Who Pays Federal Income Taxes?

New Inside Income Service knowledge for taxA tax is a compulsory fee or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of common authorities companies, items, and actions. 12 months 2023 exhibits the US federal revenue tax system continues to be progressive, as high-income taxpayers pay the best common revenue tax charges. Common tax charges for all revenue teams had been in keeping with 2022 charges and remained under charges previous to the 2017 Tax Cuts and Jobs Act (TCJA).

• In 2023, taxpayers filed 153.1 million tax returns, reported incomes practically $15.2 trillion in adjusted gross revenueFor people, gross revenue is the entire of all revenue obtained from any supply earlier than taxes or deductions. It consists of wages, salaries, ideas, curiosity, dividends, capital features, rental revenue, alimony, pensions, and different types of revenue.
  For companies, gross revenue (or gross revenue) is the sum of whole receipts or gross sales minus the price of items bought (COGS)—the direct prices of manufacturing items(AGI), and paid $2.1 trillion in particular person revenue taxes.
• The common revenue tax fee in 2023 was 14.1 p.c. The highest 1 p.c of taxpayers paid a 26.3 p.c common fee, seven occasions greater than the three.7 p.c common fee paid by the underside half of taxpayers.
• The highest 1 p.c’s revenue share fell for the second consecutive 12 months from 22.4 p.c in 2022 to twenty.6 p.c in 2023, and its share of federal revenue taxes paid fell from 40.4 p.c to 38.4 p.c.
• The highest 50 p.c of all taxpayers paid practically 97 p.c of all federal particular person revenue taxes, whereas the underside 50 p.c paid the remaining 3 p.c.

Reported Revenue and Taxes Paid Rose in Tax Yr 2022

Taxpayers reported practically $15.2 trillion in AGI on 153.1 million tax returns in 2023, a rise of $445 billion in AGI throughout nearly 725,000 fewer returns in comparison with 2022. Complete revenue taxes paid remained practically the identical, rising solely $8 billion (0.4 p.c) to $2.14 trillion. The common particular person revenue taxA person revenue tax (or private revenue tax) is levied on the wages, salaries, investments, or different types of revenue a person or family earns. The U.S. imposes a progressive revenue tax the place charges improve with revenue. The Federal Revenue Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years previous, particular person revenue taxes are the biggest supply fee eased down from 14.5 p.c in 2022 to 14.1 p.c in 2023.

As a result of the Workplace of Administration and Finances (OMB) classifies the refundable a part of tax credit as spending, the IRS doesn’t embrace it in tax share figures. The outcome overstates the tax burden of the underside half of taxpayers.

Desk 1. Abstract of Federal Revenue Tax Information, Tax Yr 2023

Word: Desk doesn’t embrace dependent filers. “Revenue cut up level” is the minimal AGI for tax returns to fall into every percentile. Complete revenue tax was the sum of revenue tax after credit (together with the subtraction of web premium tax credit score compensation, the earned revenue credit score, American alternative credit score, well being protection tax credit score, restoration rebate, certified sick and household go away credit score, extra youngster tax credit score, and the regulated funding credit score) restricted to zero plus web funding revenue tax from Kind 8960 and the tax from Kind 4970, Tax on Accumulation Distribution of Trusts. It doesn’t embrace any refundable parts of the credit.

Supply: IRS, “SOI tax stats – Particular person statistical tables by tax fee and revenue percentile,” https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile.

Excessive-Revenue Taxpayers Paid the Highest Common Revenue Tax Charges

The underside half of taxpayers, or taxpayers making underneath $53,801, confronted a mean revenue tax fee of three.7 p.c. Common revenue tax charges rise as family revenue will increase. As an example, taxpayers with AGI between the ten^th and 5^th percentiles ($187,608 and $272,209) paid a mean revenue tax fee of 14.2 p.c—practically 4 occasions the speed paid by taxpayers within the backside half.

The highest 1 p.c of taxpayers (AGI of $675,602 and above) paid the best common revenue tax fee of 26.3 p.c—seven occasions the speed confronted by the underside half of taxpayers. The common revenue tax fee declines barely for taxpayers within the high 0.001 p.c (the 1,531 returns reporting greater than $78.6 million in AGI), falling to 23.6 p.c in 2023—nonetheless greater than six occasions the typical fee for the underside half of taxpayers.

Excessive-Revenue Taxpayers Paid the Majority of Federal Revenue Taxes

In 2023, the underside half of taxpayers earned 12.3 p.c of whole AGI and paid 3.3 p.c of all federal particular person revenue taxes. The highest 1 p.c earned 20.6 p.c of whole AGI and paid 38.4 p.c of all federal revenue taxes.

