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The Distribution of Federal Taxes

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Publication Date: June 2007

Publisher(s): Tax Policy Center

Author(s): Jeff Rohaly

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)

Keywords: Tax Policy; Tax Distribution and Economic Trends; Taxation of Households; Distribution of Taxes and Income

Type: Report


Overall, the federal tax system is highly progressive: On average, households with higher incomes pay taxes that are a larger share of their income. The 2007 average effective federal tax rate ? tax paid as a percentage of cash income ? rises from 3.4 percent for the bottom quintile ? or fifth ? of the income distribution to 25.9 percent for the top fifth.1 Within the top quintile, average rates climb from 30.4 percent for the top 1 percent to 32.8 percent for the top one-tenth of 1 percent. The individual income tax is the most progressive of the major revenue sources while payroll taxes for Social Security and Medicare are regressive.