电话：010-85195300
E-mail：cassoa@cass.org.cn
地址：中国北京建国门内大街5号中国社会科学院1#楼
扫一扫关注微信
国家哲学社会科学文献中心版权所有
1997 Ad
David CampbellTaxpayers filed 122.4 million Individual Income Tax Returns for Tax Year 1997, of which more than 76 percent showed an income tax liability. Despite the introduction of lower capital gains rates for 1997, the average tax rate on taxable returns increased for the sixth consecutive year. The rate reached 15.3 percent for 1997, the highest level since 1986. The average adjusted gross income (less deficit) (AGI) rose to $50,980, a 6.8-percent increase from 1996. Over the same period, average total income tax increased 8.1 percent to $7,824. Total AGI increased 9.7 percent to $4,765.2 billion for 1997, while total income tax over the same period increased 11.1 percent to $731.3 billion.
The percent of AGI reported by the top 5 percent of taxpayers increased for the fourth consecutive year, reaching 31.8 percent for 1997. The top 5 percent of taxpayers also reported 51.9 percent of the total income tax for 1997, an increase of almost 1 percentage point over 1996. An AGI of at least $108,048 placed an individual in the top 5 percent of taxpayers, while an AGI of at least $250,736 included an individual in the top 1 percent of taxpayers. The percent of AGI reported by the top 1 percent of taxpayers for 1997 increased for the fourth consecutive year to 17.4 percent, while the same group accounted for 33.2 percent of the total income tax.
The capital gain tax rate was changed midway through 1997, from a uniform maximum rate of 28 percent on long-term capital gains to varying rates of either 10 percent, 20 percent, 25 percent, 28 percent, or a combination of these rates, depending on the type of asset, dates it was bought and sold, and (in the case of the 10-percent rate) the taxpayer's marginal income tax rate (tax bracket). (See Appendix C: Changes in Law for 1997 for an explanation of the new capital gain rates.) The amount of capital gains reported by taxpayers increased 41.4 percent for 1997, and, in turn, tax generated from capital gains increased 35.5 percent to $63.8 billion for 1997. However, if all capital gains had been taxed as ordinary income for 1997, the tax generated from capital gains would have been $35.6 billion higher compared to 15.9 billion for 1996. Due to these lower capital gain rates, taxpayers with AGI's of $1 million or more actually paid taxes at a lower average rate (28.8 percent) than taxpayers reporting between $500,000 and $1 million of AGI (29.1 percent).
This article discusses the individual income tax rates and tax shares and the computation of "total income tax" for 1997. To put this discussion into perspective, the appendices to the article provide explanations of selected terms used for the article and describe the income tax structure, certain tax law changes ("The Taxpayer Relief Act of 1997"), income and tax concepts (the "1979 Income Tax Concept," "modified" taxable income, and marginal tax rates), the computation of "alternative minimum taxable income," and the data sources and limitations.
Income Tax Rates
Discussions of income tax rates generally center on measuring two distinct tax rates: average tax rates and marginal tax rates. Average tax rates are calculated by dividing some measure of tax by some measure of income. For the statistics in this article, the average tax rate is "total income tax" (the sum of "income tax after credits" and the "alternative minimum tax") divided by AGI reported on returns showing some income tax liability. Measures of marginal tax rates, on the other hand, focus on determining the tax rate imposed on the last (or next) dollar of income received by a taxpayer. For this article, the marginal tax rate is the statutory rate at which the last dollar of taxable income is taxed. (See Appendix D for a more detailed explanation of marginal tax rates.) The following sections describe the measurement of the average and marginal tax rates in more detail and discuss the statistics based on these rates for 1997.
Average Tax Rates
Figure A presents statistics for 1986 through 1997 on income (based on each year's definition of AGI and on the common 1979 Income Concept) and taxes reported. (See Appendix D for an explanation of the 1979 Income Concept.) These tax years can be partitioned into six distinct subperiods:
(1) Tax Year 1986 was the last year under the Economic Recovery Tax Act of 1981 (ERTA81). The tax bracket boundaries, personal exemptions, and standard deductions were indexed for inflation, and the maximum tax rate was 50 percent,
(2) Tax Year 1987 was the first year under the Tax Reform Act of 1986 (TRA86). During 1987, a 1-year, transitional, five-rate tax bracket structure was established with a partial phase-in of new provisions that broadened the definition of AGI. The maximum tax rate was 38.5 percent.
(3) During Tax Years 1988 through 1990, there was effectively a three-rate tax bracket structure [1]. The phase-in of the provisions of TRA86 continued with a maximum tax rate of 33 percent.
(4) Tax Years 1991 and 1992 brought a three-rate tax bracket structure (with a maximum tax rate of 31 percent), a limitation on some itemized deductions, and a phaseout of personal exemptions.
(5) Tax Years 1993 through 1996 had a five-rate tax bracket structure (with a maximum statutory tax rate of 39.6 percent), a limitation on some itemized deductions, and a phaseout of personal exemptions.
(6) Tax Year 1997 was the first year under the Taxpayer Relief Act of 1997 (TRA97). TRA97 added three new capital gain tax rates to the previous rate structure to form a new eight-rate tax bracket structure (with maximum statutory tax rate of 39.6 percent). (See Appendix C for more detailed description of the new capital gains rates)
Figure A
Adjusted Gross Income, Total Income Tax, Average Tax Rate, and Average Total Income Tax, Tax Years 1986-1997
[Money amounts are in billions of dollars, except where indicated]
Taxable returns
Tax Total number Number of As a
year of returns returns percentage of
total returns(1)
Using each tax year's adjusted gross income
(1) (2) (3)
1986 103,045,170 83,967,413 81.5
1987 106,996,270 86,723,796 81.1
1988 109,708,280 87,135,332 79.4
1989 112,135,673 89,178,355 79.5
1990 113,717,138 89,862,434 79.0
1991 114,730,123 88,733,587 77.3
1992 113,604,503 86,731,946 76.3
1993 114,601,819 86,435,367 75.4
1994 115,943,131 87,619,446 75.6
1995 118,218,327 89,252,989 75.5
1996 120,351,208 90,929,350 75.6
1997 122,421,991 93,471,200 76.4
Using 1979 Income Concept(5)
1986 103,045,170 83,967,413 81.5
1987 106,996,270 86,723,796 81.1
1988 109,708,280 87,135,332 79.4
1989 112,135,673 89,178,355 79.5
1990 113,717,138 89,862,434 79.0
1991 114,730,123 88,733,587 77.3
1992 113,604,503 86,731,946 76.3
1993 114,601,819 86,435,367 75.4
1994 115,943,131 87,619,446 75.6
1995 118,218,327 89;252,989 75.5
1996 120,351,208 90,929,350 75.6
1997 122,421,991 93,471,200 76.4
Taxable returns
Tax Adjusted Total Average
year gross income income tax rate
(less deficit) tax (percent)(2,3)
(4) (5) (6)
Using each tax year's adjusted gross income
1986 2,440 367 15.1
1987 2,701 369 13.7
1988 2,990 413 13.8
1989 3,158 433 13.7
1990 3,299 447 13.6
1991 3,337 448 13.4
1992 3,484 476 13.7
1993 3,564 503 14.1
1994 3,737 535 14.3
1995 4,008 588 14.7
1996 4,342 658 15.2
1997 4,765 731 15.3
Using 1979 Income Concept(5)
1986 2,703 367 13.6
1987 2,736 369 13.5
1988 3,011 413 13.7
1989 3,188 433 13.6
1990 3,335 447 13.4
1991 3,387 448 13.2
1992 3,553 476 13.4
1993 3,625 503 13.9
1994 3,796 535 14.1
1995 4,075 588 14.4
1996 4,418 658 14.9
1997 4,849 731 15.1
Taxable returns
Average per return (whole dollars)(3)
Current dollars Constant dollars(4)
Tax
year Adjusted Total Adjusted Total
gross income income gross income income
(less deficit) tax (less deficit) tax
(7) (8) (9) (10)
Using each tax year's adjusted gross income
1986 29,062 4,374 26,516 3,991
1987 31,142 4,257 27,414 3,747
1988 34,313 4,738 29,005 4,005
1989 35,415 4,855 28,560 3,915
1990 36,711 4,976 28,088 3,807
1991 37,603 5,054 27,609 3,711
1992 40,168 5,491 28,630 3,914
1993 41,233 5,817 28,535 4,026
1994 42,646 6,104 28,776 4,119
1995 44,901 6,593 29,463 4,326
1996 47,750 7,239 30,433 4,614
1997 50,980 7,824 31,763 4,875
Using 1979 Income Concept(5)
1986 32,194 4,374 29,374 3,991
1987 31,551 4,257 27,774 3,747
1988 34,556 4,738 29,210 4,005
1989 35,752 4,855 28,832 3,915
1990 37,108 4,976 28,392 3,807
1991 38,169 5,054 28,024 3,711
1992 40,964 5,491 29,198 3,914
1993 41,938 5,817 29,023 4,026
1994 43,322 6,104 29,232 4,119
1995 45,655 6,593 29,957 4,326
1996 48,582 7,239 30,964 4,614
1997 51,875 7,824 32,321 4,875
(1) Number of taxable returns (column 2) divided by total number of returns (column 1).
