Who actually pays the federal income tax, read straight from the IRS tables

Somewhere tonight a cable panelist will announce, with great confidence and no spreadsheet, that the wealthy "don't pay their fair share." Nobody on the panel will ask what the share is, what a fair one would be, or who is paying it. That is a strange way to run an argument about the most important bill most of us get. So let us do what the panel will not: open the government's own tables and read them.

The Internal Revenue Service publishes a long-running series called Statistics of Income, usually shortened to SOI. It reports, for each year, how much adjusted gross income filers reported and how much federal income tax they paid, sorted by percentile. It is not a think-tank estimate and it is not a campaign talking point. It is the tax collector counting its own receipts. The numbers below are for tax year 2022, a year I checked against published summaries of the IRS data. The IRS has since released tax year 2023, and the top of the ladder looks broadly similar there. Where I am not certain of a figure, I will say so and send you to the table.

Define the terms before we fight

Arguments about taxes go wrong when the words slide around, so let us fix four of them.

Adjusted gross income (AGI) is the income figure on a federal return after a handful of adjustments, before the standard or itemized deduction. It is the number the IRS uses to rank filers.

Federal individual income tax is the tax computed under the brackets in the Internal Revenue Code, after credits, and nothing else. It is not the payroll tax that funds Social Security and Medicare, not the excise taxes on gasoline, not the corporate tax, and not any state or local tax. We will come to those, because they are the other side's best argument.

Share of income means a group's AGI divided by all filers' AGI. Share of tax means the group's income tax paid divided by all income tax paid. The comparison between those two shares is the whole question of fairness in one line.

Percentile means a rank. "The top 1 percent" is the one filer in a hundred with the highest AGI, and the IRS publishes the dollar threshold you must clear to belong to it.

The numbers, with the arithmetic shown

For tax year 2022, the IRS data as summarized by the Tax Foundation and the National Taxpayers Union Foundation show the following.

• The top 1 percent of filers, those with AGI above roughly $663,000, reported 22.4 percent of all AGI and paid 40.4 percent of all federal individual income tax.
• The top 50 percent of filers paid about 97 percent of the income tax. The bottom 50 percent paid the remaining 3 percent.

Now the arithmetic the panel skipped. Divide the share of tax by the share of income.

40.4 divided by 22.4 is 1.80. The top 1 percent paid a share of the income tax about 1.8 times as large as its share of the income. Put in a sentence a child can check: for every dollar of income that group earned, it carried about eighty cents more than a strictly proportional share of the bill.

Run the same test on the bottom half. The bottom 50 percent paid 3 percent of the tax. Its share of AGI is small too, but it is far larger than 3 percent, in the neighborhood of one dollar in ten. The exact figure for the bottom half and for the top 5 and top 10 percent is in the same SOI table, and I would rather you look it up than take my rounding. What matters here is the direction, and the direction does not depend on the third decimal place: the share of tax paid rises faster than the share of income as you climb the ladder.

That is what a progressive income tax is designed to do. You may think it is the right design or the wrong one. What you cannot honestly say is that the income tax is not being paid by the people with the most income. It is. It is paid by them in larger proportion than they earn.

Notice also the trend. The top 1 percent's share of income tax was about 33.2 percent in 2001 and 40.4 percent in 2022. A reader who wants to be fair to both sides should hold two thoughts at once. Incomes at the top grew, which is why their share of AGI is large. And the tax collected from them grew with it, which is why their share of the bill is larger still.

Why so many households owe nothing

Here is the part that startles people. If the top half pays about 97 percent, then the bottom half pays almost nothing. How does a tax system in which tens of millions of households owe zero income tax come to exist? Three mechanisms, in order of size.

One, the standard deduction. Before the bracket schedule touches a dollar, a filer subtracts a standard deduction. A household earning a modest wage may have taxable income of zero after it. There is no tax to pay on zero.

Two, the child tax credit. A credit is not a deduction. A deduction lowers the income you are taxed on. A credit lowers the tax itself, dollar for dollar. A family with children can see a bracket-computed bill of a few thousand dollars cut to nothing by the credit.

