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Summary of the Latest Federal Income Tax Data, 2021 Update
The Internal Revenue Service (IRS) has released data on individual income taxes for tax year 2018, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1] The new data shows how taxes changed in the first tax year after passage of the Tax Cuts and Jobs Act (TCJA) in December 2017.
The data shows that the U.S. individual income tax continued to be progressive, borne primarily by the highest income earners.
In 2018, 144.3 million taxpayers reported earning $11.6 trillion in adjusted gross income (AGI) and paid $1.5 trillion in individual income taxes.
Tax year 2018 was the first under the Tax Cuts and Jobs Act (TCJA). The number of returns filed and the amount of income reported grew in 2018 yet average tax rates fell across every income group and total income taxes paid decreased by $65 billion.
The share of reported income earned by the top 1 percent of taxpayers fell slightly, to 20.9 percent in 2018 from 21 percent in 2017. Their share of federal individual income taxes rose by 1.6 percentage points to 40.1 percent.
Since 2001, the share of federal income taxes paid by the top 1 percent increased from 33.2 percent to a new high of 40.1 percent in 2018.
In 2018, the top 50 percent of all taxpayers paid 97.1 percent of all individual income taxes, while the bottom 50 percent paid the remaining 2.9 percent.
The top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).
The top 1 percent of taxpayers paid a 25.4 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.4 percent).
OMG! No wonder bridges aren't being repaired, wildfire prevention measures can't be carried out, unemployment benefits have run dry during the Covid crisis, Vet hospitals and clinics are struggling, medical R & D at this crucial time have been cut, Medicaid is not available in some states, and our formerly great country is going down the drain! This is not the way to MAGA! Thank heaven we were able to put a stop to continued severe hatchet jobs done to the federal budget! Hopefully, Congress can do something to stop this phased-in train wreck.
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For most people, tax season comes to a close on April 15 each year. In 2019, many taxpayers were surprised to find they had to pay more taxes than the previous year, while others received significantly lower refund checks from the Internal Revenue Service (IRS)—even though their financial circumstances didn't change.
For the wealthy, banks, and other corporations, the tax reform package was considered a lopsided victory given its significant and permanent tax cuts to corporate profits, investment income, estate tax, and more. Financial services companies stood to see huge gains based on the new, lower corporate rate
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KEY TAKEAWAYS
The Tax Cuts and Jobs Act was the largest overhaul of the tax code in three decades.
The law creates a single corporate tax rate of 21%.
Many of the tax benefits set up to help individuals and families will expire in 2025
In my view, these numbers illustrate the main problem with our federal tax system. That problem is that with each new tax law that is passed, a greater tax burden is placed on a smaller number of tax payers at the top while those in the middle and lower income brackets pay little or nothing to help support all the public systems that our country has come to rely on.
You can cherry pick any numbers you want out of the data, but the inescapable fact is that a greater and greater percentage of people are paying nothing to help support the things that benefit all of us as a society. This leaves us with a system whereby the overwhelming majority of people who pay little or no taxes keep voting for the spending of any amount of money for any purpose because they know that they won't be the ones who have to pay for it.
A system like this is doomed to failure when you have an overwhelming majority of voters with no "skin in the game". Why should they worry about whether our tax dollars are being used wisely? Why should they worry about graft, corruption, political favoritism, boondoggle projects, and the like? They're not paying for it.
OMG! No wonder bridges aren't being repaired, wildfire prevention measures can't be carried out, unemployment benefits have run dry during the Covid crisis, Vet hospitals and clinics are struggling, medical R & D at this crucial time have been cut, Medicaid is not available in some states, and our formerly great country is going down the drain! This is not the way to MAGA! Thank heaven we were able to put a stop to continued severe hatchet jobs done to the federal budget! Hopefully, Congress can do something to stop this phased-in train wreck.
I suspect that most or all of these problems could be fixed with just the money we waste on foreign aid and payments to non-citizens.
Agree. I don't think that our federal tax system is generating "too little" income for our needs. The problem is on the other end. We need to be more accountable for what we spend the money on. And this circles right back to the issue of a large majority of our population paying little to no federal income tax. When someone has no skin in the game, they don't care where the money goes... especially if a few of those dollars are showered on them in the form of "freebies". It's always great to have a party if someone else is footing the bill.
OMG! No wonder bridges aren't being repaired, wildfire prevention measures can't be carried out, unemployment benefits have run dry during the Covid crisis, Vet hospitals and clinics are struggling, medical R & D at this crucial time have been cut, Medicaid is not available in some states, and our formerly great country is going down the drain! This is not the way to MAGA! Thank heaven we were able to put a stop to continued severe hatchet jobs done to the federal budget! Hopefully, Congress can do something to stop this phased-in train wreck.
I'd only note that your depressing thoughts about The US aren't shared by very many people and your read of economic history is distorted by your politics, you've proved that many times over.
Most of the, "problems" you noted above are pain points because The US has increased social welfare spending by ~10X since the '50s crowding out infrastructure, R&D and other investment type spending.
I don't like Trump either but, pre-covid, net worth numbers for the bottom two quintiles of Americans exploded upwards while his tax cuts were in effect.