(2) Average tax rate is "total income tax" (column 5) as a percentage of adjusted gross income (AGI) less deficit (column 4).
(3) The average adjusted gross income (less deficit), average total income tax, and average tax rate were calculated from unrounded data.
(4) Constant dollars were calculated using the U.S. Bureau of Labor Statistics' consumer price index for urban consumers (CPI-U, 1982-84=100). See footnote 2 of this article for further details.
(5) These statistics are based on adjusted gross income (AGI) recomputed to reflect the 1979 Income Concept, thus enabling more valid comparisons to be made of the average tax rates among years. See Figure 1 for the components of the 1979 Income Concept. Changes in the definition of AGI among years render direct comparison of the unadjusted figures misleading. For additional information, see Statistics of Income--Individual Income Tax Returns, for 1986-1997.
Approximately 93.5 million, or 76.4 percent, of the 122.4 million individual returns filed for 1997 were "taxable returns." Total AGI for these returns increased 9.7 percent to $4,765 billion. Using the 1979 Income Concept, taxable returns showed total income of $4,849 billion, an increase of 9.8 percent from 1996. Taxpayers reported $731 billion in total income tax for 1997, approximately $73 billion (11.1 percent) more than for 1996. Thus, for 1997, the growth of total income tax exceeded the growth of AGI by 1.4 percentage points, less than half the 3.6-percentage point difference for 1996. The lessening of this gap between the growth rates of total income tax and AGI can be partially attributed to the reduction of the capital gain tax rate from 28 percent to 10, 20, or 25 percent in many cases.
Average AGI and average total income tax increased from 1996 to 1997, in both current and constant 1982-84 dollars [2]. Average AGI increased 6.8 percent to $50,980, while average tax increased 8.1 percent to $7,824. After adjusting for inflation, average AGI rose to $31,763, and average total income tax increased to $4,875 in constant dollars.
Because TRA86 reduced statutory tax rates and broadened the definition of AGI (by eliminating or limiting the preferential treatment of various tax items, such as restricting the use of "passive losses" to offset "non-passive income" and eliminating the beneficial tax treatment of net long-term capital gains), comparisons of average tax rates before and after 1986, based on current-year definitions of AGI, become less meaningful [3]. The 1979 Income Concept provides a more consistent basis for such comparisons. Based on the 1979 Income Concept, average tax rates declined 0.1 percentage point from 13.6 percent for 1986 to 13.5 percent for 1987, increased to 13.7 percent for 1988, and declined again for the next 3 years, until reaching 13.2 percent for 1991. The average tax rate rose to 13.4 percent for 1992, increased to 13.9 percent for 1993, and continued to increase to 15.1 percent for 1997.
As shown in Figure B, the average tax rate (as a percentage of AGI) on all taxable returns increased approximately 0.1 percentage point for 1997 to 15.3 percent, while the average tax rate for all of the AGI-size classes either remained unchanged or declined between 1996 and 1997. Thus, the higher overall average tax rate was due to more taxpayers moving to higher income-size classes with higher average tax rates. The increased number of taxpayers in the three highest AGI-size classes likely accounted for much of the higher average tax rate. The number of taxable returns reporting AGI of $200,000 or more increased 18.6 percent for 1997, whereas the total number of taxable returns increased 2.8 percent. Likewise, AGI on all taxable returns increased 9.7 percent, while on returns for taxpayers reporting AGI of $200,000 or more, it increased 24.6 percent. Total income tax for this group also rose 19.5 percent, while for all taxable returns, it increased 11.1 percent. The average tax rate increased progressively with each AGI size class except for those taxpayers in the "$1,000,000 or more" income-size class, whose average tax rate (28.8 percent) was actually 0.3 percentage points less than those taxpayers in the "$500,000 under $1,000,000" income-size class (29.1 percent).
