The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes.
To measure the tax burden over time, Congressional Budget Office economists look beyond income-tax returns. They add federal income, payroll, excise and corporate taxes and calculate them as a percentage of income, broadly defined to include wages plus the value of government- and employer-provided benefits.
From Ronald Reagan to Barack Obama, the tax code has been tweaked and the economy has had its ups and downs, and the share of federal taxes paid by the top 5% and the top 1% has risen faster than their share of income:
In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.
In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes
In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes
Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.
Across the earnings spectrum, Americans' share of income that went to taxes fell in the 1980s, rose in the 1990s and fell again in the 2000s. This year, taxes and other receipts will cover only two-thirds of federal spending; the government will borrow the rest.
For those in the top 1%, whose incomes are more volatile than others, the average tax bite in 2007 was 28.9%, below the 1995 Clinton-era peak (35.3%) but higher than the 1986 Reagan-era trough (24.6%.)
Most Americans, though, have seen the share of their income that goes to taxes fall steadily. For earners in the middle, the tax bite eased from 18.9% in 1979 to 16.6% in 1999 to 14% in 2007 even before the recession and recession-fighting tax cuts.
The share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income. In 2007, the bottom 40% received 14.9% of the income (including the value of government benefits) and paid 5.9% of all federal taxes. In 1979, they had a bigger share (17.4%) of the income and paid more (9.5%) of the taxes.
A growing number of Americans don't pay any income tax. They don't make enough or live on Social Security or are getting tax breaks targeted at low-wage workers.
In 2011, according to the Tax Policy Center, about 46% of households didn't pay any U.S. income taxes, a proportion swollen because so many have seen paychecks shrink or evaporate. But even in the better years of the mid-2000s, roughly 40% of households didn't pay any federal income tax.
Many did get hit by the payroll tax, which helps finance Social Security and Medicare. But about one-fifth of households didn't pay either federal income or payroll taxes; many did pay state and local taxes.
