Since
1937
TA X
FOUNDATION
October 1999
No. 92
SPECIAL
RT
Distribution of the Federal Individual Income Ta x
TopEarning Five Percent Pays Over Half, Top One Percent Nearly a Thir d
Patrick Fleeno r
Senior Economis t
Tax Foundation
The latest data from the Internal Revenu e
Service show that in 1997 the five percent of
taxpayers who earned the most paid mor e
than half of all federal individual income taxes ,
51 .9 percent . This top five percent consiste d
of 6 .1 million earners whose adjusted gross
incomes (AGI) were higher than $108,048 .
(See Figure 1 and Table I . )
A time series analysis of the data show s
that since 1980 the share of federal individual
income taxes borne by the top five percen t
has increased markedly. In 1980 this prosper-
Figure 1
Percentage of Individual Income Taxes Paid by Income Group
1997 and 198 7
To p
1%
To p
5%
To p
10 %
To p
25 %
95 .7 %
To p
50 %
93 .9 %
Botto m
50%
0
Source : Tax Foundation
I
20
I
I
40
60
Percentage of Total Collection s
I
80
I
10 0
: .P 1
2
ous 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 correspondin g
decline in the share of the tax burden shoul -
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 bottom half of income
earners paid 61 percent of total federa l
individual income taxes. By 1997 this
figure had dropped to just 4.3 percent.
dered by the remaining 95 percent of th e
nation's taxpayers .
Even among the top five percent, th e
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 .
Figure 1 and Table 1 also show that in
1997, 63 .2 percent of federal individual income taxes was collected from individuals i n
the top 10 percent of income earners-thos e
with adjusted gross incomes higher tha n
$79,212 . In 1987, 51 .6 percent of all federa l
individual income taxes were collected fro m
filers in this percentile .
Dividing all tax returns in half by AGI, the
vast majority of 1997's federal individua l
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 . Figure 1 shows that i n
1987 individuals in the lower half of incom e
earners paid 6 .1 percent of total federal individual income taxes . By 1997 this figure had
dropped to just 4 .3 percent .
Income Earned vs . Taxes Paid
By Income Group
The fraction of total collections paid by
different parts of the income spectrum is only
Table 1
Federal Individual Income Tax Return Dat a
1997 & 198 7
1997
Income
Group
All Taxpayers
Top 1%
Top 5%
Top 10%
Top 25%
Top 50%
Bottom 50%
Number of
Return s
(000)
AG I
($000,000)
121,506
$ 5,023,492
1,215
6,075
12,151
30,377
60,753
60,753
872,834
1,597,124
2,151,426
3,267,638
4,328,031
695,461
Income Taxes
Pai d
($000,000)
$ 727,303
Group' s
Share o f
Total AGI
Group' s
Share of
Total Taxe s
100.0%
100 .0 %
17.4%
31 .8%
42.8%
65.0%
86.2%
13.8%
33.2 %
51 .9 %
63.2 %
81 .7 %
95.7 %
4.3 %
241,241
377,244
459,643
594,008
696,165
31,138
Income
Split Point
Averag e
Tax Rate
14.5 %
above $250,736
above $108,048
above $79,212
above $48,173
above $24,393
below $24,393
27 .6 %
23.6 %
21 .4 %
18.2 %
16.1 %
4.5 %
1987
Income
Group
All Taxpayers
Top 1%
Top 5%
Top 10%
Top 25%
Top 50%
Bottom 50%
Source : IRS
Number of
Return s
AG I
(000)
($000,000)
106,155
$ 2,813,728
1,062
5,308
10,615
26,539
53,077
53,077
346,635
722,221
1,038,221
1,709,389
2,373,869
439,859
Income Taxes
Pai d
($000,000)
$ 369,046
91,559
159,642
205,230
283,857
346,655
22,391
Group' s
Share o f
Total AGI
100.0%
12.3%
25.7%
36.9%
60.8%
84.4%
15.6%
Group' s
Share of
Total Taxe s
100 .0 %
24.8 %
43.3 %
55.6 %
76 .9 %
93.9 %
6 .1 %
Income
Split Point
-
Averag e
Tax Rate
13.1 %
above $139,289
above $68,414
above $52,921
above $33,983
above $17,768
below $17,768
26.4 %
22.1 %
19.8 %
16.6 %
14.6 %
5.1 %
3
instructive when compared to each group' s
income share . Figure 2 and Table 1 present
the shares of AGI claimed and the shares o f
While the highest-earning one percent of
tax filers earned 17.4 percent of the
nation's total adjusted gross income in
1997, they paid 33.2 percent offederal
individual income taxes during that year
federal individual income taxes paid by eac h
group .
