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Who Really Pays Federal Income Taxes?

In April of this year, Congress' Joint Economic Committee (JEC) released a report (requires Adobe Reader) showing that those in the top quintile , i.e., those who earned 46% of all income earned, paid 83% of federal income taxes. On the other hand, households in the two lowest quintiles (i.e., 40% of all households) paid no incomes taxes. Because of refundable tax credits such as the EITC and the child credit, those in the lowest quintile received refunds larger than their tax liabilities. These numbers use 2001 IRS tax data.

In their analysis of the same IRS data, the National Taxpayers Union provides additional detail on who is in the various quintiles. For example, households with the top 1% of Adjusted Gross Income (AGI) had incomes above $292,913, and paid 33.89% of Federal income taxes. Householdsl with the top 25% of AGI, i.e., those with AGI's above $56,085, paid almost 83% of Federal income taxes.

The JEC emphasized that such a highly progressive system "means that federal revlenues devoted to general government operations are particular sensitive to changes in the income of the top earners." Also, see my June 30 entry where I describe the Tax Foundation's more detailed picture of the 40% of non-filers.


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