1986-2008 IRS Collections Data
by Income Category (Percentile)

John Gaver
October 5, 2010

John GaverEvery year, between June and October, the IRS releases information concerning its tax collections, based on income category. We try to update this page as soon as possible, thereafter. Once again, ActionAmerica is the very first to announce the release of this data, that was made public within the last hour. As I write this, none of the major media outlets or talk shows have yet made mention of this new tax collections data.

The latest numbers are usually about 18 months old, depending on release date. The most recent data to be released summarizes IRS tax collections for the years 1986 through 2008.

The reason why this is important is because these numbers represent actual collections. These are the raw numbers, before they have been massaged in any way. They are not projections or estimates. There are no assumptions in these numbers that would add bias.

This is what the IRS actually put into the US Treasury.

The numbers are broken down by descending income categories, so this tells us which income groups actually paid what portion of the tax that was actually collected, after all tax breaks and exemptions were applied.

It should also be noted that when talking about the top 1% of income earners, we're actually only talking about roughly one half of one percent (0.5%) of the adult population. When talking about the top 5% of income earners, we are actually only talking about roughly 2.5% of the adult population. Two issues contribute to this difference. First, approximately 47% of Americans pay no federal personal income tax at all or have all of their taxes refunded or rebated. In fact, many even receive rebates for taxes that they never paid. Secondly, when you lump an additional 20 million illegal aliens, into the mix, almost all of whom pay no income tax, it means that more than half of the legal and illegal adult population pays no federal personal income tax whatsoever.

If nothing else, these numbers shatter the popular liberal myth that there are so many loopholes in the tax code, for the rich, that the rich don't pay their share of the tax load. In fact, in 2008, the top-earning 1% of taxpayers earned 20.0% of the income and paid 38.02% of the tax collected or almost double their share, based upon income earned.

For the purposes of this article, we have included the summary of this IRS data, for just the year 2008. However, if you wish to download the entire IRS Spreadsheet, you will find that the problems discussed here have been getting progressively worse. In fact, we urge you to do just that. For your convenience, we have provided a button near the bottom of this page, that will download the entire Excel file directly from the IRS web site.

We hope that you find this information useful.

2008 IRS Collections Data (source IRS)
Number of
Returns
(000)
AGI
(000,000)
Income
Taxes
Paid
(000,000)
Group's %
Share of
Total AGI
Group's %
Share of
Total Taxes
Group's
Avg. Tax
Rate (%)
Income
Floor for
Group
All
Taxpayers
139,960
8,426,625
1,031,512
100.00
100.00
12.24
(NA)
Top 1%
1,400
1,685,472
392,149
20.00
38.02
23,27
380,354
Top 5%
6.998
2,926,701
605,718
34.73
58.72
20.70
159,619
Top 10%
13,996
3,856,462
721,421
45.77
69.94
18.71
113,799
Top 25%
34,990
5,678,179
890,614
67.38
86.34
15.68
67,280
Top 50%
69,980
7,352,111
1,003,639
87.25
97.30
13.65
33,048
Bottom 50%
69,980
1,074,514
27,873
12.75
2.70
* 2.59
(NA)
* The average tax rate for the bottom 50% is drawn from a related IRS spreadsheet.

As mentioned above, this table shows clearly that those with the highest incomes pay far more than their share of tax load. But what's worse, is that prior years' collections data shows that since 1995, the top 1% and top 5% of taxpayers have seen a rather steady increase in the percentage of taxes collected from them.

To be fair, during that period, there was a small 3.5% drop in the percentage of total taxes paid by the top 1%, in 2001, which remained virtually unchanged in 2002. There was also a 2% drop in the percentage of total taxes paid by the top 1% in 2008. But that said, each of those drops in the percentage of total taxes paid by the top 1% corresponded to an almost identical drop in the percentage of the total adjusted gross income earned by that group, in the same year. In other words, those drops had nothing to do with changes in the tax code or marginal tax rates, but rather, were caused by a decrease in earnings among top earners.

One of the key factors that this data exposes that the liberal media would like to keep hidden, it that the percentage of the tax load paid by the top 1% of income earners has continued to climb rather steadily, since the early 90's (including after the Bush tax cuts), with only a few minor dips related to downturns in the economy.

Let's put this all into perspective. The ratio of income earned to taxes paid by the wealthy trended down in 1997, 1998, 1999 and 2000, during the Clinton administration, but trended up again in 2001 (after Bush, Jr. took office), peaking at 2.09 times their share, in 2002. That's not exactly what the liberal media told us, is it?

The ratio of income earned, to tax paid, by the top 1% of income earners didn't drop below double their share till 2004, when it was 1.94 times their share, 1.86 times their share in 2005, 1.81 times their share in 2006 and 1.77 times their share in 2007, which is still higher than when Bush took office. In other words, the Bush tax cuts did not help the top income earners even a little bit. In fact, every year since Bush took office, until 2007, the top earners paid a greater percentage of tax, relative to income, than the 1.80 times their share, in 2000, when he took office. But even in 2007, the wealthiest 1% of income earners were only paying three hundredth of a percent less of the tax load than when Bush took office.

In the simplest of terms, for those who think that Clinton was a hero of the working class, the wealthiest taxpayers paid less of the tax load under Clinton than under Bush.

It might be argued that since the top-earning 1% averaged a lower tax rate in 2003 through 2005, than in 2002, this top group got a break in 2003 through 2005. However, that apparent break is offset by the fact that tax rates were down across the board in 2003 and remained low in 2004. Furthermore, the top income earners actually ended up paying roughly the same percentage of the total tax load in 2003, as they did in 2002 and they continued to pay an increasingly higher percentage of the total tax load each year, until 2008, when their income levels dropped, as well (34.27% of the tax load in 2003, 36.89% in 2004, 39.38% in 2005, 39,89% in 2006, 40.42% in 2007 and finally dropping along with their income, to 38.02% in 2008).