Figure B
Taxable Returns: Number of Returns, Adjusted Gross Income, and Total Income Tax, by Size of Adjusted Gross Income, Tax Years 1996 and 1997
[Number of returns is in thousands--money amounts are in millions of dollars]
Size adjusted gross income
$1
Under under
Tax year, item Total $1(1) $10,000
(1) (2) (3)
Tax Year 1997:
Number of taxable returns 93,471 6 9,994
Adjusted gross income
(less deficit) 4,765,197 -6,969 59,448
Total income tax 731,321 111 2,525
Average tax rate (percent) 15.3 (2) 4.2
Tax Year 1996:
Number of taxable returns 90,929 4 10,044
Adjusted gross income
(less deficit) 4,341,871 -7,737 60,205
Total income tax 658,245 121 2,501
Average tax rate (percent) 15.2 (2) 4.2
Increase in average tax rates,
1997 over 1996 0.1 (3) --
Size adjusted gross income
$10,000 $20,000 $30,000
under under under
Tax year, item $20,000 $30,000 $50,000
(4) (5) (6)
Tax Year 1997:
Number of taxable returns 15,722 16,357 22,620
Adjusted gross income
(less deficit) 235,780 407,092 882,808
Total income tax 15,779 33,662 89,793
Average tax rate (percent) 6.7 8.3 10.2
Tax Year 1996:
Number of taxable returns 16,277 16,417 21,961
Adjusted gross income
(less deficit) 245,462 408,100 858,369
Total income tax 16,859 33,875 68,649
Average tax rate (percent) 6.9 8.3 10.3
Increase in average tax rates,
1997 over 1996 -0.2 -- -0.1
Size adjusted gross income
$50,000 $100,000 $200,000
under under under
Tax year, item $100,000 $200,000 $500,000
(7) (8) (9)
Tax Year 1997:
Number of taxable returns 21,592 5,374 1,401
Adjusted gross income
(less deficit) 1,476,061 707,311 404,056
Total income tax 190,445 126,268 99,512
Average tax rate (percent) 12.9 17.9 24.6
Tax Year 1996:
Number of taxable returns 20,094 4,610 1,198
Adjusted gross income
(less deficit) 1,368,290 603,354 347,177
Total income tax 178,230 109,838 87,687
Average tax rate (percent) 13.0 18.2 25.3
Increase in average tax rates,
1997 over 1996 -0.1 -0.3 -0.7
Size adjusted gross income
$500,000 $1,000,000
under or
Tax year, item $1,000,000 more
(10) (11)
Tax Year 1997:
Number of taxable returns 262 144
Adjusted gross income
(less deficit) 176,547 423,065
Total income tax 51,291 121,936
Average tax rate (percent) 29.1 28.8
Tax Year 1996:
Number of taxable returns 214 111
Adjusted gross income
(less deficit) 144,695 313,957
Total income tax 43,530 96,956
Average tax rate (percent) 30.1 30.9
Increase in average tax rates,
1997 over 1996 -1.0 -2.1
(1) Includes returns with adjusted gross deficit. Tax in these returns represents some combination of alternative minimum tax, Form 4972 tax on lump-sum distributions from qualified retirement plans, and Form 8814 tax on a child's interest and dividends not reflected in adjusted gross income or taxable income.
(2) Percentage not computed.
(3) Increase not computed.
NOTE: Detail may not add to totals because of rounding.
Marginal Tax Rate Classifications
A return's marginal tax rate is the highest statutory tax rate bracket applicable to that tax return. Marginal tax rate statistics are presented in Figures C and D, and in Table 1. These statistics were based on individual income tax returns showing an amount for "tax generated" on taxable income and items of income that were subject to the regular income tax, generally those included in AGI [4]. Tables 2 and 3 contain additional data based on marginal tax rates. These tables present statistics on the income and tax generated at each marginal tax rate by size of AGI (Table 2) and by filing status (Table 3). Appendix D explains the details on the determination of the marginal tax rate bracket into which a return is assumed to fall.
Figure C
Returns with Modified Taxable Income: Tax Generated at All Rates on Returns with the Indicated Marginal Tax Rate, Tax Year 1997
[Money amounts are in thousands of dollars]
Number of returns
Number Percentage
Marginal tax
rate classes (1) (2)
All rates 99,217,292 100.0
10 percent 506,115 0.5
15 percent (Form 8814)(1) 13,927 (2)
15 percent 68,703,363 69.2
20 percent 897,974 0.9
25 percent 37,749 (2)
28 percent 20,125,622 20.3
28 percent (capital gains)(3) 3,695,872 3.7
31 percent 2,868,200 2.9
36 percent 1,169,742 1.2
396 percent 691,359 0.7
Form 8615(4) 507,367 0.5
Modified taxable income
Amount Percentage
Marginal tax
rate classes (3) (4)
All rates 3,429,576,155 100.0
10 percent 1,822,520 0.1
15 percent (Form 8814)(1) 10,417 (2)
15 percent 939,404,002 27.4
20 percent 82,106,281 2.4
25 percent 4,119,307 0.1
28 percent 998,563,003 29.1
28 percent (capital gains)(3) 248,694,887 7.3
31 percent 321,551,623 9.4
36 percent 249,769,289 7.3
396 percent 580,861,776 16.9
Form 8615(4) 2,673,050 0.1
Tax generated
Amount Percentage
Marginal tax
rate classes (5) (6)
All rates 738,816,216 100.0
10 percent 182,339 (2)
15 percent (Form 8814)(1) 1,566 (2)
15 percent 140,896,164 19.1
20 percent 15,649,877 2.1
25 percent 820,993 0.1
28 percent 189,013,768 25.6
28 percent (capital gains)(3) 50,498,743 6.8
31 percent 77,515,492 10.5
36 percent 68,609,227 9.3
396 percent 194,949,710 26.4
Form 8615(4) 678,337 0.1
(1) Form 8814 was filed for a dependent child under age 14 for whom the parents made an election to report the child's investment income (if it was from interest or dividends totaling between $500 and $6,500) on the parents' income tax return.
(2) Less than 0.05 percent.
(3) Returns with net long-term capital gains in excess of net short-term capital losses taxed at the 28-percent rate, which otherwise (based on ordinary income) would be taxed at a higher rate than 28 percent.
(4) Form 8615 was filed for a child under age 14 to report the child's investment income in excess of $1,300. The returns in this rate classification are not distributed by tax rate.
NOTES: Detail may not add to totals because of rounding. See Appendix A for an explanation of "tax generated" and Appendix D for an explanation of "modified taxable income."
[Figure D ILLUSTRATION OMITTED]
Table 1.--Returns with Modified Taxable Income: Tax Classified by Marginal Tax Rate, Tax Year 1997
[All figures are estimates based on samples--money amounts are in thousands of dollars]
Adjusted
Highest marginal rate Number of gross
at which tax was computed returns income
(less deficit)
(1) (2)
All returns
Total 99,217,292 4,868,199,362
10 percent 506,115 7,354,401
15 percent (Form 8814)(1) 13,927 -21,054
15 percent 68,703,363 1,754,291,826
20 percent 897,974 106,168,591
25 percent 37,749 5,139,670
28 percent 20,125,622 1,343,619,282
26 percent (capital
gains)(2) 3,695,872 320,060,814
31 percent 2,868,200 394,983,806
36 percent 1,169,742 291,682,151
39.6 percent 691,359 641,810,735
Form 8615(3) 507,367 3,109,139
