• Average Federal Tax Rates, 2007

    The federal tax system is progressive--that is, average tax rates generally rise with income. Households in the bottom fifth of the income distribution (with average income of $18,400, under a broad definition of income) paid 4.0 percent of their income in federal taxes. The middle quintile, with average income of $64,500, paid 14.3 percent of that income in taxes, and the highest quintile, with average income of $264,700, paid 25.1 percent.

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  • Share of Total Before-Tax Income and Total Federal Tax Liabilities, 2007

    Higher-income groups earn a disproportionate share of pretax income and pay a disproportionate share of federal taxes. In 2007, the highest quintile earned 55.9 percent of pretax income and paid 68.9 percent of federal taxes. In all other quintiles, the share of federal taxes was less than the income share. The bottom quintile earned 4.0 percent of income and paid 0.8 percent of taxes, and the middle quintile earned 13.1 percent of income and paid 9.2 percent of taxes.

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  • Average Federal Tax Rates by Income Quintile and Tax Source, 2007

    Much of the progressivity of the federal tax system derives from the individual income tax, which features average rates that rise rapidly with income. Social Insurance tax rates rise gradually across most of the income distribution, falling for the top quintile. Among the different types of taxes, social Insurance taxes pose the greatest liability for all quintiles except the highest, for which the individual income tax is larger. The impact of the corporate income tax rises with income, while the effect of excise taxes falls.

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  • Average Federal Tax Rates by Household Type and Tax Source, 2007

    Average tax rates vary among different types of households, because of differences in household income as well as tax rules. The elderly stand out, facing much lower payroll tax burdens than other types of households because wage income is a much smaller part of their household income.

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  • Cumulative Change in Real After-Tax Average Income

    Growth in after-tax income has been uneven across the income distribution, with upper-income groups seeing more rapid growth than lower-income groups. Much of that increase reflects the pattern of before-tax income growth.

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  • Average Federal Tax Rate by Income Quintile, 1979-2007

    The pattern of average tax rates has varied over time. The lowest three income quintiles have seen steady declines in their average rate. The tax rate on the fourth quintile was flat over most of this period, before declining in the early part of this decade. The tax rate on the top quintile has fluctuated more, with periods of increases and decreases.

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