Q&A – Who Pays Federal Income Taxes?
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Today’s entry: @brianmuddradio How about updating us on who actually pays taxes?
Bottom Line: Another Tax Day has come and gone and along with it a lot of money sent to the federal government...but not by everybody and certainly not evenly. Over the years I have provided updates as to who paid what in federal income taxes. Here’s the update for this year based on the latest study released just this week by the National Taxpayers Union Foundation.
Here's the breakout based on the percentage of total federal income taxes paid by income bracket:
- Top 1%: earned 20.6% of all income; paid 38.4% of all taxes
- Top 5%: earned 36.4% of all income; paid 59.3% of all taxes
- Top 10%: earned 47.6% of all income; paid 70.5% of all taxes
- Top 25%: earned 68.5% of all income; paid 86.3% of all taxes
- Top 50%: earned 87.7% of all income; paid 96.7% of all taxes
- Bottom 50%: earned 12.3% of all income; paid 3.3% of all taxes
That means the bottom half of income earners paid only about 3.3% of the federal income tax burden. Roughly 30.5% of all tax returns (about 49 million filers) reported no federal income tax liability, often due to deductions, credits, or income below taxable thresholds. The federal tax burden continues to rest overwhelmingly — both literally and relatively — on upper-income earners with the top 5% accounting for nearly 60% of all federal income taxes paid.
Over the past year the tax cuts brought about by the Tax Cuts and Jobs Act were locked in via the One Big Beautiful Bill Act last year in addition to President Trump’s additional tax cut policies...no tax on tips and no tax on overtime, which were capped (based on income) and overwhelmingly benefited middle and lower income workers.
As always, there are two sides to every story and one side to the facts. The narrative that tax relief under President Trump is primarily aimed at “millionaires and billionaires” doesn’t align with the numbers. Upper-income earners continue to pay the vast majority of federal income taxes, while nearly a third of Americans (and effectively closer to half when considering broader effective liability) have little or no federal income tax burden.