Joint returns and returns
of surviving spouses
Total 43,515,577 3,304,812,528
10 percent 155,271 4,049,506
15 percent (Form 8814)(1) 7,027 -87,725
15 percent 25,743,008 984,870,246
20 percent 515,262 74,787,378
25 percent 27,490 3,949,781
28 percent 11,381,599 934,616,453
28 percent (capital
gains)(2) 2,509,495 248,375,301
31 percent 1,657,949 271,431,497
36 percent 928,047 239,748,194
39.6 percent 590,431 543,071,897
Form 8615(3) -- --
Returns of married
persons filing separately
Total 2,287,343 91,354,525
10 percent (*)7,021 (*)133,899
15 percent (Form 8814)(1) (**) (**)
15 percent 1,364,774 26,243,372
20 percent 11,133 1,937,171
25 percent (**) (**)
28 percent 694,826 28,418,597
28 percent (capital
gains)(2) 55,298 3,302,765
31 percent 102,654 8,025,771
36 percent 30,046 4,255,201
39.6 percent 21,536 18,964,397
Form 8615(3) (**) (**)
Returns of heads
of households
Total 11,014,994 334,534,651
10 percent 20,433 466,534
15 percent (Form 8814)(1) (*)6,890 (*)72,175
15 percent 9,755,629 236,296,458
20 percent 40,738 3,767,560
25 percent (*)715 (*)149,955
28 percent 994,101 61,925,594
28 percent (capital
gains)(2) 106,803 7,681,698
31 percent 44,561 6,578,958
36 percent 32,328 7,232,828
39.6 percent 12,796 10,362,893
Form 8615(3) -- --
Returns of single persons
Total 42,399,377 1,137,497,657
10 percent 323,390 2,704,462
15 percent (Form 8814)(1) (**) (**)
15 percent 31,839,952 506,881,750
20 percent 330,841 25,676,483
25 percent 9,491 959,135
28 percent 7,055,096 318,658,638
28 percent (capital
gains)(2) 1,024,276 60,701,050
31 percent 1,063,037 108,947,580
36 percent 179,322 40,445,929
39.6 percent 66,596 69,411,548
Form 8615(3) 507,367 3,109,139
Modified taxable income
Highest marginal rate Taxed at Taxed at
at which tax was computed all rates marginal
rate
(3) (4)
All returns
Total 3,429,576,155 1,653,463,053
10 percent 1,822,520 1,821,147
15 percent (Form 8814)(1) 10,417 10,417
15 percent 939,404,002 925,337,331
20 percent 82,106,281 37,950,321
25 percent 4,119,307 931,245
28 percent 998,563,003 269,959,959
26 percent (capital
gains)(2) 248,694,887 17,995,548
31 percent 321,551,623 55,728,162
36 percent 249,769,289 50,629,474
39.6 percent 580,861,776 290,762,893
Form 8615(3) 2,673,050 2,336,555
Joint returns and returns
of surviving spouses
Total 2,376,104,562 1,061,734,521
10 percent 967,990 966,623
15 percent (Form 8814)(1) 4,538 4,538
15 percent 526,703,146 518,611,906
20 percent 58,173,746 27,045,080
25 percent 3,152,281 666,134
28 percent 680,974,125 182,702,693
28 percent (capital
gains)(2) 191,214,615 12,959,759
31 percent 218,526,315 34,176,185
36 percent 204,721,548 40,564,346
39.6 percent 491,666,257 244,037,257
Form 8615(3) -- --
Returns of married
persons filing separately
Total 67,955,412 34,761,478
10 percent (*)13,198 (*)13,198
15 percent (Form 8814)(1) (**) (**)
15 percent 15,043,469 14,872,166
20 percent 1,442,830 919,749
25 percent (**) (**)
28 percent 21,502,897 6,842,119
28 percent (capital
gains)(2) 2,632,737 341,582
31 percent 6,565,295 1,064,827
36 percent 3,636,992 805,780
39.6 percent 17,045,926 9,886,238
Form 8615(3) (**) (**)
Returns of heads
of households
Total 183,320,652 127,444,666
10 percent 80,629 80,629
15 percent (Form 8814)(1) (*)5,873 (*)5,873
15 percent 107,539,087 106,972,777
20 percent 2,927,128 1,306,575
25 percent (*)135,985 (*)62,120
28 percent 45,817,189 11,602,100
28 percent (capital
gains)(2) 5,910,333 376,914
31 percent 5,300,228 991,707
36 percent 6,186,994 1,297,416
39.6 percent 9,417,205 4,748,554
Form 8615(3) -- --
Returns of single persons
Total 802,195,529 429,522,387
10 percent 760,703 760,697
15 percent (Form 8814)(1) (**) (**)
15 percent 290,118,300 284,880,482
20 percent 19,562,576 8,678,917
25 percent 758,974 187,171
28 percent 250,268,792 68,813,047
28 percent (capital
gains)(2) 48,937,201 4,317,293
31 percent 91,159,785 19,495,444
36 percent 35,223,754 7,961,932
39.6 percent 62,732,388 32,090,843
Form 8615(3) 2,673,050 2,336,555
Tax generated
Highest marginal rate At
at which tax was computed At all rates marginal
rate
(5) (6)
All returns
Total 738,816,216 378,712,678
10 percent 182,339 182,115
15 percent (Form 8814)(1) 1,566 1,566
15 percent 140,896,164 138,800,600
20 percent 15,649,877 7,590,064
25 percent 820,993 232,811
28 percent 189,013,768 75,588,789
26 percent (capital
gains)(2) 50,498,743 5,038,753
31 percent 77,515,492 17,275,730
36 percent 68,609,227 18,226,611
39.6 percent 194,949,710 115,142,106
Form 8615(3) 678,337 633,533
Joint returns and returns
of surviving spouses
Total 531,708,220 260,086,703
10 percent 96,874 96,662
15 percent (Form 8814)(1) 683 683
15 percent 79,056,569 77,791,786
20 percent 11,179,383 5,409,016
25 percent 624,844 166,533
28 percent 129,087,058 51,156,754
28 percent (capital
gains)(2) 38,804,021 3,628,733
31 percent 52,341,881 10,594,617
36 percent 55,866,072 14,603,165
39.6 percent 164,650,836 96,638,754
Form 8615(3) -- --
Returns of married
persons filing separately
Total 15,623,648 8,966,613
10 percent (*)1,319 (*)1,320
15 percent (Form 8814)(1) (**) (**)
15 percent 2,270,136 2,230,825
20 percent 298,266 183,950
25 percent (**) (**)
28 percent 4,149,113 1,915,793
28 percent (capital
gains)(2) 554,830 95,643
31 percent 1,577,892 330,096
36 percent 994,959 290,081
39.6 percent 5,761,852 3,914,950
Form 8615(3) (**) (**)
Returns of heads
of households
Total 32,590,675 22,340,758
10 percent 8,066 8,063
15 percent (Form 8814)(1) (*)883 (*)883
15 percent 16,104,774 16,045,917
20 percent 525,631 261,315
25 percent (*)29,276 (*)15,530
28 percent 8,522,231 3,248,588
28 percent (capital
gains)(2) 1,158,848 105,536
31 percent 1,292,321 307,429
36 percent 1,724,327 467,070
39.6 percent 3,224,318 1,880,427
Form 8615(3) -- --
Returns of single persons
Total 158,893,672 87,318,605
10 percent 76,080 76,070
15 percent (Form 8814)(1) (**) (**)
15 percent 43,464,685 42,732,072
20 percent 3,646,597 1,735,783
25 percent 151,592 46,793
28 percent 47,255,366 19,267,653
28 percent (capital
gains)(2) 9,981,044 1,208,842
31 percent 22,303,398 6,043,588
36 percent 10,023,869 2,866,296
39.6 percent 21,312,705 12,707,974
Form 8615(3) 678,337 633,533
Income tax after credits
As a percentage of--
Adjusted Modified
Highest marginal rate gross taxable
at which tax was computed Total income income
(less
deficit)
(7) (8) (9)
All returns
Total 727,274,473 14.9 21.2
10 percent 177,181 2.4 9.7
15 percent (Form 8814)(1) 785 (X) 7.5
15 percent 135,190,939 7.7 14.4
20 percent 15,524,206 14.6 18.9
25 percent 814,087 15.8 19.8
28 percent 188,365,274 14.0 18.9
26 percent (capital
gains)(2) 50,212,031 15.7 20.2
31 percent 76,887,208 19.5 23.9
