Federal Income Tax Form 1040

There’s lot of misinformation out there about the Federal tax system, usually with a strong political slant attached. A balanced, unbiased overview of the tax code is something that I think very few people ever hear. This is because it isn’t polarizing, party-energizing information–it’s just the makeup of our system: good, bad, or indifferent. However, by knowing a few of these things, perhaps it can help temper some of the misinformation out there that’s presented as if it’s absolute fact. I thought that might be particularly helpful as we go into this election season.

My source for this is Congress itself–specifically, the most recent Joint Committee on Taxation’s report on the Federal Tax System. Most of it is just a general review of the tax system, but there are some very enlightening charts and graphs at the end. From those and other sections, I came away with a few tidbits that you might not know (click on the images below for more details):

  • Who is the average American income tax payer? The median 2014 taxpayer will have between $40,000 and $50,000 of income, including wages, social security, pensions, interest, and just about any other source. Roughly 80% of all income tax returns will show less than $100k of total income.
  • Who pays most of the taxes? However, 95% of all income taxes paid were paid by those making $100k or above.
  • What other sources of revenue are there, besides income tax? To expand on the answer to the last question, even though 95% of income taxes were paid by the top 20% of taxpayers, income tax itself is less than half of all Federal income. The rest is made up of corporate taxes (12%), social insurance taxes (Medicare/Medicaid and Social Security) at around 35%, and several smaller taxes such as estate, excise, etc.
  • How have tax rates changed over time? While the rates for income, estate, corporate, and even Social Security have all changed over the years, the total amount of Federal income tax as a percentage of GDP has remained relatively constant (in the 15-20% range). To briefly summarize the long-term trends, corporate taxes have gradually declined as a share of total Federal revenue, while Social Insurance (Medicare and Social Security) has gradually increased. For the most part, the other taxes have stayed the same.

Sources (click to enlarge):


You can download and read the full report here.