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Average Federal Tax Rates in 2007 1 (June 2010)

handle is hein.congrec/cbo10368 and id is 1 raw text is: Average Federal Tax Rates in 2007 June 2010 The accompanying tables update annual estimates by the Congressional Budget Office (CBO) of average tax rates-that is, households' tax liability divided by their income- and compare those estimates for 2007 with estimates from 2006. This report's tables show average tax rates for various income categories for the four largest sources of federal revenue-individual income taxes, social insurance (payroll) taxes, corporate income taxes, and excise taxes-and for the four taxes combined. The tables also present average before-tax and after-tax household income; the number of households in each income category; and shares of taxes, income, and households for each fifth (quintile) of the income distribution and for the top 10 percent, 5 percent, and 1 percent of households. A page on CBO's Web site, Average Federa Taxes by Income Group, includes publications on this topic, CBO's estimates of average federal tax rates for the years 1979 to 2007, and other information on household income and taxes. Estimates for 2007 In 2007, the overall average federal tax rate was 20.4 percent (see Table 1). Individual income taxes, the largest component, were 9.3 percent of household income. Social insurance taxes (also called payroll taxes) were the next-largest source, with an average rate of 7.4 percent. Corporate income taxes and excise taxes were smaller, with average tax rates of 3.0 percent and 0.6 percent, respectively. The federal tax system is progressive-that is, average tax rates generally rise with income. Households in the bottom fifth of the income distribution paid 4.0 percent of their income in federal taxes, the middle quintile paid 14.3 percent, and the highest quintile paid 25.1 percent. Average rates continued to rise within the top quintile: The top 1 percent faced an average rate of 29.5 percent. Higher-income groups earn a disproportionate share of pretax income and pay a disproportionate share of federal taxes. In 2007, the highest quintile earned 55.9 percent of pretax income and paid 68.9 percent of federal taxes; the top 1 percent of households earned 19.4 percent of income and paid 28.1 percent of taxes. The share of taxes paid by high-income groups exceeded their share of income because average tax rates rise with income. In all other quintiles, the share of federal taxes was less than the income share. The bottom quintile earned 4.0 percent of income and paid 0.8 percent of taxes, and the middle quintile earned 13.1 percent of income and paid 9.2 percent of taxes.

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