36 percent 67,804,437 23.2 27.1
39.6 percent 191,633,734 29.9 33.0
Form 8615(3) 664,593 21.4 24.9
Joint returns and returns
of surviving spouses
Total 525,326,904 15.9 22.1
10 percent 93,533 2.3 9.7
15 percent (Form 8814)(1) 360 (X) 7.9
15 percent 77,139,566 7.8 14.6
20 percent 11,083,127 14.8 19.1
25 percent 618,928 15.7 19.6
28 percent 128,627,472 13.8 18.9
28 percent (capital
gains)(2) 38,560,947 15.5 20.2
31 percent 51,881,581 19.1 23.7
36 percent 55,253,242 23.0 27.0
39.6 percent 162,068,147 29.8 33.0
Form 8615 3 -- (X) (X)
Returns of married
persons filing separately
Total 15,352,208 16.8 22.6
10 percent (*)1,319 (*)1.0 (*)10.0
15 percent (Form 8814)(1) (**) (X) (X)
15 percent 2,242,921 8.5 14.9
20 percent 296,072 15.3 20.5
25 percent (**) (X) (X)
28 percent 4,137,376 14.6 19.2
28 percent (capital
gains)(2) 550,189 16.7 20.9
31 percent 1,561,886 19.5 23.8
36 percent 992,626 23.3 27.3
39.6 percent 5,554,921 29.3 32.6
Form 8615(3) (**) (X) (X)
Returns of heads
of households
Total 28,989,345 8.7 15.8
10 percent 7,439 1.6 9.2
15 percent (Form 8814)(1) (*)424 (*)0.6 (*)7.2
15 percent 12,690,726 5.4 11.8
20 percent 522,188 13.9 17.8
25 percent (*)29,276 19.5 21.5
28 percent 8,436,230 13.6 18.4
28 percent (capital
gains)(2) 1,151,634 15.0 19.5
31 percent 1,287,805 19.6 24.3
36 percent 1,690,716 23.4 27.3
39.6 percent 3,172,906 30.6 33.7
Form 8615(3) -- (X) (X)
Returns of single persons
Total 157,606,017 13.9 19.6
10 percent 74,890 2.8 9.8
15 percent (Form 8814)(1) (**) (X) (X)
15 percent 43,117,726 8.5 14.9
20 percent 3,622,818 14.1 18.5
25 percent 150,986 15.7 19.9
28 percent 47,164,195 14.8 18.8
28 percent (capital
gains)(2) 9,949,261 16.4 20.3
31 percent 22,155,935 20.3 24.3
36 percent 9,867,852 24.4 28.0
39.6 percent 20,837,761 30.0 33.2
Form 8615(3) 664,593 21.4 24.9
(*) Estimate should be used with caution due to the small number of sample returns on which it is based.
(**) Data deleted to avoid disclosure of information for specific taxpayers. Deleted data are included in appropriate totals.
(1) Form 8814 was filed for a dependent child under age 14 for whom the parents made the election to report the child's investment income (if it was from interest or dividends totaling between $500 and $6,500) on the parents' income tax return. This rate classification is comprised of those returns with a tax liability only from the dependents' income.
(2) Returns with net long-term capital gains in excess of short-term capital losses taxed at the 28-percent rate.
(3) Form 8615 was filed for a child under age 14 to report the child's investment income in excess of $1,300. The returns in this rate classification are not distributed by tax rate.
(X) Percentage not computed.
NOTE: Detail may not add to totals because of rounding.
[TABULAR DATA 2 NOT REPRODUCIBLE IN ASCII]
Table 3.--Returns with Modified Taxable Income: Taxable Income, Total Tax, and Tax Classified by Marginal Tax Rate and by Filing Status, Tax Year 1997
[All figures are estimates based on samples--money amounts are in thousands of dollars]
All
returns
Marginal tax
rate classes Number Income Income tax
of taxed generated
returns at rate at rate
(1) (2) (3)
All tax rates 99,217,292 3,429,576,149 738,811,513
10 percent 6,907,742 17,771,867 1,777,187
15 percent (Form
8814)(1) 244,568 175,713 26,450
15 percent 98,555,961 1,944,874,703 291,731,205
20 percent 7,796,946 178,967,637 35,793,527
25 percent 246,106 4,905,399 1,226,350
28 percent 28,550,795 612,168,865 171,407,282
28 percent (capital
gains)(2) 5,917,203 89,203,768 24,977,055
31 percent 4,729,302 154,606,632 47,928,056
36 percent 1,861,101 133,802,118 48,168,763
39.6 percent 691,359 290,762,893 115,142,105
Form 8615(3) 507,367 2,336,555 633,533
Joint returns and
returns of surviving spouses
Marginal tax
rate classes Number Income Income tax
of taxed generated
returns at rate at rate
(4) (5) (6)
All tax rates 43,515,577 2,376,104,562 531,706,867
10 percent 3,092,420 10,232,839 1,023,284
15 percent (Form
8814)(1) 223,638 158,594 23,874
15 percent 43,332,095 1,240,426,423 186,063,963
20 percent 5,309,431 137,009,227 27,401,845
25 percent 173,315 3,775,925 943,981
28 percent 17,067,520 447,856,931 125,399,941
28 percent (capital
gains)(2) 4,025,557 68,239,841 19,107,156
31 percent 3,176,426 113,364,789 35,143,085
36 percent 1,518,478 111,002,735 39,960,985
39.6 percent 590,431 244,037,257 96,638,754
Form 8615(3) -- -- --
Returns of married
persons filing separately
Marginal tax
rate classes Number Income Income tax
of taxed generated
returns at rate at rate
(7) (8) (9)
All tax rates 2,287,343 67,955,412 15,623,607
10 percent 52,341 107,919 10,792
15 percent (Form
8814)(1) 3,194 2,191 330
15 percent 2,279,396 33,686,019 5,052,903
20 percent 116,686 4,858,742 971,748
25 percent 4,151 88,323 22,081
28 percent 904,360 12,263,851 3,433,878
28 percent (capital
gains)(2) 99,043 2,561,883 717,327
31 percent 154,236 2,409,830 747,047
36 percent 51,582 2,090,416 752,550
39.6 percent 21,536 9,886,238 3,914,950
Form 8615(3) -- -- --
Returns of head
of households
Marginal tax
rate classes Number Income Income tax
of taxed generated
returns at rate at rate
(10) (11) (12)
All tax rates 11,014,994 183,320,652 32,590,155
10 percent 350,928 922,117 92,212
15 percent (Form
8814)(1) 14,342 12,715 1,912
15 percent 10,986,092 147,401,655 22,110,248
20 percent 227,084 3,732,716 746,543
25 percent 3,862 102,693 25,673
28 percent 1,190,589 18,740,273 5,247,276
28 percent (capital
gains)(2) 145,540 1,286,081 360,103
31 percent 89,685 3,376,501 1,046,715
36 percent 245,918 17,711,620 6,376,183
39.6 percent 66,596 32,090,843 12,707,974
Form 8615(3) -- -- --
Returns of
single persons
Marginal tax
rate classes Number Income Income tax
of taxed generated
returns at rate at rate
(13) (14) (15)
All tax rates 42,399,377 802,195,523 156,890,884
10 percent 3,412,053 6,508,992 650,899
15 percent (Form
8814)(1) 3,394 2,212 334
15 percent 41,958,377 523,360,605 78,504,091
20 percent 2,143,745 33,366,953 6,673,391
25 percent 64,778 938,457 234,614
28 percent 9,388,327 133,307,810 37,326,187
28 percent (capital
gains)(2) 1,647,063 17,115,963 4,792,470
31 percent 1,308,955 35,455,512 10,991,209
36 percent 245,918 17,711,620 6,376,183
39.6 percent 66,596 32,090,843 12,707,974
Form 8615(3) 507,367 2,336,555 633,533
(1) Form 8814 was filed for a dependent child under age 14 for whom the parents made an election to report the child's investment income (if it was from interest or dividends totaling between $500 and $6,500) on the parents' income tax return. This rate classification is comprised of those returns with a tax liability only from the dependents' income.