Three, refundable credits. Some credits are refundable, which means that when the credit is larger than the tax owed, the Treasury sends the difference as a check. The Earned Income Tax Credit is the best-known. A refundable credit can push a household's income tax below zero. The IRS tables count those households as paying nothing at the bottom, and the Treasury, in budget accounting, scores the refund as spending. When a family with one earner and two children files, the arithmetic can run like this, in a labelled hypothetical. Suppose the bracket calculation gives a tax of $1,000 and the credits total $5,000. The tax paid is not zero. It is negative $4,000, and the household receives a payment. Nobody in that story has broken a rule. The rule is the problem, or the feature, depending on your view of what the code should do.

I have a view, and I will give it in the next sections. For now the point is simple: a very large part of the country is outside the income tax by design, and the design was voted on by Congresses of both parties.

The strongest objection, stated fairly

The best case against what I have just written goes like this.

The income tax is not the only tax. Payroll taxes take 7.65 percent from the worker and another 7.65 percent from the employer, and a worker at the bottom of the income scale often pays more in payroll tax than in income tax. Add state sales taxes, which fall hardest on people who spend most of what they earn, and property taxes folded into rent. Count all of it and the poor are not free riders. The rich, meanwhile, hold wealth in unrealized gains that no return ever reports. A table that looks only at the federal income tax tells a convenient half of the story.

That is a serious argument, and part of it is right. Answer it in points.

1. The payroll tax is real and regressive in one respect. The Social Security portion applies only up to an annual wage cap, so high earners pay it on a smaller fraction of their income. Concede it. But the payroll tax is also tied to a benefit: the wage you pay on builds the Social Security record that sets your retirement check, and the formula is tilted to pay lower earners a higher fraction of their past wages. It is closer to a premium than to a pure tax. Folding it into the fairness question without that context is not honest accounting.

1. The question the panelist asked was about the income tax. The claim in circulation is that the rich do not pay. The claim is tested against the income tax tables, because that is the tax the claim is about. The fact that other taxes exist does not rescue a false statement about this one.

1. State and local taxes cut both ways. Sales taxes are regressive. State income taxes are generally progressive. Property taxes depend on the state and on who owns what. Any total-burden study that claims one clean verdict is hiding a long list of assumptions. Where the burden falls is genuinely contested, and I would trust any analyst who says so over any who does not.

1. Wealth that goes untaxed until sale is real. That is a separate subject, and it is a fair one. Gains are taxed when assets are sold, a rule with consequences we cover in capital gains taxes and the lock-in effect that keeps money frozen in place. It is not an argument that the income tax collects little from the rich. It collects a great deal from them.

Take the objection at its full strength and the conclusion survives: the federal income tax is concentrated on a small group, and the claim that the rich pay nothing fails.

What the shape of the tax does to everyone else

Now the values question, and I will not pretend it is a number. A tax system that gathers about 40 percent of its income-tax revenue from one filer in a hundred, and nearly all of it from the top half, has a political side effect that the economists rarely mention. A majority of voters can approve spending whose cost falls mostly on someone else.

James Madison saw the problem in Federalist No. 10, where he warned of factions, groups united by a common interest adverse to the rights of other citizens or to the permanent interests of the community. A majority that pays little of the income tax and votes on how much of it to raise is not a villain in a play. It is simply a group with a standing incentive. The same incentive runs in the other direction among those who benefit from a deduction. Anyone can see how the temptation grows when the bill is paid by somebody else.

This is why I do not make the argument as a complaint about the successful. The point is structural. A citizen who pays nothing has little reason to care what a program costs, and a citizen who is told that someone unseen will pay for everything stops asking. Responsibility and decisions belong together. You will remember that the Revolution was fought partly over the principle that those who pay should have a say. The inverse is worth keeping in view: those who vote the bill should feel some of it.