Agree. I don't think that our federal tax system is generating "too little" income for our needs. The problem is on the other end. We need to be more accountable for what we spend the money on. And this circles right back to the issue of a large majority of our population paying little to no federal income tax. When someone has no skin in the game, they don't care where the money goes... especially if a few of those dollars are showered on them in the form of "freebies". It's always great to have a party if someone else is footing the bill.
It's actually way worse than that. Friedman warned us decades ago that myriad government and private organizations helping the poor and working poor at the same time would obscure how much these cadres receive directly and indirectly and drive more people into various benefits traps.
Part of this is easy to see. The average poor family in The US does not go hungry even a day per year and as TVs, smartphones, at least one car, most have high speed internet. Many in this cadre receive $10,000 - $15,000 - $20,000 (some much more) in WIC, rental assistance, EITC, Medicad, direct food benefits etc.
These benefits in total are so substantial that The Census Bureau and others don't count these benefits as, "income" because doing so would push millions and million above the official poverty line.
During a lecture the great and hyper-left economist Amartya Sen noted that the overwhelming majority of US poor do not endure any level of absolute material hardship on an ongoing basis.
The problem is defense spending and tax cuts. The trust fund programs, SS and Medicare, aren't running the huge deficits. It's entirely due to the discretionary programs which are funded by income tax receipts. About a third of that portion of the budget, which is mainly defense, is funded by borrowing. If not for the interest rate subsidies given to these programs, the deficit would be far higher for the many years of profligate spending for 'defense' and stimulus to offset the bursting of the bubbles created by the monetary policy.
You can clearly see the deep dive in individual and corporate income tax receipts after the Trump tax plans were passed. The tax cuts have little to do with wealth effects. That is due to the 8 trillion dollars in money printing targeted at financial assets which are overwhelmingly owned by the top 1% and almost entirely owned at the top two quintiles. The AGI is a poor use to determine effective tax rates because of the special exclusions and tax rates for gains and other income, not to mention the income that can be sheltered by postponing their realization. The corporate tax liabilities differ substantially from the actual tax payments, and have for a very long time with the nearly indefinite deferral of tax liabilities.
In the end, it's extremely hypocritical to blame workers who lose jobs because of the financial bubbles. We're repeating the same cycle as the last two. A small bubble burst in 2020, and 15-20 percent were thrown out of work. The Fed rushes to the rescue of the top 1%. Having been saved, they now bitterly complain about the rest of society. You're the main cause of the huge budget deficits...
Summary of the Latest Federal Income Tax Data, 2021 Update
The Internal Revenue Service (IRS) has released data on individual income taxes for tax year 2018, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1] The new data shows how taxes changed in the first tax year after passage of the Tax Cuts and Jobs Act (TCJA) in December 2017.
The data shows that the U.S. individual income tax continued to be progressive, borne primarily by the highest income earners.
In 2018, 144.3 million taxpayers reported earning $11.6 trillion in adjusted gross income (AGI) and paid $1.5 trillion in individual income taxes.
Tax year 2018 was the first under the Tax Cuts and Jobs Act (TCJA). The number of returns filed and the amount of income reported grew in 2018 yet average tax rates fell across every income group and total income taxes paid decreased by $65 billion.
The share of reported income earned by the top 1 percent of taxpayers fell slightly, to 20.9 percent in 2018 from 21 percent in 2017. Their share of federal individual income taxes rose by 1.6 percentage points to 40.1 percent.
Since 2001, the share of federal ime taxes paid by the top 1 percent increased from 33.2 percent to a new high of 40.1 percent in 2018.
In 2018, the top 50 percent of all taxpayers paid 97.1 percent of all individual income taxes, while the bottom 50 percent paid the remaining 2.9 percent.
The top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).
The top 1 percent of taxpayers paid a 25.4 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.4 percent).
The problem is defense spending and tax cuts. The trust fund programs, SS and Medicare, aren't running the huge deficits. It's entirely due to the discretionary programs which are funded by income tax receipts. About a third of that portion of the budget, which is mainly defense, is funded by borrowing. If not for the interest rate subsidies given to these programs, the deficit would be far higher for the many years of profligate spending for 'defense' and stimulus to offset the bursting of the bubbles created by the monetary policy.
You can clearly see the deep dive in individual and corporate income tax receipts after the Trump tax plans were passed. The tax cuts have little to do with wealth effects. That is due to the 8 trillion dollars in money printing targeted at financial assets which are overwhelmingly owned by the top 1% and almost entirely owned at the top two quintiles. The AGI is a poor use to determine effective tax rates because of the special exclusions and tax rates for gains and other income, not to mention the income that can be sheltered by postponing their realization. The corporate tax liabilities differ substantially from the actual tax payments, and have for a very long time with the nearly indefinite deferral of tax liabilities.
In the end, it's extremely hypocritical to blame workers who lose jobs because of the financial bubbles. We're repeating the same cycle as the last two. A small bubble burst in 2020, and 15-20 percent were thrown out of work. The Fed rushes to the rescue of the top 1%. Having been saved, they now bitterly complain about the rest of society. You're the main cause of the huge budget deficits...
Notice Britain has put banks on notice for negative deposit rates, another attempt to push more money into the US financial system.
The first part of that is total nonsense - literally misdirection.
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