January 2016

Who Pays Income Taxes?

By Amy K. Frantz

National Taxpayers Union Foundation (NTUF) has just released their analysis of “Who Pays Income Taxes?”[1] for the 2013 tax year. (There is always a significant lag in the government reporting of data; thus the most recent data available is from 2013).  The table below, with data from NTUF, shows the percentage of the total amount of federal personal income taxes that are paid by each income group.  For example, the top 10 percent of earners, those earning $127,695 or more annually, pay 70 percent of the total federal personal income taxes.  On the other hand, the bottom half of earners, those earning less than $36,841 annually, paid only 3 percent of the total federal personal income taxes.

Top 1% of earners Top 5% of earners Top 10% of earners Top 25% of earners Top 50% of earners Bottom 50% of earners
Have adjusted Gross Income at or above this level: $428,713 $179,760 $127,695 $74,955 $36,841 <$36,841
Pay this Percentage    of Federal Personal Income Tax Paid: 38% 59% 70% 86% 97% 3%

For those who continually claim that the “rich” do not pay their “fair share” of federal income taxes, an interesting fact was noted for the 2013 tax year: “The richest 1 percent of income earners in the U.S. paid 37.8 percent of all income taxes, down slightly from last year’s mark of 38.09 percent. The share of taxes paid dropped despite a new higher tax rate of 39.6 percent on income above $450,000.”[2]  It seems that an attempt to make the “rich” pay more in taxes actually resulted in the top 1 percent of earners paying a bit less rather than more of the overall tax burden.  While NTUF notes that “one year of data does not make a trend,”[3] it will be interesting to see if the top 1 percent’s share of the tax burden continues to fall.

NTUF cautions those calling for increasing the tax burden on the “rich,” stating: “The higher taxes sought under the “fair share” rallying cry run the risk of undermining economic growth and job creation. Equity is an important part of a tax system and as the data reflects, our system is quite progressive. The system should also encourage individual achievement and economic growth.”[4]

After looking at the data for tax year 2013, NTUF suggests we should ask those claiming the rich are not paying their fair share “exactly which income groups do they consider ‘wealthy’?” and “how much higher of a burden would be ‘fair’?”[5]

Amy K. Frantz is Vice President of Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.

[1] “Who Pays Income Taxes?,” National Taxpayers Union Foundation, <http://www.ntu.org/foundation/page/who-pays-income-taxes?utm_source=National+Taxpayers+Union+and+Foundation&utm_campaign=7ed7315a46-Tab_11-17&utm_medium=email&utm_term=0_deb6614940-7ed7315a46-189718041> accessed December 4, 2015.

[2] “Who Pays Income Taxes? 2013,” National Taxpayers Union Foundation, The Taxpayer’s Tab, Volume 7, Issue 40, December 4, 2015, <http://www.ntu.org/foundation/detail/taxpayers-tab-7-40-who-pays-income-taxes> accessed December 4, 2015.

[3] Ibid.

[4] Ibid.

[5] Ibid.