ISSUE/TAXES : Shifting the Burden

Today, as the deadline arrives for filing federal income tax returns, Americans with the highest incomes are paying a smaller share of their income than they did 10 years ago. Paradoxically, they also account for a greater share of total tax payments now than they did in 1980.

The reason: The taxable incomes of the most affluent Americans grew so handsomely that lower tax rates yield more total revenue.

Those with low incomes are paying a higher share of what they earn to the IRS, but their incomes rose so slowly in the 1980s that their taxes now make up a smaller share of total revenue.

The two tables show the tax-paying population divided into five equal segments, from poorest to richest, then additionally into the richest 10% and richest 5%. All federal taxes, most notably the income and Social Security taxes, are included.

Federal Taxes as a Share of Income

% Change Poorest 20% $7,725 8.4% 10.6% 9.7% +16.1% Second 19,348 15.7 16.1 16.7 +6.0 Third 30,964 20.0 19.3 20.3 +1.2 Fourth 44,908 23.0 21.7 22.5 -2.2 Richest 20% 105,209 27.3 24.0 25.8 -5.5 Richest 10% 144,832 28.4 24.4 26.4 -7.3 Richest 5% 206,142 29.5 24.5 26.7 -9.5 Overall 23.3 21.7 23.0 -1.0

Shares of Federal Taxes Paid by All Families

Difference Family Income 1980 1985 1990* 1980-1990 Poorest 20% $7,725 1.6% 1.9% 1.6% 0.0% Second 19,348 7.0 7.0 6.6 -6.7 Third 30,964 13.4 13.1 12.6 -5.9 Fourth 44,908 22.2 21.9 21.0 -5.4 Richest 20% 105,209 55.7 55.9 58.1 +4.3 Richest 10% 144,832 38.7 39.0 41.8 +8.0 Richest 5% 206,162 27.1 27.3 30.4 +12.2

* Estimated

The chart below shows how the federal income tax became somewhat less “progressive” during the 1980s. The highest-income taxpayers still pay a greater share of their taxable income in taxes, but not as much more as in 1980.

Source: Congressional Budget Office