NCPA - National Center for Policy Analysis


October 10, 2007

New data released by the Internal Revenue Service (IRS) offers interesting insights into the distributional spread of the federal income tax burden, according to a new analysis by the Tax Foundation.


  • The top-earning 25 percent of taxpayers -- those with an Adjusted Gross Income (AGI) over $62,068 -- earned 67.5 percent of nation's income, but they paid more than 4 out of every 5 dollars collected by the federal income tax (86 percent).
  • The top 1 percent of taxpayers (AGI over $364,657) earned approximately 21.2 percent of the nation's income (as defined by AGI), yet paid 39.4 percent of all federal income taxes.
  • That means the top 1 percent paid about the same amount of federal individual income taxes as the bottom 95 percent.

The IRS data also shows increases in individual incomes across all income groups:

  • Just as the highest earners lost the biggest percentage of their incomes during the recession of 2001, so they have prospered the most as the economy has continued to rebound.
  • Between 2000 and 2005, pre-tax income for the top 1 percent group grew by 19.1 percent.
  • In the same time period, pre-tax income for the bottom 50 percent increased by 15.5 percent.

This pattern of income loss and growth at the top of the income spectrum is the same during every recession and recovery, says the Foundation.  The net result has also been a sharp rise in federal government tax revenue from 2003-2005 compared to previous years.

Source: "New Data: Top 1% Pay Greater Dollar Amount in Income Taxes to Federal Government than Bottom 90%," Tax Foundation, October 4, 2007.

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