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"Tax Yield Curve" Shows Progressivity of Tax System
Daily Policy Digest

Tax Issues / Tax Burden by Income

Monday, January 21, 2002
Tax Foundation figures on shares of federal income taxes paid by percentiles of income have always shown those at the top of the income distribution paying an overwhelming share of all taxes.

In 1975, for instance, the top 1 percent of taxpayers, those earning more than $59,338, paid 18.7 percent of all federal income taxes, up from 17.7 percent 5 years earlier.

The top half of taxpayers paid 92.9 percent of all income taxes in 1975, meaning that the bottom 50 percent paid just 7.1 percent.

According to the most recent figures, released by the Joint Economic Committee of Congress, the share of total federal income taxes paid by the top 1 percent of taxpayers has doubled since 1975. In 1999, they paid 36.2 percent of income taxes versus 18.7 percent in 1975.

  • For perspective, the top 1 percent of taxpayers reported just 19.5 percent of adjusted gross income; thus their share of the tax burden exceeded their income share by almost 17 percentage points.
  • For the top 5 percent, the spread was more than 21 percentage points.
  • By contrast, for those in the bottom 50 percent, the difference between the percentage of total taxes and total income was minus 9.25 percent -- that is, their income share greatly exceeded their tax share.
On a chart, these data form a kind of "yield curve," showing how steeply progressive federal income taxes are. It shows those in the top 1 percent of the income distribution paid a 27.5 percent effective income tax rate in 1999 (see figure).

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, January 21, 2002.

For text
http://www.ncpa.org/edo/bb/2002/bb012102.html

For JEC figures
http://www.house.gov/jec/press/2002/01-14-02.htm

For more on the Tax Burden by Income
http://www.ncpa.org/iss/tax/
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