TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, October 16, 2018

The Top 3% Of U.S. Taxpayers Pay 50% Of Income Taxes

Bloomberg, Top 3% of U.S. Taxpayers Paid Majority of Income Taxes in 2016:

Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the charts below:

  • The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
  • The top 50 percent of all taxpayers paid 97 percent of total individual income taxes.

Bloomberg 1

Bloomberg 2

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Comments

I'm willing to bet that high income taxpayers pay an even larger percentage of capital gains taxes. So what? By choosing to focus on income taxes rather than all federal taxes, Bloomberg has chosen its desired result.

Posted by: Theodore Seto | Oct 16, 2018 2:30:00 PM

And what, pray, might Bloomberg have included in its definition of "income tax"? There is no indication whether they included payroll taxes. Nor is there any attempt to compare the relative wealth of the various percentile groups or to measure the differences by percentile group in the gap between disposable income (taxed and otherwise) and the cost of living.

A thoroughly useless article.

Posted by: John | Oct 17, 2018 1:16:55 AM

Seriously Teddy? Bloomberg is merely presenting factual data about federal income taxes, not trying to get "desired results". If they were trying to make the point you're suggesting, they'd have also included state/local income taxes.

Posted by: len fuld | Oct 17, 2018 5:59:00 AM

Payroll taxes in 2017 and projected for 2018 account for about 35% of federal revenues. Spotcheckingly, it's varied between about 35% and about 40% this century.

Per the OMB:

2017 Actual Revenue:
Individual FIT = $1,587 B
Payroll = $1,162 B
Corporate FIT = $297 B
Excise & Other = $270 B

2018 Projected Revenue:
Individual FIT = $1,660 B
Payroll = $1,170 B
Corporate FIT = $218 B
Excise & Other = $293 B

Posted by: Troll Feeder | Oct 17, 2018 7:24:30 AM

For those who are asking “But what about payroll taxes?”, the information is out there. See https://www.cbo.gov/publication/51361 .

From the Congressional Budget Office report, I quote the average amount of total federal taxes paid by quintile, where “Federal taxes include individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes.” I also calculated proportions of the sum.

lowest quintile: 800 (0.8%)
second quintile: 4,000 (4.0%)
middle quintile: 8,900 (8.8%)
fourth quintile: 17,600 (17.4%)
highest quintile: 69,700 (69.0%)

So the lowest income households contribute basically nothing to the federal coffers, even when counting payroll taxes.

Posted by: Tammi Tyler | Oct 17, 2018 9:26:03 AM

Welcome to California, my fellow Americans!

Posted by: Micha Elyi | Oct 17, 2018 4:57:12 PM

So we all have this info on our nation's revenue. The real questions are: 1. When will we have a balanced budget?, 2. When will this nation's debt of $21 plus trillion be eliminated?, 3. When will our over staffed government agencies be reduced in size or eliminated? For example, our Department of Education has 26,000 employees and yet this nation's children test near to dead last among developed nations!!

Posted by: Richard Morrissett | Oct 18, 2018 10:40:00 AM