In fact, the most relevant benchmark of tax load is the ratio of percent of total income earned, to the percent of total tax paid, by each income group. So consider that 2005 was the first year since 2001 (which was the first year that Bush, Jr. could have affected) that this ratio has been lower than the highest point of the previous four years (Clinton's last term). Considering that lower percentages mean rich pay less percentage of taxes, here are the actual number from the IRS collections data. See for yourself, how the top earners paid less of the tax load, based on income earned, under Clinton, than under Bush, Jr.

• 1997=1.91%
• 1998=1.88%
• 1999=1.85%
• 2000=1.80% (Last year the Clinton could have affected taxes)
• 2001=1.93% (First year that Bush could have affected taxes)
• 2002=2.09%
• 2003=2.04%
• 2004=1.94%
• 2005=1.86%
• 2006=1.81%
• 2007=1.77%
• 2008= 1.90% (Last year that Bush could have affected taxes)

As you can see, the percentage of total tax paid, with regard to the percentage of total income earned, by the wealthiest one percentile of income earners was actually trending down in the four years preceding Bush's election to his first term and immediately jumped back up, in 2001. Only in 2007 did that ratio move down to just barely below where it was when he took office, but it jumped back up again significantly, in 2008.

Now think back to the best economy that we have seen in the last 30 years. During the time that President Reagan was in office, the economy was booming. The top income earners were paying in the range of 25% of the total tax load and still, that was far more than their share, based upon income. With more after tax money to spend, the wealthy invested it and created tons of jobs that in turn, spured the best economic conditions that we have seen since Kennedy cut taxes. That should tell you something.

What does this all mean?

What makes this so bad, is that those people who pay most of the taxes, are the ones who are being punished by our tax system and many of them are doing the only legal thing that they can, to defend against this increasing assault on wealth. They are leaving.

Our government is forcing those who pay the bills to take their money and leave. If a large part of the 1.4 million taxpayers that make up the top 1% were to leave, that would mean a loss of over one-third of our tax base. Well, guess what. Those people are leaving in quite significant numbers.

On April 25, 2010, the New York Times even published an article titled, "More American Expatriates Give Up Citizenship", in which they pointed out that more and more Americans, who already live abroad, have been turning in their passports, due in part to rising US taxes and laws that punish wealth. The number of official renunciations in the last quarter of 2009 was more than all of 2007 and 2008 combined. But, those are just people who actually went to the effort of turning in their passports.

Many more Americans just take their money and leave; never, as they say, "telling the jailer that they have gone." In fact, the US Bureau of the Census estimated that in 2005, over 350,000 US citizens and permanent residents would quietly leave the United States permanently (reported by the Bureau of Citizenship and Immigration Services - BCIS - of the Department of Homeland Security; formerly the Immigration and Naturalization Service – INS). But a series of Zogby polls, between 2005 and 2007 indicate that the problem is much worse. Zogby estimates the number of Americans permanently leaving the USA to be more than 3 million each and every year.

How many of those expats do you think were poor? In fact, the people who pay most of the taxes are the ones who are leaving. After all, it is not the poor who our tax system is punishing - it's the wealthy and they are the ones who can afford to live anywhere they want. Increasingly, they are the ones who can't afford to stay. At the same time, the poor come streaming across our still unprotected southern border, with hands out and pay little or no tax. So, the most important question is, "Who is going to make up the difference in taxes, after the wealthy leave?"

For a more thorough examination of this often overlooked economic threat, we suggest that you see the annually updated Action America feature article, The Economy Bomb - Ticking down faster at http://www.ActionAmerica.org/taxecon/tickfast.shtml. That article is updated every year when this data is released. At this time, it still reflects the previous year's tax collections data. Although that article is in the process of being updated to the most recent data, the previous findings still hold true, so check it out.

You can open or download the actual IRS spreadsheet, directly from the IRS web site, by clicking the button below. The spreadsheet contains no macros, so you can turn off macros without causing any problems. We hope that you find this information useful.

Discuss this article

Copyright 2013 John Gaver
All rights reserved


See related articles and supporting documents:

1986-2008 IRS Collections Data by Income Category
Obama agenda drives record expatriation
Tick - Tick - Tick / The Economy Bomb
Tax Freedom Day Builds Case for FairTax
US Tax Freedom Day Clock Web Widget
UK Tax Freedom Day Clock Web Widget
US Tax Freedom Day Clock
US Tax Freedom Day Clock Widget (for Mac)
UK Tax Freedom Day Clock Widget (for Mac)
The Privacy Factor
More Attacks on the Wealthy
US Taxpatriates List
2000 Statistical Yearbook of the Immigration & Naturalization Service (6.2mb PDF)
2003 World Wealth Report (Press Release)
American Citizens Residing Abroad (US Bureau of Consular Affairs)
Health Insurance Portability & Accountability Act of 1996 (26 USC 877(a)(1))
Immigration Reform and Immigrant Responsibility Act of 1996 (8 USC 1182(a)(10)(E))
Heroes Earnings Assistance & Relief Tax Act (Public Law 110-245) (8 USC 1182(a)(10)(E))
The Economic Impact of Replacing Federal Income Taxes
      with a Sales Tax (CATO)
Fair Tax Act of 2011 (H.R. 25)
Americans for Fair Taxation
National Retail Sales Tax Alliance

Recommended Books:

The Rich Don't Pay Tax …Or Do They?
The Fair Tax Book
Fair Tax: The Truth
How to Hide Your A$$et$ and Disappear
Escape From America

See Expatriate sites:

The Sovereign Society
Escape Artist
Expat World
Second Passports

Contact your Congressman here.

 

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