The Internal Revenue Service (IRS) has released data on individual income taxes for tax year 2019, showing the number of taxpayers, adjusted gross income, income tax paid, and income tax shares by income percentiles. The new data outlines the tax system under the second year of the Tax Cuts and Jobs Act (TCJA), the last year before the onset of the COVID-19 pandemic.
The data demonstrates the U.S. individual income tax continues to be progressive, borne primarily by the highest income earners.
- In 2019, taxpayers filed 148.3 million tax returns, reported earning nearly $11.9 trillion in adjusted gross income, and paid $1.6 trillion in individual income taxes.
- The top 1 percent of taxpayers paid a 25.6 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).
- The share of reported income earned by the top 1 percent of taxpayers fell to 20.1 percent from 20.9 percent in 2018. The top 1 percent’s share of federal individual income taxes paid fell to 38.8 percent from 40.1 percent.
- The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
- The top 1 percent paid a greater share of individual income taxes (38.8 percent) than the bottom 90 percent combined (29.2 percent).
- The Tax Cuts and Jobs Act reduced average tax rates across income groups.
Taxpayers reported nearly $11.9 trillion in adjusted gross income (AGI) on 148.3 million tax returns in 2019. The number of returns filed rose by 3.9 million (2.7 percent) and reported AGI rose by $319 million (2.8 percent) above 2018 levels. Total income taxes paid rose by $42 billion to $1.58 trillion, a 2.7 percent increase above 2018. The average individual income tax rate was nearly unchanged: 13.29 percent in 2019, compared to 13.28 percent in 2018.
|Top 1%||Top 5%||Top 10%||Top 25%||Top 50%||Bottom 50%||All Taxpayers|
|Number of Returns||1,482,459||7,412,296||14,824,593||37,061,482||74,122,965||74,122,965||148,245,929|
|Adjusted Gross Income ($ millions)||$2,393,383||$4,269,727||$5,621,027||$8,177,266||$10,517,131||$1,365,719||$11,882,850|
|Share of Total Adjusted Gross Income||20.1%||35.9%||47.3%||68.8%||88.5%||11.5%||100.0%|
|Income Taxes Paid ($ millions)||$612,027||$938,429||$1,117,856||$1,367,843||$1,530,288||$48,373||$1,578,661|
|Share of Total Income Taxes Paid||38.8%||59.4%||70.8%||86.6%||96.9%||3.1%||100.0%|
|Income Split Point||$546,434||$221,572||$154,589||$87,917||$44,269||$44,269|
|Average Tax Rate||25.6%||22.0%||19.9%||16.7%||14.6%||3.5%||13.3%|
|Average Income Taxes Paid||$412,846||$126,604||$75,406||$36,907||$20,645||$653||$10,649|
Note: Table does not include dependent filers. “Income split point” is the minimum AGI for tax returns to fall into each percentile. “Income taxes paid” is the sum of income tax after credits (including the subtraction of excess advance premium tax credit repayment, the earned income credit, American opportunity credit, health coverage tax credit, and the regulated investment credit credit) limited to zero plus net investment income tax from Form 8960 and the tax from Form 4970, Tax on Accumulation Distribution of Trusts. It does not include any refundable portions of these credits.
Source: IRS, Statistics of Income, ”Individual Income Rates and Tax Shares.”
High-Income Taxpayers Paid the Highest Average Income Tax Rates
In 2019, taxpayers with higher incomes paid much higher average income tax rates than lower-income taxpayers.
The bottom 50 percent of taxpayers (taxpayers with AGI below $44,269) faced an average income tax rate of 3.5 percent. As household income increases, average income tax rates rise. For example, taxpayers with AGI between the top 10th and 5th percentiles ($154,589 and $221,572) paid an average income tax rate of 13.3 percent—3.8 times the rate paid by taxpayers in the bottom 50 percent.
The top 1 percent of taxpayers (AGI of $546,434 and above) paid the highest effective income tax rate of 25.6 percent—more than seven times the rate faced by the bottom 50 percent of taxpayers.
Readers should note the IRS dataset excludes the refundable portion of tax credits such as the earned income tax credit, which means the IRS data overstates the tax rate paid by taxpayers at the bottom.
High-Income Taxpayers Paid the Majority of Federal Income Taxes
In 2019, the bottom 50 percent of taxpayers (taxpayers with AGI below $44,269) earned 11.5 percent of total AGI and paid 3.1 percent ($48.4 billion) of all federal individual income taxes.
The top 1 percent (taxpayers with AGI of $546,434 and above) earned 20.1 percent of total AGI in 2019 and paid 38.8 percent of all federal income taxes.
In 2019, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $612 billion in income taxes while the bottom 90 percent paid $461 billion in income taxes.
Readers should note the IRS dataset does not account for the refundable portion of tax credits such as the earned income tax credit. If the refundable portion were included, the tax share of the top income groups would be higher than what is reported here. The refundable portion is classified as a spending program by the Office of Management and Budget (OMB) and therefore is not included by the IRS in tax share figures.
The share of income taxes paid by the top 1 percent increased from 33.2 percent in 2001 to 38.8 percent in 2019, down about 1.3 percentage points from a high of 40.1 percent in 2018. Over the same period, the share paid by the bottom 50 percent of taxpayers fell from 4.9 percent to just over 3 percent in 2019, up about a tenth of a percentage point from 2018.
Similarly, the share of adjusted gross income reported by the top 1 percent increased from 17.4 percent in 2001 to 20.1 percent in 2019. The AGI share of the top 1 percent fluctuates considerably over the business cycle, rising with expansions and falling with contractions to a greater extent than income reported by other groups. The share of AGI reported by the bottom 50 percent of taxpayers fell from 14.4 percent in 2001 to 11.5 percent in 2019.
The Tax Cuts and Jobs Act Reduced Average Tax Rates Across Income Groups
The 2019 filing season was the second filing season under the TCJA. The TCJA made many significant, but temporary, changes to the individual income tax code including lower tax rates, wider brackets, a larger standard deduction, and an expanded child tax credit. The net effect of all the changes was to lower tax burdens, on average, for taxpayers across all income levels.
In 2019, individual taxpayers paid $1.6 trillion in individual income taxes, $23 billion less than in 2017, even as adjusted gross income was $946 billion higher. Average tax rates were lower in 2019 than in 2017 across all income groups. Average rates for the bottom 50 percent fell from 4.05 percent in 2017 to 3.54 percent in 2019 and for the top 1 percent, from 26.76 percent to 25.57 percent.
By Erica York, an economist with Tax Foundation’s Center for Federal Tax Policy, posted on the Tax Foundation website. To read more, click here.