(2) Returns with net long-term capital gains in excess of short-term capital losses taxed at the 28-percent rate.
(3) Form 8615 was filed for a child under age 14 to report the child's investment income in excess of $1,300. The returns in this rate classification are not distributed by tax rate.
NOTE: Detail may not add to totals because of rounding.
For 1997, the 99.2 million individual returns with modified taxable income totaling $3,429.6 billion generated more than $738.8 billion in income taxes. Figure C presents the amounts and percentages of modified taxable income and income tax generated (before reduction by tax credits, including the earned income credit) by the marginal rate categories (defined in Appendix D). Although 69.3 percent of the returns were in the "15-percent" and "15-percent (Form 8814)" marginal rate categories, they reported only 27.4 percent of the modified taxable income and generated 19.1 percent of the tax. Conversely, the 0.7 percent of returns in the "39.6-percent" classification reported 16.9 percent of the modified taxable income and generated 26.4 percent of the tax. The 24.0 percent of returns in the "28-percent" and "28-percent (capital gains)" categories reported 36.4 percent of the modified taxable income and 32.4 percent of the tax. Returns in the "31-percent" classification reported 9.4 percent of the modified income tax and 10.5 percent of the income tax, while returns in the "36-percent" classification showed 7.3 percent of the modified taxable income and 9.3 percent of the income tax. Other than capital gains, the remaining returns--those in the "Form 8615" category--reported 0.1 percent of the modified taxable income and 0.1 percent of the income tax generated.
The three new marginal rate classifications for 1997, "10 percent," "20 percent," and "25 percent," reported just 2.6 percent of the modified taxable income and 2.3 percent of the income tax. As shown in Table 2, the 7.9 percent of returns with modified taxable income taxed at "20 percent" reported 5.3 percent of the modified taxable income and 4.9 percent of the income tax. The 6.7 percent of returns (with modified taxable income) taxed at the "10-percent" rate accounted for only 0.5 percent of modified taxable income and 0.2 percent of income tax. The returns in the "25-percent" marginal rate classification accounted for only 0.3 percent of the total, while the modified taxable income and income tax reported on these returns were 0.1 percent and 0.2 percent of the aggregates, respectively. Including capital gain income tax at the 28-percent rate, income taxed at lower capital gain rates represented 8.5 percent of total modified taxable income. This income generated $63.8 billion for 1997, representing 9.7 percent of taxes. In contrast, for 1996, only 5.4 percent of modified taxable income was taxed at lower capital gain rates, generating $47.1 billion in taxes.
Figure D illustrates changes in the distribution of percentages of tax returns, modified taxable income, and income tax generated among various marginal tax rate classifications over Tax Years 1995, 1996, and 1997. Over the 3-year period, the percentage of returns in the "15-percent" marginal tax rate category decreased 2.2 percentage points, while the remaining four marginal tax rate categories either increased or remained the same. During this 3-year period, the largest changes in the percentage shares of modified taxable income and income tax generated occurred in the "15-percent," "28-percent," and "39.6-percent" categories. The percentage shares of modified taxable income declined 3.5 percentage points in both the "15-percent" and "28-percent" categories, while it increased 3.1 percentage points in the "39.6-percent" category. Similar to the changes in the percentage shares of modified taxable income, the percentage shares of income tax generated for the "15-percent" and "28-percent" categories decreased by 2.8 and 4.0 percentage points, respectively. The percentage share of income tax generated for the "39.6-percent" category increased 3.7 percentage points. The three new marginal tax rate categories for 1997, "10 percent," "20 percent," and "25 percent," did not have a significant impact on the distribution of returns, modified taxable income, or tax generated.
Components of Total Income Tax
Regular Tax
Regular tax is generally tax determined from a taxpayer's taxable income based on statutory tax rates less any applicable tax credits. It does not include the "alternative minimum tax" (AMT). Figure E illustrates the derivation of aggregate total income tax for 1997 returns with modified taxable income. Table 1 includes two tax amounts: "tax generated" and "income tax after credits." Tables 5 through 8 and Figures A and B include an additional measure of tax, "total income tax."
Figure E Derivation of 1997 Total Income Tax as Shown in Statistics of Income [Money amounts are in billions of dollars] Tax generated from tax rate schedules or tax table 738.8 PLUS: Tax on lump-sum distributions from qualified retirement plans 0.7 EQUALS: Income tax before credits 738.5 LESS: Tax credits, total 12.2 Child-care credit 2.5 Foreign tax credit 4.1 General business credit 0.8 Earned income credit (limited to the amount needed to reduce total income tax to zero) 3.8 Credit for prior-year minimum tax 0.7 Other credits(1) 0.3 EQUALS: Income tax after credits 727.3 PLUS: Alternative minimum tax 4.0 EQUALS: Total Income tax 731.3
(1) Includes the elderly or disabled credit, empowerment zone employment credit, mortgage interest credit, adoption credit, nonconventional source fuel credit, and other credits.
NOTE: Detail may not add to totals because of rounding.
