NCPA - National Center for Policy Analysis

Who Is Paying Federal Income Taxes?

January 2, 2015

The IRS has released the most recent set of income tax data, from 2012, illustrating exactly who is paying federal income taxes -- and how much they are paying. Economists Kyle Pomerleau and Andrew Lundeen of the Tax Foundation have summarized the latest information:

  • Overall, more than 136 million Americans filed tax returns for overall earnings of $9.04 trillion. They paid $1.1 trillion in federal income taxes.
  • Income -- and resulting taxes paid -- increased for all income groups in 2012 compared to 2011.
  • The top 50 percent of taxpayers (68,040,177 filers) paid almost all of the nation's income taxes -- 96.7 percent. The 68 million filers in the bottom 50 percent of taxpayers paid just 3.3 percent of income taxes.
  • The top 1 percent of taxpayers paid 38.1 percent of all federal income taxes.
  • The top 1 percent's effective tax rate was 22.8 percent -- higher than the rates on any other group.

Pomerleau and Lundeen note that the top 0.1 percent had an average effective tax rate of 21.7 percent, which is lower than the 22.8 percent paid by the top 1 percent. However, they attribute this to high-income earners' tendency to have large amounts of capital gains income.

Capital gains income is income from the sale of an investment -- for example, if an individual purchases stock and then sells it for a profit, he is taxed on that "gain." Those gains are taxed at 23.8 percent, which is lower than the federal tax imposed on wage income and corporate income. However, Pomerleau and Lundeen remind readers that capital gains taxes are a second layer of tax -- the dollars used to make investments were already taxed when they were earned as income, and corporations already pay the corporate income tax on earnings.


Source: Kyle Pomerleau and Andrew Lundeen, "Summary of Latest Federal Income Tax Data," Tax Foundation, December 22, 2014.

 

Browse more articles on Tax and Spending Issues