There is also a plain question of dignity. Work that leaves a household owing no income tax at all, and indeed receiving a check, is meant to be a ladder. For a family that is climbing, the credits are a helping hand. For a family that stays at the same earnings for twenty years, they become a floor with a ceiling attached. We look at that ceiling in benefit cliffs can make a raise cost a single mother real money and at the credit itself in The EITC began as a conservative idea and now pays out billions in error.

What the Founding would say

The framers expected federal money to come mostly from tariffs and excise taxes. The Constitution's direct-tax clauses in Article I required that direct taxes be apportioned among the states by population, which made a broad income tax nearly impossible until the Sixteenth Amendment in 1913. The story of that amendment and of the original promise attached to it, that it would touch only the very rich, is told in The Sixteenth Amendment and the 1913 bargain that built the income tax. The top rate in the first year was 7 percent, on incomes above a very high threshold. A tax sold on the promise that few would pay it has, a century later, been refined into a tax that few in fact pay. The promise was kept in an ironic sense: the burden remained on a few. It simply stopped being the few who vote.

Anyone who reads the original document will notice something else. The Constitution says Congress may lay and collect taxes "to pay the Debts and provide for the common Defence and general Welfare of the United States." It says nothing about using the tax code as a machine for steering behavior, and yet a large share of the Internal Revenue Code is exactly that, a pile of credits, phase-outs and carve-outs. We take up what that pile costs in tax complexity is a subsidy for lobbyists, and the code shows how it works.

Rival ideas, answered

Some readers will draw the opposite conclusion from the same table and argue that if the top 1 percent pays 40 percent, it can surely pay 50. Maybe. Three cautions.

First, a rate is not the same as revenue. As the rate on a group rises, behavior changes: income moves into forms taxed more lightly, retirement dates shift, and entrepreneurs who might have expanded decide not to. How much revenue survives is an empirical question, and the answer varies by tax. It is not a free lunch. We weigh that case in where tax cuts pay for themselves and where they honestly do not.

Second, the top 1 percent is not a club with fixed members. People enter it in a good year, a business sale or a large bonus, and leave the next year. A tax on the top is a tax on whoever has the best year of their life, and it falls unevenly on the self-employed and on owners of small firms who report business income on a personal return.

Third, even a confiscatory rate on every dollar above the top threshold would not close the gap between what the government spends and what it collects. The arithmetic of a trillion-dollar deficit is bigger than any one group's income. Anyone who tells you otherwise has not done the division. You can check the size of the problem yourself on the national debt clock.

The verdict

Put the evidence together in a short, numbered argument.

1. The federal income tax is concentrated: in tax year 2022 the top 1 percent paid 40.4 percent of it while reporting 22.4 percent of the income, and the top half paid about 97 percent.
2. The ratio of tax paid to income earned is about 1.8 at the top, which is what progressivity means in practice. The claim that the rich pay nothing does not survive the IRS's own table.
3. Tens of millions of households owe no income tax because of the standard deduction, the child credit and refundable credits. That was a choice of Congress, and it has consequences for who votes on what a program costs.
4. Payroll, state and local taxes are real, and the honest way to discuss them is as a separate and contested question, not as a rescue of a false claim about the income tax.
5. The question for conservatives is not whether the rich pay. They do. It is whether a system where a majority pays little is a sound foundation for a republic that is supposed to hold spending to the consent of those who fund it.

The case in brief

1. For tax year 2022, the top 1 percent of filers reported 22.4 percent of AGI and paid 40.4 percent of the federal income tax, and the top half of filers paid about 97 percent.
2. Dividing share paid by share earned gives about 1.8 at the top, so the income tax is heavily progressive.
3. Large numbers of households owe nothing because of the standard deduction and credits, some of them refundable, which can make the income tax negative for a family.
4. Payroll and state taxes matter, but they answer a different question and do not change what the income tax tables show.
5. A republic works better when most voters feel some of what a program costs, and the present shape of the tax weakens that link.

What you can do: open the IRS Statistics of Income individual tables for the latest year, find the percentile table, and divide each group's share of tax by its share of income yourself.