The Rich Pay the Highest Tax Rates

See It’s Tax Season—Five Charts on Who Pays and What’s at Risk by Adam N. Michel and Joshua Loucks of Cato. Excerpts:

"Data on income tax payments and estimates from the Treasury Department show that the US federal tax system is highly progressive. The top 10 percent of income earners pay more than 60 percent of all federal taxes and 72 percent of income taxes, shares that have been increasing over time.

Figure 2 reports average federal tax rates, accounting for income, payroll, corporate, and other taxes. Estimates from the US Treasury’s Office of Tax Analysis show that tax rates rise as incomes increase.

The lowest-income 20 percent of earners, measured by adjusted family cash income, face average tax rates that are either negative or close to zero. A negative tax rate means the taxpayer is a net beneficiary of the tax system, likely receiving refundable tax credits, such as the earned income tax credit (EITC) and child tax credit (CTC).

On the other end of the distribution, the top 10 percent of income earners pay an average tax rate of 27.3 percent, which is 7 percentage points higher than the next closest group. Treasury breaks the highest income earners into narrower segments, showing that the highest-earning 0.1 percent pay the highest average tax rate of 33.4 percent.

The federal income tax system is even more progressive. The latest IRS data on income taxes for the 2022 tax year show that higher-income Americans continue to pay a disproportionate share of income taxes and that the system has become more progressive over time."

"a share of adjusted gross income (AGI), the top half of income earners paid 97.1 percent of federal income taxes. The top 1 percent earned 22.4 percent of total income and paid 40.4 percent of all the income taxes. The top 10 percent earned 49.4 percent of the income and paid 72 percent of the income tax."

"Since 2001, average income tax rates have fallen for all five income groups. During this same time, the share of income taxes paid by the top 5 percent increased from 52.2 percent to 61 percent, while the share paid by all other taxpayers declined. According to the National Taxpayers Union, the top 1 percent’s income tax share is the highest since the 1980s."