Table 5.--Returns with Positive Adjusted Gross Income (AGI): Number of Returns, Shares of AGI and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates, by Selected Descending Cumulative Percentiles of Returns Based on Income Size Using the Definition of AGI for Each Year, Tax Years 1986-1997
[All figures are estimates based on samples]
Descending cumulative
percentiles
Item, tax year Total Top Top
1 percent 5 percent
(1) (2) (3)
Number of returns:(1)
1986 102,087,623 1,020,876 5,104,381
1987 106,154,761 1,061,548 5,307,738
1988 108,872,859 1,088,729 5,443,643
1989 111,312,721 1,113,127 5,565,636
1990 112,812,262 1,128,123 5,640,613
1991 113,804,104 1,138,041 5,690,205
1992 112,652,759 1,126,528 5,632,638
1993 113,681,387 1,136,814 5,664,069
1994 114,989,920 1,149,899 5,749,496
1995 117,274,186 1,172,742 5,863,709
1996 119,441,767 1,194,418 5,972,088
1997 121,506,446 1,215,064 6,075,322
Adjusted gross income
floor on percentiles
(current dollars):
1986 N/A 118,818 62,377
1987 N/A 139,289 68,414
1988 N/A 157,136 72,735
1989 N/A 163,869 76,933
1990 N/A 167,421 79,064
1991 N/A 170,139 81,720
1992 N/A 181,904 85,103
1993 N/A 185,715 87,386
1994 N/A 195,726 91,226
1995 N/A 209,406 96,221
1996 N/A 227,546 101,141
1997 N/A 250,736 108,048
Adjusted gross income
floor on percentiles
(constant dollars):(2)
1986 N/A 108,411 56,913
1987 N/A 122,614 60,224
1988 N/A 132,828 61,464
1989 N/A 132,152 62,043
1990 N/A 128,096 60,493
1991 N/A 124,919 60,000
1992 N/A 129,654 60,658
1993 N/A 128,522 60,475
1994 N/A 132,069 61,556
1995 N/A 137,406 63,137
1996 N/A 145,026 64,462
1997 N/A 156,222 67,320
Adjusted gross
income (millions of
dollars):(1)
1986 2,524,124 285,197 608,467
1987 2,813,728 346,635 722,221
1988 3,124,156 473,527 890,702
1989 3,298,858 468,079 918,421
1990 3,451,237 483,252 953,337
1991 3,516,142 456,603 943,350
1992 3,680,552 523,586 1,031,093
1993 3,775,578 520,586 1,048,252
1994 3,961,146 546,700 1,103,084
1995 4,244,607 619,610 1,222,723
1996 4,590,527 736,545 1,393,805
1997 5,023,492 872,834 1,597,124
Total income tax
(millions of
dollars):(3)
1986 366,979 94,491 156,240
1987 369,046 91,559 159,642
1988 412,761 113,641 188,303
1989 432,838 109,259 190,168
1990 447,061 112,338 195,088
1991 448,349 111,267 194,480
1992 476,163 131,156 218,479
1993 502,720 145,836 238,083
1994 534,754 154,337 264,106
1995 588,331 178,035 287,741
1996 658,124 212,626 335,433
1997 731,210 243,779 380,785
Average tax rate
(percentage):(4)
1986 14.54 33.13 25.68
1987 13.12 26.41 22.10
1988 13.21 24.04 21.14
1989 13.12 23.34 20.71
1990 12.95 23.25 20.46
1991 12.75 24.37 20.62
1992 12.94 25.05 21.19
1993 13.32 28.01 22.71
1994 13.50 28.23 23.04
1995 13.68 28.73 23.53
1996 14.34 28.87 24.07
1997 14.48 27.64 23.62
Adjusted gross income
share (percentage):
1986 100.00 11.30 24.11
1987 100.00 12.32 25.67
1988 100.00 15.16 28.51
1989 100.00 14.19 27.64
1990 100.00 14.00 27.62
1991 100.00 12.99 26.83
1992 100.00 14.23 28.01
1993 100.00 13.79 27.76
1994 100.00 13.80 27.85
1995 100.00 14.60 28.81
1996 100.00 16.04 30.36
1997 100.00 17.38 31.79
Total income tax
share (percentage):
1986 100.00 25.75 42.57
1987 100.00 24.81 43.26
1988 100.00 27.56 45.62
1989 100.00 2,524 43.94
1990 100.00 25.13 43.64
1991 100.00 24.82 43.38
1992 100.00 27.54 45.68
1993 100.00 29.01 47.38
1994 100.00 28.86 47.52
1995 100.00 30.26 48.91
1996 100.00 32.31 50.97
1997 100.00 33.17 51.87
Descending cumulative percentiles
Item, tax year Top Top Top
10 percent 25 percent 50 percent
(4) (5) (6)
Number of returns:(1)
1986 10,208,762 25,521,906 51,043,811
1987 10,615,476 26,538,690 53,077,380
1988 10,887,286 27,218,214 54,436,429
1989 11,131,272 27,828,181 55,656,361
1990 11,281,226 28,203,066 56,406,132
1991 11,380,410 28,451,026 56,902,052
1992 11,265,276 28,163,190 56,326,380
1993 11,368,139 28,420,347 56,640,694
1994 11,498,992 28,747,480 57,494,960
1995 11,727,419 29,318,546 58,637,093
1996 11,944,177 29,860,442 59,720,864
1997 12,150,645 30,376,611 60,753,223
Adjusted gross income
floor on percentiles
(current dollars):
1986 48,656 32,242 17,302
1987 52,921 33,983 17,768
1988 55,437 35,398 18,367
1989 58,263 36,839 18,993
1990 60,287 38,080 19,767
1991 61,944 38,929 20,097
1992 64,457 40,378 20,803
1993 66,077 41,210 21,179
1994 68,753 42,742 21,802
1995 72,094 44,207 22,344
1996 74,986 45,757 23,174
1997 79,212 48,173 24,393
Adjusted gross income
floor on percentiles
(constant dollars):(2)
1986 44,394 29,418 15,786
1987 46,585 29,915 15,641
1988 46,861 29,922 15,526
1989 46,986 29,709 15,317
1990 46,126 29,135 15,124
1991 45,480 28,582 14,756
1992 45,942 28,780 14,828
1993 45,728 28,519 14,657
1994 46,392 28,841 14,711
1995 47,306 29,007 14,661
1996 47,792 29,163 14,769
1997 49,353 30,014 15,198
Adjusted gross
income (millions of
dollars):(1)
1986 886,510 1,490,173 2,103,569
1987 1,038,221 1,709,389 2,373,869
1988 1,232,536 1,950,860 2,657,865
1989 1,286,539 2,054,478 2,805,235
1990 1,338,032 2,144,177 2,932,537
1991 1,343,202 2,174,765 2,984,003
1992 1,443,764 2,299,401 3,131,400
1993 1,474,463 2,357,953 3,212,299
1994 1,552,205 2,481,074 3,371,352
1995 1,704,513 2,689,820 3,627,642
1996 1,909,149 2,952,637 3,944,383
1997 2,151,426 3,267,638 4,328,031
Total income tax
(millions of
dollars):(3)
1986 200,703 278,976 343,289
1987 205,230 283,857 346,655
1988 236,411 321,297 389,145
1989 241,458 334,258 407,599
1990 247,514 344,340 421,075
1991 250,282 346,511 423,759
1992 276,213 373,700 452,070
1993 297,808 398,516 478,563
1994 317,902 425,402 509,258
1995 357,402 472,808 561,225
1996 411,404 535,164 629,684
1997 463,405 597,882 700,057
Average tax rate
(percentage):(4)
1986 22.64 18.72 16.32
1987 19.77 16.61 14.60
1988 19.18 16.47 14.64
1989 18.77 16.27 14.53
1990 18.50 16.06 14.36
1991 18.63 15.93 14.20
1992 19.13 16.25 14.44
1993 20.20 16.90 14.90
1994 20.48 17.15 15.11
1995 20.97 17.58 15.47
1996 21.55 18.12 15.96
1997 21.38 18.18 16.09
Adjusted gross income
share (percentage):
1986 35.12 59.04 83.34
1987 36.90 60.75 84.37
1988 39.45 62.44 85.07
1989 39.00 62.28 85.04
1990 38.77 62.13 64.97
1991 38.20 61.85 84.87
1992 39.23 62.47 85.08
1993 39.05 62.45 85.08
1994 39.19 62.64 85.11
1995 40.16 63.37 85.46
1996 41.59 64.32 85.92
1997 42.83 65.05 86.16
Total income tax
share (percentage):
1986 54.69 76.02 93.54
1987 55.81 76.92 93.93
1988 57.28 77.64 94.28
1989 55.78 77.22 94.17
1990 55.36 77.02 94.19
1991 55.82 77.29 94.52
1992 58.01 78.48 94.94
1993 59.24 79.27 95.19
1994 59.45 79.55 95.23
1995 60.75 80.36 95.39
1996 62.51 81.32 95.68
1997 63.20 81.67 95.72
N/A-- Not applicable.
