Top 0.001%, Bottom 50% of US Taxpayers Pay Equal Shares of Income Tax

The top 0.001% of U.S. taxpayers paid 3.25% of all federal income tax collected in 2016. The bottom 50% paid 3.04% of all income tax collected that year. The top 3% of taxpayers paid just over 51% of all 2016 income taxes. Income tax payments in 2016 totaled $1.442 trillion.

The 2016 data were recently reported by the U.S. Internal Revenue Service (IRS). Depending on one’s world-view, the data support many interpretations. We’ll confine ourselves to reporting several fascinating data points.

Total taxable income in 2016 amounted to $7.301 trillion. The top 50% of taxpayers accounted for $6.827 trillion of that total, leaving the bottom 50% to share a total of $474 billion. Taxpayers filed 95.9 million tax returns, with 66.73 million (nearly 70%) coming from the top 50%

Total taxable income for the 0.001% came in at $164.58 billion for 1,405 taxpayers. That represents an average taxable income of just over $117 million. The average tax rate for this group was 22.86%, and the total income tax paid by the top 0.001% amounted to $46.85 billion.

Taxable income for the top 1% totaled $1.745 trillion, or 23.9% of taxable income for the top 50% of taxpayers. As a group, the top 1% had an average tax rate of 26.87%, second only to the highest average tax rate of 27.05% paid by the top 0.1% of taxpayers. The top 1% paid $583.26 billion in income tax in 2016.

The top 50% of taxpayers paid nearly 97% of all federal income tax in 2016, or $1.398 trillion. The bottom 50% paid just over 3%, or $44 billion. Taxable income for the top 50% totaled $6.827 trillion (93.5% of all income).

Compared with 2015, the total number of tax returns filed fell from 141.2 million to 140.9 million and total tax receipts fell from $1.454 trillion to $1.442 trillion. Total adjusted gross income rose slightly, from $10.142 trillion to $10.156 trillion. Total taxable income dropped from $7.322 trillion to $7.301 trillion.

One last data point. Last October, the Pew Research Center estimated U.S. taxpayers would pay about $1.66 trillion in individual income taxes in fiscal year 2017, amounting to about 48% of all federal revenue. Corporate taxes were estimated to total $324 billion or about 9% of all federal revenue.

One thing these data point out is that the U.S. individual income tax system is, as designed, progressive — the more a person earns, the more taxes that person pays. But the tax system, by itself, cannot level out the vast gulf between the top earners and those at the bottom.