Which Age Groups Bear the Largest Share of the Tax Burden?

August 4, 2010

Debates over tax policy – such as the question of whether or not the Bush tax cuts should be allowed to expire – tend to be waged on the basis of class grounds. In other words, should we raise taxes on the "rich" as opposed to extending tax cuts for the "middle-class." Rarely, however, does age enter these discussions. Perhaps it should.

New data from the IRS provides us some insights on the composition of tax filers by age and how much of the nation's tax burden they pay. While the data does not break down the income levels of taxpayers by age, the data can still give lawmakers a new perspective on which age groups could be most impacted by changes in tax policy.

Table 1 below shows the distribution of tax filers by age and how much of the nation's adjusted gross income they account for. Out of the roughly 142 million filers, people under the age of 35 account for 35 percent of all returns but just 17 percent of total AGI. By far, the largest number of filers are between the ages of 35 and 55, and they account for nearly half of total AGI. Meanwhile, only 14 percent of filers are between the ages of 55 and 65 yet they account for 20 percent of AGI. Seniors comprise 14 percent of filers and account for 15 percent of AGI.

Table 1.

Tax Returns and AGI by Age Group

All Returns

Percentage of All Returns in Age Group

Adjusted Gross Income (Billions)

Percentage of AGI in Income Group

All returns

142,450,569

100%

$8,263

100%

Under 18

2,708,155

2%

$13

0%

18 under 26

23,171,781

16%

$379

5%

26 under 35

24,104,248

17%

$1,040

13%

35 under 45

26,519,702

19%

$1,816

22%

45 under 55

26,272,336

18%

$2,149

26%

55 under 65

19,672,834

14%

$1,631

20%

65 and over

20,001,512

14%

$1,236

15%

http://www.irs.gov/pub/irs-soi/08in37ag.xls

As Table 2 shows, when it comes to paying taxes, filers under the age of 35 bear just 11 percent of the total tax burden and have the highest concentration of filers with no income tax liability. More than half of filers between the ages of 18 and 26 don't owe any income taxes, while 43 percent of filers between the ages of 26 and 35 are non-payers.

The largest share of the income tax burden – 29 percent – is borne by filers between the age of 45 and 55, with the next largest share – 23 percent – being borne by tax filers between the ages of 55 and 65, those nearing retirement. Interestingly, this group has the lowest percentage of non-payers, just 21 percent.

While many Americans who are older than 65 don't earn enough to file a tax return, those that do file returns pay 16 percent of the total tax burden, slightly more than their share of total AGI. Overall, filers over age 55 paid nearly 40 percent of all income taxes in 2008 even though they comprised just 28 percent of all tax filers and accounted for 35 percent of AGI. As more Baby Boomers reach their peak earnings years and near retirement, their share of the tax burden will surely rise. Lawmakers should take this into account when they consider the impact of changes in tax policy.

Table 2. Total Income Tax Liability by Age Group: 2009

Number of Returns with Tax Liability

Amount Paid (Billions)

Share of Total Taxes Paid

Non-Payers

Percent of Age Group Non-Payers

All returns

90,660,104

$1,032

100%

51,790,465

36%

Under 18

759,997

$1

0%

1,948,158

72%

18 under 26

11,093,216

$20

2%

12,078,565

52%

26 under 35

13,824,211

$91

9%

10,280,037

43%

35 under 45

16,606,019

$212

21%

9,913,683

37%

45 under 55

19,249,488

$303

29%

7,022,848

27%

55 under 65

15,598,055

$242

23%

4,074,779

21%

65 and over

13,529,118

$162

16%

6,472,394

32%

http://www.irs.gov/pub/irs-soi/08in37ag.xls


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