Effective U.S. federal tax rate vs. income

October 24, 2009

The congressional budget office provides data about the distribution of the federal tax burden (including income tax, social security tax, excise tax, and corporate income tax allocated to households according to their capital income) among the different income groups. The chart below shows the 2005 distribution. The area of the entire chart represents the total household income in 2005 ($9.7 trillion).

The chart is divided by solid lines into 5 vertical bars, corresponding to the five household income quintiles, sorted in order of increasing household income from left to right. The bars’ widths correspond to the total income of the quintile (i.e., income per household in the group times the number of households in the group). The top income quintile is split with a dotted vertical line into the two groups – the top 1% on the right and the rest of the top quintile (percentiles 80 to 99) on the left. Those subgroups within the top quintile are broken down further into the following percentile brackets (not marked with vertical lines): [80-90], [90-95], [95-99], [99-99.5], [99.5-99.9], [99.9-99.99], and [99.99-100].

Each bar has a shaded portion corresponding to the share of the income group’s income which is collected as federal taxes. Thus the total shaded area corresponds to the federal tax total ($2 trillion = 20.5% of $9.7 trillion).

The tax rates increase from 4.3% for the bottom quintile to 32.1% for the [99.9-99.9] percentile bracket, before dipping slightly to 31.5% for the top hundredth of percentile.

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