,507 3.2% $3,485 12% $50,000 — $75,000 17,814,551 726,336,744 94,443,396 9.2% $5,301 13% $75,000 — $100,000 10,979,416 656,902,758 90,019,371 8.8% $8,199 14% $100,000 — $200,000 12,036,255 1,180,048,005 209,381,101 20.4% $17,396 18% $200,000 — $500,000 3,112,958 731,077,382 177,041,086 17.3% $56,872 24% $500,000 — $1,000,000 587,466 347,608,241 94,213,951 9.2% $160,373 27% $1,000,000 — $1,500,000 149,994 161,343,642 44,125,225 4.3% $294,180 27% $1,500,000 — $2,000,000 63,752 98,009,348 26,721,295 2.6% $419,144 27% $2,000,000 — $5,000,000 98,377 264,780,730 71,647,095 7.0% $728,291 27% $5,000,000 — $10,000,000 24,884 153,633,684 39,556,521 3.9% $1,589,637 26% $10,000,000 or more 15,911 398,700,477 91,013,554 8.9% $5,720,166 23% Source: http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133521,00.html Stay informed on the tax policies impacting you. 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