While high-income earners claim relativel y
large shares of total income, they pay even
greater shares of the federal individual incom e
tax burden . For example, while individuals in
the top one percent of tax filers earned 17 . 4
percent of total AGI in 1997, they paid 33 . 2
percent of federal individual income taxe s
during that year . Their average effective fed-
eral individual income tax rate was 27 .6 percent . Similarly, while tax filers in the top five
percent of income earners earned 31 .8 percen t
of total AGI during 1997, they paid 51 .9 percent of total federal individual income taxes .
The average effective federal income tax rat e
for this group was 23 .6 percent.
Figure 2 also shows that the top 50 per cent earning 86 .2 percent of total AGI paid
95 .7 percent of total federal individual incom e
taxes . The average effective federal individua l
income tax rate for this group was 16 .1 percent . Taxpayers in the lower half of filers, o n
the other hand, earned 13 .8 percent of total
AGI but paid just 4 .3 percent of total federa l
individual income taxes . The average effective
federal individual income tax rate of this grou p
was 4 .5 percent .
Comparing Income and Tax
Shares Over Time
Comparing shares of income earned t o
income taxes paid over time sheds light on the
progressive structure of our tax system .
Figure 2
Percentages of Total Income Earned and Federal Individual Income Taxes Paid by Income Group
1997
li Tax Shar e
33 .2%
To p
1%
Income Share
17.4%
51 .9%
To p
5%
31 .8%
63 .2%
To p
10%
42 .8%
To p
25%
95 .7%
To p
50%
Botto m
50%
0
20
40
60
Percentage
Source : Tax Foundation
80
4
Income Pattern s
Table 2 and Figure 3 show that from 1980
to 1988, the top five percent of filers earned a
steadily higher fraction of total income, but th e
trend line leveled off from 1989 to 1994 befor e
starting up again from 1995 to 1997 . Most o f
the rise was attributable to income growth b y
the top one percent of filers .
Looking just at the top one percent, th e
percentage of total income these taxpayers
earned gradually rose from 8 .5 to 15 .2 percen t
between 1980 and 1988, fell to 13 .0 percent
by 1991, then leveled off at around 13 .9 percent from 1992 to 1994 . During the next thre e
years it once again began to climb upward ,
reaching 17 .4 percent in 1997 .
The share of total income earned by th e
next four percent of filers also rose during thi s
period . In 1980 this group earned 12 .5 percent
of total income . This percentage rose to 13 . 6
Table 2
Shares of Adjusted Gross Income by Income Group
1980-199 7
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Top 1
Percent
8 .46%
8 .30
8 .91
9 .29
9 .66
10 .03
11 .30
12 .32
15 .16
14 .19
Next 4
Percent
12 .55%
12 .48
12 .32
12 .45
12 .53
12.64
12 .81
13 .35
13 .35
13 .65
Top 5
Percent
21 .01%
20 .78
21 .23
21 .74
22 .19
