Who Pays Income Taxes in Four Charts

Much of the haggling over the recent fiscal cliff has been over what level to set for the break-point at which marginal tax rates are allowed to rise back to their Clinton era levels.  The President's original proposal was to set the cutoff level at 250,000 USD.  So taxpayers with incomes over 250,000 USD would see their marginal rates rise back to Clinton era levels.  Speaker Boehner's Plan B set the cutoff level at 1MM USD.  The plan currently being discussed would set that level at 400,000 USD for individual filers and 450,000 USD for joint filers.  Assuming the cutoff is the sticking point - how many people are actually affected by setting the cutoff at 250,000 USD as opposed to 1MM USD?  and how much does that impact total tax revenues?

2009 US tax return data can be found here   I broke down various totals by the Adjusted Gross Income that filers claimed.  So for example:  in the first graph we see that about 7.4% of tax returns came from persons claiming Adjusted Gross Incomes between 1 USD and 5,000 USD (I marked that bar in green for identification).  So what percent of US tax returns are from filers claiming Adjusted Gross Incomes of greater than 250,000 USD?  The IRS does not break out 250,000 but they do break out 200,000 USD.  In 2009 there were 140MM personal tax returns filed in the US.  2.8% of those tax returns came from filers claiming adjusted gross incomes of greater than 200,000 USD (I have marked those bars in red).  So the debate is over less than 3%  taxpayers.



The next question is what percent of the total Adjusted Gross Income of the US do those 3% of taxpayers account for?   Obviously the distribution will skew right because each taxpayer gets weighted by his Adjusted Gross Income ie 100 taxpayers who each claim an Adjusted Gross Income of 1,000 only makes up (10*1000=) 100,000 of the US's total Adjusted Gross Income.  Whereas one single taxpayer who claims an Adjusted Gross of Income of 1MM USD accounts for ten times as much.  In 2009 the US's total Adjusted Gross Income was 6.9 Trillion USD and 29% of that (marked below in red) came from persons who claimed Adjusted Gross Incomes of greater than 200,000 USD.



Due to deductions and exemptions the  incomes that persons are actually taxed on is smaller than the Adjusted Gross Income.   Taxable Income is given by Adjusted Gross Income minus personal exemptions and itemized deductions.  In 2009 the US's Total Taxable Income was 4.7 Trillion USD.  33% of that (marked below in red) came from persons claiming Adjusted Gross Incomes of greater than 200,000 USD.



 Finally what percent of income taxes are paid by persons claiming an Adjusted Gross Income of greater than 200,000 USD?  Again higher income brackets pay higher marginal tax rates so the distribution should move further to the right.  In 2009 there was 865 BB USD paid in Income Taxes.  50% of that (marked below in red) was paid by persons claiming Adjusted Gross Incomes of greater than 200,000 USD.