1986-2005 IRS Collections Data

1986-2005 IRS Collections Data
by Income Category (Percentile)

John Gaver
October 4, 2007

John Gaver Every year, between September and February, 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 among the very first to announce the release of this data, since as I write this, none of the major media outlets or talk shows have made mention of this new tax data.

The latest numbers are usually about two years old. The most recent data to be released summarizes tax collections for the years 1986 through 2005 and was posted to the IRS web site today, October 4, 2007.

The reason why this is important is because these numbers represent actual collections. They are not projections. There are no assumptions. 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 groups actually paid what portion of the tax that was actually collected, after all tax breaks and exemptions.

If nothing else, these numbers shatter the popular illusion 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 2005, the top-earning 1% of taxpayers earned 21.20% of the income and paid 39.38% 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 2005. 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 useful.

2005 IRS Collections Data

	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	132,612	7,507,958	934,703	100.00	100.00	12.45	(NA)
Top 1%	1,326	1,591,711	368,132	21.20	39.38	23.13	364,657
Top 5%	6,631	2,683,934	557,759	35.75	59.67	20.78	145,283
Top 10%	13,261	3,487,010	657,085	46.44	70.30	18.84	103,912
Top 25%	33,153	5,069,455	803,772	67.52	85.99	15.86	62,068
Top 50%	66,306	6,544,824	906,028	87.17	96.93	13.84	30,881
Bottom 50%	66,306	963,134	28,675	12.83	3.07	* 2.98	(NA)

* The average tax rate for the bottom 50% is drawn from a related IRS spreadsheet.

As mentioned above, this table shows that those with the highest incomes pay far more than their share of taxes. But what's worse, is that since 1995, the top 1% and top 5% of taxpayers ended up paying a larger and larger percentage of taxes collected. 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 and corresponded to a similar 3.5% drop in the percentage of the total adjusted gross income earned by that group, in 2001. In other words, this drop had nothing to do with changes in the tax code or marginal tax rates, but rather a decrease in earnings among the top earners. That percentage of tax paid has continued to climb since then.

But, it should be noted that even with the temporary drop in percentage of tax paid by the wealthy in 2001 and 2002, due to the drop in income of the top earning 1%, during those years, 2002 was the first year since 1996 that the top earning 1% paid more than twice their share of taxes, based on adjusted gross income. The year 2003 continued that trend, as for only the second time since 1996, the top-earning 1% paid more than twice (2.04 times) their share of taxes, based on adjusted gross income.

That ratio of income earned to taxes paid by the wealthy trended down in 1997, 1998, 1999 and 2000, but trended up again in 2001 (after Bush took office), peaking at 2.09 times their share, in 2002. 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 and remained at 1.86 times their share in 2005, 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, the top earners have paid a greater percentage of tax, relative to income, than in 2000, when he took office.

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 have paid an increasingly higher percentage of the total tax load each year since then (39.38% of taxes in 2005, 36.89% of taxes in 2004 and 34.27% in 2003).

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 is the first year since 2001 (the first year that Bush could have affected) that this ratio has been lower than the highest point of the previous four years (Clinton's last term). (1997=1.91%, 1998=1.88%, 1999=1.85%, 2000=1.80%, 2001=1.93%, 2002=2.09%, 2003=2.04%, 2004=1.9%4, 2005=1.86%). 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. It is only now getting down to close to where it was when he took office.

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 1.326 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. 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).

How many of those expats do you think were poor? In fact, the people who pay most of the taxes are leaving, while the poor come streaming across our still unprotected southern border and pay little or no tax. The more 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 and is now current for 2008 (the 2005 tax year).

You can open or download the 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 useful.