22 .67
24.11
25 .67
28 .51
27 .84
14 .00
12 .99
14 .23
13 .79
13 .80
14 .60
16 .04
17 .38
13 .62
13 .84
13.79
13 .98
14 .05
14 .21
14 .32
14 .42
27 .62
26 .83
28 .01
27 .76
27 .85
28 .81
30 .36
31 .79
Next 5
Percent
11 .12%
11 .20
11 .03
11 .04
11 .06
11 .10
11 .02
11 .23
10 .94
11 .16
11 .15
11 .37
11 .21
11 .29
11 .34
11 .35
11 .23
11 .03
Top 1 0
Percent
32 .13%
31 .98
32 .26
32 .78
33 .25
33 .77
35 .12
36 .90
39 .45
39 .00
38 .77
38 .20
39 .23
39 .05
39 .19
40 .16
41 .59
42 .83
Next 1 5
Percent
24 .57%
24 .69
24 .53
24 .44
24 .31
24 .21
23 .92
23 .85
22 .99
23.28
23 .36
23 .65
23 .25
23 .40
23 .45
23 .21
22 .73
22 .22
Top 25
Percent
56 .70%
56 .67
56 .79
57 .22
57 .56
57 .97
59 .04
60 .75
62 .44
62 .28
62 .13
61 .85
62 .47
62 .45
62 .64
63 .37
64 .32
65 .05
Next 2 5
Percent
25 .62%
25 .59
25 .50
25 .30
25 .00
24 .77
24 .30
23 .62
22 .63
22 .76
22 .84
23.01
22.61
22 .63
22 .48
22 .09
21 .60
21 .11
Top 50
Percent
82 .32%
82 .25
82 .29
82 .52
82 .56
82 .74
83 .34
84 .37
85 .07
85 .04
84 .97
84 .87
85 .08
85 .08
85 .11
85 .46
85 .92
86.16
Bottom 5 0
Percen t
17 .68 %
17 .7 5
17 .7 1
17 .4 8
17 .4 4
17 .2 6
16 .6 6
15 .6 3
14 .9 3
14 .9 6
15 .0 3
15 .1 3
14 .9 2
14 .9 2
14 .8 9
14.5 4
14.0 8
13 .84
Top 2 5
Percent
73.02%
72 .29
72 .50
73 .10
73 .49
74 .06
76.02
76 .92
77 .84
77 .22
77 .02
77 .29
78 .48
79 .27
79 .55
80 .36
81 .32
81 .67
Next 2 5
Percent
19.93%
20 .26
20 .15
19 .73
19 .16
18 .77
17 .52
17 .02
16 .44
16 .94
17 .16
17 .23
16 .46
15 .92
15 .68
15 .03
14 .36
14 .05
Top 5 0
Percent
92 .95%
92 .55
92 .65
92 .83
92 .65
92 .83
93 .54
93 .93
94 .28
94 .17
94 .19
94 .52
94 .94
95 .19
95 .23
95 .39
95 .68
95 .72
Bottom 50
Percen t
7 .05 %
7 .4 5
7 .3 5
7 .1 7
7 .35
7 .1 7
6 .4 6
6 .0 7
5 .7 2
5 .83
5 .81
5 .48
5 .06
4 .81
4 .77
4 .6 1
4 .32
4 .28
Source: IR S
Table 3
Shares of Total Federal Individual Income Tax Payments by Income Group
1980-199 7
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Source : IRS
Top 1
Percent
19 .05%
17 .58
19 .03
20 .32
21 .12
21 .81
25 .75
24 .81
27 .58
25 .24
25 .13
24 .82
27 .54
29 .01
28 .86
30 .26
32 .31
33 .17
Next 4
Percent
17 .79%
17 .48
17 .11
16 .95
16 .87
16 .97
16 .83
18 .45
18 .04
18 .70
18 .51
18 .56
18 .34
18 .35
18 .66
18 .65
18 .66
18 .70
Top 5
Percent
36 .84%
35 .06
36 .13
37 .26
37 .98
38 .78
42 .57
43 .26
45 .62
43 .94
43 .64
43 .38
45 .88
47 .36
47 .52
48 .91
50 .97
51 .87
Next 5
Percent
12 .44%
12 .90
12 .45
12 .44
12 .58
12 .67
12 .12
12 .35
11 .66
11 .85
11 .73
12 .45
12 .12
11 .88
11 .93
11 .84
11 .54
11 .33
Top 1 0
Percent
49 .28%
47 .96
48 .59
49 .71
50 .56
51 .46
54 .69
55 .61
57 .28
55 .78
55 .36
55 .82
58 .01
59 .24
59 .45
60 .75
62 .51
63 .20
Next 1 5
Percent
23.74%
24 .33
23 .91
23 .39
22 .92
22 .60
21 .33
21 .31
20 .57
21 .44
21 .66
21 .46
20 .47
20 .03
20 .10
19 .62
18 .80
18 .47
5
in 1990 and then to 14 .4 in 1997 .
