Recent Federal Income Tax

Income tax collections are highly dependent on the economy. In recent years the federal government has collected around 10 percent of GDP in federal income tax, but tax collections dip sharply in each recession: to 8.8 percent GDP in 1992, to 8.04 percent GDP in 2003; to 7.3 percent GDP in 2010.

Overall, the individual income tax collects about 80-85 percent of the total income tax take, and the corporate income tax collects about 15-20 percent of the take.

US Federal Income Tax Since 1900

The modern federal income tax began in 1913, and quickly collected nearly 5 percent of GDP in World War I, with the majority coming from the Corporate Income Tax.

In the 1920s and 1930s federal income tax collections declined to 2-3 percent of GDP, but in World War II shot up to 15 percent of GDP with the personal income tax collecting nearly 9 percent of GDP.

Since World War II the personal federal income tax has chugged along between 7 and 8 percent of GDP, with occasional departures up to 9 percent in the 1970s and 10 percent in the lates 1990s, and notable collapses in the 2000 and 2009 recessions.

Since World War II the corporate income tax has notably and steadily decreased as a percent of GDP, from 5 percent of GDP in the mid 1950s to 3.5 percent in the 1960s to 2.5 percent of GDP in the 1970s to 2.4 percent of GDP in the 1980s. In the Great Recession corporate income tax collections declined to one percent of GDP and have since recovered to over 1.5 percent of GDP.

Individual vs. Corporate Income Tax Shares

The federal income tax was initially paid only by corporations, but starting in World War I, it broke down about 50 percent between individuals and corporations.

After World War II, the corporate income tax share began to shrink, going below 40 percent share in 1950, 30 percent share in 1968, and 20 percent share in 1980. By 1983 at the bottom of a recession, corporate income tax was down to 11 percent of total income tax collections.

Since the mid 1980s, the corporate income tax has fluctuated along at about 20 percent of income tax collections.

Federal Income Tax Shares

Income Tax and the Top One Percent

Since the mid-1980s the top one percent of income tax filers has paid an increasing share of federal income tax, except during recessions.

Chart 3.32: The Top One Percent’s Share
of Federal Income Tax

The top one percent of income tax filers has seen its income increase from 11.3 percent to 22.8 percent of income reported to the IRS in the period from 1986 to 2007. But the share of federal income tax paid has increased from 25.8 percent of all individual income taxes in 1986 to a 40.1 percent share of the total in 2007.

When recessions hit, the rich earn less income and pay a smaller share of taxes. The income of the richest 1 percent dipped from 20.8 percent of reported income in 2000 to 17.5 percent in 2001, while their federal income tax payments dipped from 37.4 percent in 2000 to 33.4 percent in the recession year of 2002.

In the Great Recession of 2007-09, the top one percent share of income fell from 22.8 percent to 17.1 percent of reported income. Their income tax share fell from 40.1 percent to 36.5 percent.

In 2020 the income share of the top one percent was 22.2 percent. Their income tax share was 42.3 percent of total federal income tax collections.

See SOI Tax Stats - Individual Income Tax Rates and Tax Shares, SOI Bulletin article–Individual Income Tax Rates and Tax Shares Table 5 for 1986-2009 and Table 1 for 2001-2018. Descending Percentiles for 2001-2020. Ascending Percentiles for 2001-2020.

The Poor Pay Less

In good times and bad, the poor report less income and pay less federal income tax.

Chart 3.33: The Bottom Half’s Share
of Federal Income Tax

The lower half of income tax filers have reported a smaller and smaller share of income over the period 1986 to 2007. In 1986 they reported 16.7 percent of income reported to the IRS on their federal income tax forms; by 2007 this had shrunk to 12.2 percent. Income tax share declined by over 50 percent, from 6.5 percent share of total federal personal income tax paid in 1986 to 3.1 percent share of tax paid in 2007.

In the Great Recession of 2007-09 the share of federal income tax paid by the lower half has continued to decline. Income of the lower half declined to 7.40 percent of GDP in 2009 and federal income tax share declined to 2.25 percent of total collections.

In 2020 the income of the lower half was 11.6 percent of the whole and the federal income tax share was 2.9 percent of the whole.

See also here for more information on federal income tax rates and federal income tax shares.

 

Suggested Video: All About Income Tax

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Revenue Data Sources

Revenue data is from official government sources.

• Federal revenue data since 1962 comes from the president’s budget.
  
• All other revenue data comes from the US Census Bureau.

Gross Domestic Product data comes from US Bureau of Economic Analysis and measuringworth.com.

Detailed table of revenue data sources here.

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