NTU Foundation’s popular Who Pays Income Taxes page shows the distribution of the income tax burden by income percentile. The historical data, dating back to 1980, illustrates how the Tax Code has grown increasingly progressive, with a small share of earners paying the bulk of the income tax burden. The wealthiest one percent of earners shoulder 37 percent of all income taxes, an amount that is nearly double their adjusted gross income share. There are also a significant number of tax returns that show no income tax liability. The latest data available shows that 33.4 percent of returns in Tax Year 2016 paid no income tax, a slight decrease from 34.2 percent in 2015.
Income tax rates are designed to shield low-income workers from significant tax burdens. Thus, the number of nontaxable returns is in part indicative of the state of the economy. As the economy has slowly recovered and unemployment decreased, the number of taxable returns has gradually increased.
The number of nontaxable returns is also reflective of the number of exclusions and credits available to eligible filers. The Fiscal Year 2017 Budget listed 196 “tax expenditures” related to individual and business tax income, up from the 128 tax expenditures listed in the FY 1980 historical budget book. On the individual side of the tax code, these include social welfare tax credits. The corporate income side includes carve outs for certain industries through credits. There are also provisions across the code to encourage savings and investment. While these tax credits provide targeted relief to eligible taxpayers (in lieu of a flatter tax with lower overall rates), they also contribute to the complexity and compliance burdens of the Tax Code.
|All Returns||Total Returns||Taxable Returns||Nontaxable Returns||Percentage of Nontaxable Returns|
|2016||All Returns||Joint Return & Surviving Spouses||Joint Return||Filing Separately||Head of Household||Individual Returns||Surviving Spouses|
|Percentage of Non-Paying Returns||33.4%||23.31%||N/A||18.73%||65.57%||31.96%||N/A|
Want to learn more? Check out our Tax Basics page for more statistical insight.