The increasing income shares of these two
income groups are illustrated by the tw o
topmost segments of the bars in Figure 3 .
Combined, they show that the share of income
earned by the top five percent of filers gradually rose from 21 .0 percent in 1980 to 28 . 5
percent in 1988 . It then leveled off at aroun d
27 .8 percent from 1988 to 1994 . During the
next three years it once again began to rise ,
reaching 31 .8 percent in 1997 .
Tax Payment Pattern s
Table 3 and Figure 4 show that the only
segment of the income spectrum paying a
steadily higher fraction of individual incom e
tax collections is the top five percent of filers .
The share of federal individual incom e
taxes paid by this segment of the income
spectrum rose even more rapidly than thei r
share of income from 1980 to 1997 . In 1980
the top five percent of income earners pai d
36 .8 percent of total individual income taxes .
Figure 4 shows that this percentage ros e
steadily to 45 .6 percent in 1988 . Over the next
three years the burden declined slightly, reaching 43 .4 percent in 1991 . Over the next eight
years it increased by more than 8 points t o
51 .9 percent in 1997 .
Just as income gains in the top five per-
Figure 3
Shares of Adjusted Gross Income by Income Group
1980-199 7
100 %
Percentag e
of Tota l
Income
100 %
95 %
95 %
90 %
90 %
85 %
85 %
80 %
80 %
75 %
75 %
70 %
70 %
65 %
65 %
60 %
60 %
55 %
55 %
50 %
50 %
45 %
45 %
40 %
40 %
35 %
35 %
30 %
30 %
25 %
25 %
20 %
20 %
15 %
15 %
10 %
10 %
5%
5%
0
0
'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Source : Tax Foundation
Top 1 %
Top 2-5 %
Top 6-10 %
Top 11-25 %
Top 25-50 %
Bottom 50 %
6
cent were dominated by the gains of the to p
one percent, so was the increasing tax burden .
The top one percent's share of the total tax
burden rose from 19 .1 percent in 1980 to 27 . 6
percent in 1988 . After falling to 24 .8 percent
in 1991 it rose to 33 .2 percent in 1997 .
The rise in the percentage of federa l
individual income taxes paid by the top five
percent of income earners has led to a corresponding decline in the share borne by th e
remaining 95 percent . This reduction has been
felt across the board . The share of federal
income taxes paid by individuals in the top six
to ten percent of income earners fell from 12 . 4
percent in 1980 to 11 .3 percent in 1997 .
Similarly, the share paid by those in the top 1 1
to 25 percent fell from 23 .7 percent in 1980 to
18 .5 percent in 1997 . The share paid by individuals in the top 26 to 50 percent fell fro m
19 .9 percent in 1980 to 14 .0 percent in 1997 .
Finally, the share paid by the bottom 50 per cent fell from 7 .0 percent in 1980 to just 4 . 3
percent in 1997 . 41
Figure 4
Shares of Federal Individual Income Taxes Paid by Income Group
1980-199 7
100 %
Sinc e
193 7
TAX
FOUNDATION
SPECIAL REPOR T
(ISSN 1068-0306) is published at least 10 times yearly
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©1999 Tax Foundatio n
Editor and Communications
Director, Bill Ahern
Tax Foundatio n
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Percentag e
of Total Ta x
Burden
100 %
95 %
95 %
90 %
90 %
85 %
85 %
80 %
80%
75 %
75%
70 %
70 %
65 %
65 %
60 %
60 %
55 %
55 %
50 %
50 %
45 %
45 %
40 %
40 %
35 %
35 %
30 %
30%
25 %
25 %
20 %
20 %
15 %
15 %
10 %
10 %
5%
0
Source : Tax Foundation
5%
0
Top
11 1 %
To p
2-5 %
To p
6-10 %
I
To p
11-25%
- To p
25-50 %
I
Botto m
50%