tax policy center
Tax Topics

Tax Topics

2009 Tax Stimulus
2012 Election Tax Plans
2014 Budget
Alternative Minimum Tax (AMT)
American Jobs Act of 2011
Brief Description of the Model 2013
Current-Law Distribution of Taxes
Deficit Reduction Proposals
Distribution of the 2001 - 2008 Tax Cuts
Earned Income Tax Credit
Economic Stimulus
Education Tax Incentives
Estate and Gift Taxes
Expiration of the Bush Tax Cuts
Explanation of Income Measures 2013
Federal Budget
Fiscal Cliff
Fiscal Crisis
Flow-Through-Enterprises
Guide to TPC Tables
Health Insurance Tax Incentives
Homeownership
How to Interpret Distribution Tables 2013
Marriage Penalties
Model FAQ 2013
Model Related Resources and FAQs
Payroll Taxes
Presidential Transition - 2009
Recent Tax Stimulus Legislation
Retirement Saving
Tax Encyclopedia Index
Tax Expenditures
Tax Reform Proposals
Value-Added Tax (VAT)
Who Doesn't Pay Federal Taxes?
Working Families

E-mail Newsletter

Enter your e-mail address to receive periodic updates on TPC publications and events.

> newsletter archive

tax topics
 
Current Law Distribution of Taxes
Federal revenues by source 2012 
  • Fiscal year 2012 federal revenues will come from four major sources: individual income tax (47 percent), corporate income tax (10 percent), payroll taxes (34 percent), and excise taxes (3 percent). Estate and gift taxes, customs duties, Federal Reserve earnings/losses, and miscellaneous receipts will account for 6 percent.
    Source: Budget of the United States, Historical Tables

 
 

  • Overall federal taxes are progressive; that is, the effective tax rate rises as income grows. In 2011, the average combined rate of federal income, payroll, corporate and estate taxes was 0.8 percent for the lowest quintile (or fifth) of the income distribution, 12.6 percent for the middle quintile, and 24.5 percent for the highest quintile.
    Source: Tax Policy Center Table T12-0018.

 
 

   

Underlying data: Download

  • The individual income tax is highly progressive: in 2012, the lowest quintile will face an average rate of -6.9 percent while the top quintile pays 16.6 percent. In contrast, the payroll tax is regressive (the effective rate falls as income rises): the lowest quintile will pay an average of 7.0 percent while the top quintile pays 5.8 percent; the top 1 percent pays 1.9 percent.
    Source: Tax Policy Center Table T12-0190.

Average Effective Tax Rate by Source and Income Quintile 2012

Underlying data: Download 

  • The progressivity of the federal tax system means that high-income taxpayers bear a high share of taxes. In 2012, the top quintile of the income distribution received 52.5 percent of income and paid 68.3 percent of federal taxes.
    Source: Tax Policy Center Table T12-0200.

Share of cash income by income quintile 2012

Share of Federal Taxes by Income Quintile 2012

Underlying data: Download 

Other resources

More information about the distribution of federal taxes under current law and pre-EGTRRA law is available in Johnson, Rachel M. and Rohaly, Jeffrey. 2009. The Distribution of Federal Taxes, 2009-12. Washington, DC: The Urban Institute (August).

The distributional effects of the Bush tax cuts are provided in Leiserson, Greg, and Jeff Rohaly. 2008. The Distribution of the 2001-2006 Tax Cuts. Washington, DC: The Urban Institute (July).

Incidence Assumptions

A key insight from economics is that taxes are not always borne by the individual or business that writes the check to the IRS. Sometimes taxes are shifted. For example, most economists believe that the employer portion of payroll taxes translate into lower wages and are thus ultimately borne by workers. There is not a consensus, however, on the economic incidence of other taxes, such as the corporate income tax.

The Tax Policy Center's incidence assumptions generally (but not always) follow those adopted by the Congressional Budget Office and the Department of the Treasury. In particular, our tables assume the following:

  • The individual income tax is borne directly by individual income taxpayers.
  • Both the employee and employer share of payroll taxes are borne by the employee.
  • The corporate income tax is borne mostly by recipients of capital income (interest, dividends, capital gains, and rents), but workers share some of the burden. The Tax Policy Center assigns 80 percent of the burden to recipients of capital income and 20 percent to workers.
  • The estate tax is borne by decedents.
The Tax Policy Center’s microsimulation model of federal taxes is explained in detail in Rohaly, Jeff, Adam Carasso, and Mohammed Adeel Saleem. 2005. The Urban-Brookings Tax Policy Center Microsimulation Model. Washington, DC: The Urban Institute (January).

More information about the distribution of the estate tax is given in Burman, Leonard E., William G. Gale, and Jeffrey Rohaly. 2005. Options to Reform the Estate Tax.Tax Policy Issues and Options No. 10. Washington DC: The Urban Institute. (April).

The Tax Policy Center’s most recent AMT estimates and projections can be found here.

The incidence assumptions used by the Treasury Department are discussed in Cronin, Julie-Anne. 1999. U.S. Treasury Distributional Methodology. Office of Tax Analysis Paper 85. Washington DC: U.S. Department of the Treasury. Treasury's assumptions about the incidence of the corporate income tax were subsequently updated -- see Cronin, Julie-Anne, Emily Y. Lin, Laura Power, and Michael Cooper. 2012. Distributing the Corporate Income Tax: Revised U.S. Treasury Methodology. Office of Tax Analysis Technical Paper 5. Washington DC: U.S. Department of the Treasury.

Distributional tables divide tax units into dollar income categories or into percentiles of the income distribution. The dollar values for the percentile breaks are provided in Income Breaks for Distribution Tables.

See all publications related to the Current Law Distribution of Taxes.

See all estimates related to the Current Law Distribution of Taxes

See all tax facts (background data) related to the Current Law Distribution of Taxes.