In all, the highest 1 p.c of taxpayers (1.5 million tax returns) accounted for practically as a lot revenue taxes paid as the underside 95 p.c mixed (145 million tax returns). The highest 1 p.c of taxpayers paid $823 billion in revenue taxes whereas the underside 95 p.c paid $872 million.  

The share of revenue taxes paid by the highest 1 p.c elevated from 33.2 p.c in 2001 to 38.4 p.c in 2023. Whereas the share has usually been rising over the interval, 2020 and 2021 are outlier years largely due to important adjustments in revenue and tax coverage through the coronavirus pandemic, with the share peaking at 45.8 p.c in 2021. Over the identical interval, the share of revenue taxes paid by the underside 50 p.c of taxpayers fell from 4.9 p.c in 2001 to three.3 p.c in 2023.

The share of adjusted gross revenue reported by the highest 1 p.c grew from 17.4 p.c in 2001 to twenty.6 p.c in 2023, just like pre-pandemic ranges. The AGI share of the highest 1 p.c tends to fluctuate over the enterprise cycle, rising and falling to a larger extent than revenue reported by different teams. This was significantly the case in 2021 as capital features realizations elevated sharply to succeed in their highest stage in 40 years. The share of AGI reported by the underside 50 p.c of taxpayers fell from 14.4 p.c in 2001 to 12.3 p.c in 2023, usually declining by way of 2020 earlier than recovering barely lately to the best stage since 2006.

The Tax Cuts and Jobs Act Lowered Common Tax Charges Throughout Revenue Teams

The 2023 tax 12 months was the sixth because the TCJA made many important, however momentary, adjustments to the person revenue tax code to decrease tax charges, widen brackets, improve the customary deductionThe usual deduction reduces a taxpayer’s taxable revenue by a set quantity decided by the federal government. Taxpayers who take the usual deduction can’t additionally itemize their deductions; it serves as a substitute. and youngster tax credit score, and extra. The adjustments lowered tax burdens, on common, for taxpayers throughout all revenue ranges. Tax years 2020 and 2021 additionally present the results of pandemic-related reduction administered by way of the tax code. Though common tax charges have elevated over the previous couple of years because the financial system has grown, they continue to be under their pre-TCJA (2017) ranges throughout all revenue teams. The One Large Lovely Invoice Act (OBBBA), enacted in July 2025, prolonged the momentary adjustments of the TCJA, however that new legislation doesn’t have an effect on the tax 12 months 2023 knowledge on this report.

Appendix

For knowledge previous to 2001, all tax returns which have a optimistic AGI are included, even people who should not have a optimistic revenue tax legal responsibility. For knowledge from 2001 ahead, returns with unfavorable AGI are additionally included, however dependent returns are excluded. The unit of study is the tax return. Within the figures previous to 2001, some dependent returns are included. Below different models of study (just like the US Treasury Division’s Household Financial Unit), these returns would doubtless be paired with dad and mom’ returns.

Revenue tax after credit (the measure of “revenue taxes paid” above) doesn’t account for the refundable portion of tax credit, such because the EITC. If the refundable portion had been included, the tax share of the highest revenue teams could be greater, and the typical tax fee of the underside revenue teams could be decrease. The refundable portion is assessed as a spending program by the Workplace of Administration and Finances (OMB) and due to this fact is just not included by the IRS in these figures.

The one tax analyzed right here is the federal particular person revenue tax, which is answerable for greater than 25 p.c of the nation’s taxes paid (in any respect ranges of presidency). Federal revenue taxes are rather more progressive than federal payroll taxes, that are answerable for about 20 p.c of all taxes paid (in any respect ranges of presidency), and are extra progressive than most state and native taxes.

AGI is a reasonably slender revenue idea and doesn’t embrace revenue objects like authorities transfers (aside from the portion of Social Safety advantages that’s taxed), the worth of employer-provided medical health insurance, underreported or unreported revenue (most notably that of sole proprietors), revenue derived from municipal bond curiosity, web imputed rental revenue, and others.

These figures symbolize the authorized incidence of the revenue tax. Most distributional tables (akin to these from the Congressional Finances Workplace (CBO), the Tax Coverage Middle, Residents for Tax Justice, the Treasury Division, and the Joint Committee on Taxation (JCT) assume that your entire financial incidence of non-public revenue taxes falls on the revenue earner.

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