2006 Tax Comparisons

The information below for tax year 2006 is from the Tax Foundation "Federal Individual Income Tax Data 07/18/08".
These tables are also available as an Excel workbook.

This page shows a scrolled version of the tables. You can also view a wide format version with no need to scroll.

2006 Tax Data Split Into Separate AGI Slices

(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)	(14)
Slice	Rank	Tax Returns (MM)	AGI Min	Total AGI (B)	Percent of AGI	Tax Paid   (B)	Tax Rate on AGI	Tax Rate Ratio	Tax Share	Slice	AGI Per Return	Tax Per Return	Tax Per Return Ratio
All	100%	135.7	$0	$8,122	100%	$1,024	13%	1.8	100%	All	$59,844	$7,543	2.3
1%	99%	1.4	388,806	1,792	22%	408	23%	3.3	40%	1%	1,320,289	300,893	92.8
4%	95%	5.4	153,542	1,186	15%	207	17%	2.5	20%	4%	218,434	38,187	11.8
5%	90%	6.8	108,904	865	11%	109	13%	1.8	11%	5%	127,532	16,071	5.0
15%	75%	20.4	64,702	1,693	21%	158	9%	1.3	15%	15%	83,147	7,781	2.4
25%	50%	33.9	31,987	1,570	19%	110	7%	1.0	11%	25%	46,265	3,243	1.0
50%	0%	67.9	0	1,016	13%	31	3%	0.43	3%	50%	14,979	450	0.14

This table reports data from the Internal Revenue Service about all tax returns showing positive AGI (Adjusted Gross Income) whether or not any tax was owed.

Each row is data for a "slice" of taxpayers. The usual IRS data reports averages for groups of taxpayers from the top (as shown in the table far below). The IRS data reports on the top 1% 5% 10% 25% 50% and All returns. I split out each slice by computing the difference between groups.

This presentation makes it easy to compare your situation to your "tax neighbors". Are their taxes fair? Should they pay so much less or more than you do?

Read more ...

The first row is for all returns averaged together. The last row reports the 50% of tax returns with the lowest AGI's. The row "25%" reports the next one-quarter of tax returns having higher AGI's. The next higher rows report the one-quarter of tax returns with the highest AGI's.

The "25% row in yellow is the one I use for overall comparison. It is the "middle class" slice, the second one-quarter of returns from the top.

Column (10) "Tax Share" is the one usually quoted in articles. The top 1% of taxpayers paid 40% of the income tax in 2006. The top 10% paid altogether 71% of the tax, amounting to $725 billion.

Compare this to the additional $4-6 trillion in borrowings that the Obama administration wants to spend. That additional spending is 6-8 times as much as the total tax paid by the upper 10% of taxpayers. So, who is going to pay for that additional spending?

A middle class taxpayer with $46,300 of AGI paid about $3,300 in federal tax. $4-6 trillion in extra spending, spread out in proportion among all taxpayers, would require a payment of $13,000 to $20,000 from that person, being 28-42% of one year's AGI.

An upper class taxpayer at the 90% rank now pays 13% of AGI in tax. He would have to pay 52-78% of one year's AGI to pay for the increased spending, if spread in proportion among taxpayers.

Column (9) "Tax Rate Ratio" compares your effective tax rate to your tax neighbor. The middle class, yellow row is set as the standard (set to 1.0), paying 7% of AGI as tax. Note that this is the "whole" rate, 7% of total AGI. It is not the "marginal" rate that is quoted in the tax tables in tax return instructions.

The average tax on the first 50% is a whole rate of 3% on AGI, a .43 fraction of the rate paid by the middle class slice. Someone earning about $130,000 paid a whole tax rate of 13%, which is 1.8 times the rate paid by the middle class slice.

From the Tax Foundation link, 43 million tax returns had exemptions, deductions, and tax credits resulting in zero tax. Some even received money back from the IRS for the Earned Income Tax Credit (and other credits), which are not included in the IRS data. These returns are part of the lowest 50%, but are not split out because they are not separately reported.

Legend:

  (1)  Slice - Groups of taxpayers according to AGI (Adjusted Gross Income). AGI is total income less deductions for such as IRA contributions, and moving and business expenses. You get Taxable Income when you subtract deductions, allowances for dependents, and qualified expenses (eg. child care).

  (2)  Rank - Where each row ranks according to AGI. The yellow row represents 25% of all individual tax returns, and sits above 50% of all tax returns.

  (3)  Tax Returns (MM) - The millions of tax returns in the slice, 33.2 million returns in the yellow slice.

  (4)  AGI Min - The minimum AGI for returns in this slice. Returns in the yellow slice have AGI between $30,881 and the next higher slice ($62,068).

  (5)  Total AGI (B) - All AGI reported in this slice.

  (6)  Percent of AGI - (Slice AGI)/(Total AGI). The percent of AGI contained in this slice. Note that the slices are not equally wide and have different AGI's, so these numbers don't relate easily to each other.

  (7)  Tax Paid (B) - Total tax paid for this slice, in billions.

  (8)  Tax Rate on AGI - (Col 7)/(Col 5). Tax paid as a percent of AGI.

  (9)  Tax Rate Ratio - The effective tax rate for this slice compared to the 7% tax rate for the "middle class" yellow slice. For example, the value 1.8 for the "5%" row says that those people are paying tax at a rate that is 1.8 times the rate for the "middle class". The ratio is 1.0 in the yellow row because we are comparing this row to itself.

(10)  Tax Share - The percent of total tax collections paid by this slice.

(11)  Slice - Repeats (Col 1) for convenience in reading the table.

(12)  AGI Per Return - The average AGI reported for each return in the slice.

(13)  Tax Per Return - The average tax paid for each return in the slice.

(14)  Tax Per Return Ratio - This compares the amount of tax paid by an average individual in each slice, to the average "middle class" return in the yellow row.

 

2006 Tax Data by Upper AGI Groups

(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)
Group		Tax Returns (MM)	AGI Min	Total AGI (B)	Percent of AGI	Tax Paid   (B)	Tax Rate on AGI	Tax Rate Ratio	Tax Share	Group	AGI Per Return	Tax Per Return
All		135.7	$0	$8,122	100%	$1,024	13%	0.9	100%	All	$59,844	$7,543
Top   1%		1.4	388,806	1,792	22%	408	23%	1.6	40%	Top   1%	1,320,289	300,893
5%		6.8	153,542	2,978	37%	616	21%	1.5	60%	5%	438,805	90,729
10%		13.6	108,904	3,843	47%	725	19%	1.3	71%	10%	283,169	53,400
25%		33.9	64,702	5,536	68%	883	16%	1.1	86%	25%	163,155	26,029
50%		67.9	31,987	7,106	87%	993	14%	1.0	97%	50%	104,710	14,636
Low 50%		67.9	0	1,016	13%	31	3%	0.22	3%	Low 50%	14,979	450

This table gives Federal income tax statistics in the usual way, reporting on groups from the top by AGI. For example, column (11) in yellow reports that the top 1% of tax returns collectively paid 40% of all Federal income tax, and the top 5% collectively paid 60%.

This gives a good idea of what is happening to the top 1% or 5%, but it averages together what is happening to the lower groups. This data is recomputed to give the first table above, "2006 Tax Data Split Into Separate AGI Slices".