Paul L. Caron

Tuesday, April 7, 2009

CBO: Top 1% Earned 19% of Income, Paid 28% of All Federal Taxes, in 2006

The Congressional Budget Office yesterday released Historical Effective Federal Tax Rates: 1979 to 2006 and Data on the Distribution of Federal Taxes and Household Income.  From the Director's Blog:

  •  The overall effective federal tax rate (the ratio of federal taxes to household income) was 20.7% in 2006. Individual income taxes, the largest component, were 9.1% of household income. Payroll taxes were the next largest source, with an effective tax rate of 7.5%. Corporate income taxes and excise taxes were smaller, with effective tax rates of 3.4% and 0.7%.
  • The overall federal tax system is progressive—that is, effective tax rates generally rise with income. Households in the bottom fifth of the income distribution paid 4.3% of their income in federal taxes, while the middle quintile paid 14.2%, and the highest quintile paid 25.8%. Average rates continued to rise within the top quintile, with the top 1% facing an effective rate of 31.2%.
  • Higher-income groups pay a disproportionate share of federal taxes because they earn a disproportionate share of pretax income and because effective tax rates rise with income. In 2006, the highest quintile earned 55.7% of pretax income and paid 69.3% of federal taxes, while the top 1% of households earned 18.8% of income and paid 28.3% of taxes. In all other quintiles, the share of federal taxes was less than the income share. The bottom quintile earned 3.9% of income and paid 0.8% of taxes, while the middle quintile earned 13.2% of income and paid 9.1% of taxes.



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They also control 90% of the wealth.

Posted by: Common Sense | Apr 7, 2009 7:42:25 PM

Thank you for this revealing summary of tax data. It depicts the ultimate moral hazard threatening our society. A majority basically pays no income taxes. Therefore, it is logical to vote all manner of spending, because someone else will foot the bill. The Fair Tax and Flat Tax supporters have tried to address this issue to no avail. A new approach might work. See it at

Posted by: ezagrodzky | Apr 7, 2009 2:28:50 PM

I would guess that the number of people and earners in each quintile is different. Studies have shown a strong correlation between single parent families and lower income. I infer from that that the higher income groups have more married couples and more two income families than do the lower quintiles.

Posted by: Laurence | Apr 7, 2009 2:06:27 PM

I'm immediately suspicious of the "Social Insurance Taxes" rate differences in the lower quintiles. Even the kid who works minimum wage for one week over the summer pays the same FICA and Medicare rates as someone who makes $90,000/year. The numbers are also too low in that they don't include the "employer contributions" -- in fact, if you included the invisible-to-most-employees "unemployment insurance" tax, the first quintile ought to be paying a higher rate on the "social insurance" line than the other quintiles.

Posted by: cathyf | Apr 7, 2009 10:21:27 AM

So? What percentage of government services or government subsidies of their jobs, careers, industries, and homes do they enjoy? What percentage of access to political leaders and leaders in general do they enjoy?

Posted by: anon | Apr 7, 2009 9:15:22 AM

If you think this is lopsided, just wait until Obama finishes "rebalancing" the tax code.

Posted by: Colin | Apr 7, 2009 6:32:44 AM

Will be interestng to see this same set of data again in 8 years.

Posted by: MikeB | Apr 7, 2009 6:07:12 AM