Federal Income Taxes – Who’s Really Paying?

20150416160851_00001(1)Individual income taxes provide nearly half of the yearly federal revenue in the U.S., with payroll, corporate and other taxes providing the rest. So, as most of the workforce has just recently filed their income tax returns, you might be curious about where exactly you fall in the system as a whole. Other developed nations typically only receive about a third of their federal revenue from income taxes, and collect the remainder from consumption and value-added taxes. While these alternative systems have been considered in the U.S., politicians on both sides worry about potentially creating a burden on the poor, or making it too easy to raise the rates in an effort to bring in more revenue. It seems the status quo is likely to be with us for a while. Here’s a summary of who’s paying the individual income tax.

The first table indicates the percentage of taxes paid by each 20% of income earners in the U.S. in 2014. The second table analyzes income and taxes paid by the top 20% of income earners:

General Population*

Groups of Taxpayers by Income Income Range Share of Total U.S. Income

Share of Total Income Tax

Bottom Fifth $0 to $24,000 4.5% -2.2%
  $24,200 to $47,300 9.3 -1.0
Middle Fifth $47,300 to $79,500 14.8 5.9
  $79,500 to $134,300 20.0 13.4
Top Fifth Above $134,000 51.3 83.9

The Top 20%*

Income Percentile Income Range Share of Total U.S. Income Share of Total Income Tax Number of People (in millions)
80%-90% $134,300 to $180,500 13.1% 10.8% 33
90-95 $180,500 to $261,500 9.0 9.1 16
95-99 $261,500 to $615,000 12.1 18.3 13
Above 99% Above $615,000 17.1 45.7 3

*Tax tables and other data were from “Sharing the Income-Tax Load” – The Wall Street Journal, April 10, 2015, attributed to the Tax Policy Center

Income includes employer provided health care, tax exempt interest and retirement plan contributions, and includes data from both people who didn’t need to file, and people who should have filed, but didn’t. Negative taxes result from such benefits as the earned income tax credit and other benefits to low income taxpayers. Social Security and Medicare taxes are not included because they are not “income taxes”. These taxes would indicate a larger burden by lower income individuals but, in theory, these amounts don’t go into the “general tax fund”.

So, find your income and tax burden above to see your share of the income taxes paid. Decide for yourself whether the “wealthy” pay their fair share and whether you feel the tax burden is fairly distributed.

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