- Fiscal year 2008 federal revenues will come from four major sources: individual income tax (48 percent), corporate income tax (14 percent), payroll taxes (36 percent), and excise taxes (3 percent). Estate and gift taxes, customs duties, Federal Reserve earnings/losses, and miscellaneous receipts will account for -1 percent.
Source: Budget of the United States Government Fiscal Year 2009, Historical Tables
- Overall federal taxes are progressive; that is, the effective tax rate rises as income grows. In 2008, the average combined rate of federal income, payroll, and estate taxes will be 1.1 percent for the lowest quintile (or fifth) of the income distribution, 15.1 percent for the middle quintile, and 26.2 percent for the highest quintile.
Source: Tax Policy Center Table T08-0079.
Underlying data: Download
- The individual income tax is highly progressive: in 2008, the lowest quintile will face an average rate of -8.1 percent while the top quintile pays 15.0 percent. In contrast, the payroll tax is regressive (the effective rate falls as income rises): the lowest quintile will pay an average of 8.4 percent but the top quintile pays 5.7 percent and the top 1 percent pays just 1.5 percent.
Source: Tax Policy Center Table T08-0079.
Underlying data: Download
- The progressivity of the federal tax system means that high-income taxpayers bear a high share of taxes. In 2008, the top quintile of the income distribution will receive 55 percent of income and pay 69 percent of federal taxes.
Source: Tax Policy Center Table T08-0079.
Underlying data: Download
Other resources
More information about the distribution of federal taxes under current law and pre-EGTRRA law is available in Rohaly, Jeffrey. 2008. The Distribution of Federal Taxes, 2008-11. Washington, DC: The Urban Institue (June).
The distributional effects of the Bush tax cuts are provided in Leiserson, Greg, and Jeff Rohaly. 2006. The Distribution of the 2001-2006 Tax Cuts. Washington, DC: The Urban Institute (November).
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 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 by recipients of capital income (interest, dividends, capital gains, and rents).
- 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. (March).
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.
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.
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