(1) The number of returns with negative adjusted gross income, i.e., returns with an adjusted gross deficit, and the corresponding amounts for adjusted gross deficit, were excluded from Tables 5 and 6. By excluding deficit returns, alternative minimum tax reported on some of these returns was also excluded. For Tax Year 1997, there were 6,478 returns with no adjusted gross income that reported income tax, mostly alternative minimum tax, totaling $111.4 million.
(2) For Table 5, constant dollars were calculated using the U.S. Bureau of Labor Statistics' consumer price index for urban consumers (CPI-U, 1982-84=100). See footnote 2 of this article for further details.
(3) Total income tax is the sum of income tax after credits and alternative minimum tax reported on returns that showed a positive amount for adjusted gross income. Therefore, total income tax excludes alternative minimum tax, Form 8814 tax (tax on a child's interest or dividends), and Form 4972 tax (tax on lump-sum distributions from qualified retirement plans) reported on some returns with a negative amount for adjusted gross income. See also footnote 1.
(4) The average tax rate was computed by dividing total income tax (see footnote 3) by (positive) adjusted gross income.
Table 6.--Returns with Positive Adjusted Gross Income (AGI): Number of Returns, Shares of AGI and Total Income Tax, and Average Tax Rates, by Selected Ascending Cumulative Percentiles of Returns Based on Income Size Using the Definition of AGI for Each Year, Tax Years 1986-1997
[All figures are estimates based on samples.]
Ascending
cumulative
percentiles
Item, tax year Total Bottom
50 percent
(1) (2)
Number of returns:(1)
1986 102,087,623 51,043,811
1987 106,154,761 53,077,380
1988 108,872,858 54,436,429
1989 111,312,721 55,656,361
1990 112,812,262 56,406,132
1991 113,804,104 56,902,052
1992 112,652,759 56,326,380
1993 113,681,387 56,840,693
1994 114,989,920 57,494,960
1995 117,274,186 56,637,093
1996 119,441,767 59,720,883
1997 121,506,446 60,753,223
Adjusted gross Income (millions of
dollars):(1)
1986 2,524,124 420,555
1987 2,813,728 439,859
1988 3,124,156 466,291
1989 3,298,858 493,623
1990 3,451,237 518,700
1991 3,516,142 532,138
1992 3,680,552 549,152
1993 3,775,578 563,279
1994 3,961,146 589,795
1995 4,244,607 617,065
1996 4,590,527 646,144
1997 5,023,492 695,461
Total income tax (millions of
dollars):(3)
1986 366,979 23,690
1987 369,046 22,391
1988 412,761 23,616
1989 432,838 25,239
1990 447,061 25,986
1991 448,349 24,554
1992 476,183 24,093
1993 502,720 24,157
1994 534,754 25,499
1995 588,331 27,106
1996 658,124 28,440
1997 731,210 31,154
Average tax rate (percentage):(4)
1986 14.54 5.63
1987 13.12 5.09
1988 13.21 5.06
1989 13.12 5.11
1990 12.95 5.01
1991 12.75 4.61
1992 12.94 4.39
1993 13.32 4.29
1994 13.50 4.32
1995 13.86 4.39
1996 14.34 4.40
1997 14.56 4.48
Adjusted gross income share
(percentage):
1986 100.00 16.66
1987 100.00 15.63
1988 100.00 14.93
1989 100.00 14.96
1990 100.00 15.03
1991 100.00 15.13
1992 100.00 14.92
1993 100.00 14.92
1994 100.00 14.89
1995 100.00 14.54
1996 100.00 14.08
1997 100.00 13.84
Total income tax share (percentage):
1986 100.00 6.46
1987 100.00 6.07
1988 100.00 5.72
1989 100.00 5.83
1990 100.00 5.81
1991 100.00 5.48
1992 100.00 5.06
1993 100.00 4.81
1994 100.00 4.77
1995 100.00 4.61
1996 100.00 4.32
1997 100.00 4.26
Ascending cumulative
percentiles
Item, tax year Bottom Bottom
75 percent 90 percent
(3) (4)
Number of returns:(1)
1986 76,565,717 91,878,861
1987 79,616,071 95,539,285
1988 81,654,643 97,985,572
1989 83,484,542 100,181,451
1990 84,609,198 101,531,038
1991 85,353,078 102,423,694
1992 84,489,560 101,387,483
1993 85,261,040 102,313,248
1994 86,242,440 103,490,928
1995 87,955,640 105,546,767
1996 89,581,325 107,497,590
1997 91,129,835 109,355,801
Adjusted gross Income (millions of
dollars):(1)
1986 1,033,951 1,637,614
1987 1,104,338 1,775,506
1988 1,173,296 1,891,620
1989 1,244,380 2,012,319
1990 1,307,060 2,113,205
1991 1,341,377 2,172,939
1992 1,381,151 2,236,768
1993 1,417,625 2,301,115
1994 1,480,073 2,408,941
1995 1,554,788 2,540,094
1996 1,637,891 2,681,378
1997 1,755,864 2,872,065
Total income tax (millions of
dollars):(3)
1986 88,002 166,276
1987 85,189 163,816
1988 91,464 176,350
1989 98,580 191,380
1990 102,721 199,547
1991 101,837 198,067
1992 102,463 199,950
1993 104,203 204,912
1994 109,353 216,852
1995 115,523 230,929
1996 122,960 246,720
1997 133,328 267,805
Average tax rate (percentage):(4)
1986 8.51 10.15
1987 7.71 9.23
1988 7.80 9.32
1989 7.92 9.51
1990 7.86 9.44
1991 7.59 9.12
1992 7.42 8.94
1993 7.35 8.90
1994 7.39 9.00
1995 7.43 9.09
1996 7.51 9.20
1997 7.59 9.32
Adjusted gross income share
(percentage):
1986 40.96 64.88
1987 39.25 63.10
1988 37.56 60.55
1989 37.72 61.00
1990 37.87 61.23
1991 38.15 61.80
1992 37.53 60.77
1993 37.55 60.95
1994 37.36 60.81
1995 36.63 59.84
1996 35.68 58.41
1997 34.95 57.17
Total income tax share (percentage):
1986 23.98 45.31
1987 23.08 44.39
1988 22.16 42.72
1989 22.78 44.22
1990 22.98 44.64
1991 22.71 44.18
1992 21.52 41.99
1993 20.73 40.76
1994 20.45 40.55
1995 19.64 39.25
1996 18.68 37.49
1997 18.23 36.62
Ascending cumulative
percentiles
Item, tax year Bottom Bottom
95 percent 99 percent
(5) (6)
Number of returns:(1)
1986 96,983,242 101,066,747
1987 100,847,023 105,093,213
1988 103,429,215 107,784,129
1989 105,747,087 110,199,596
1990 107,171,651 111,684,141
1991 108,113,899 112,666,063
1992 107,020,121 111,526,231
1993 107,997,318 112,544,573
1994 109,240,424 113,840,021
1995 111,410,477 116,101,444
1996 113,469,679 118,247,349
1997 115,431,124 120,291,382
Adjusted gross Income (millions of
dollars):(1)
1986 1,915,657 2,238,927
1987 2,091,507 2,467,093
1988 2,233,454 2,650,629
1989 2,380,437 2,830,779
1990 2,497,900 2,967,985
1991 2,572,792 3,059,539
1992 2,649,459 3,156,966
1993 2,727,326 3,254,992
1994 2,858,063 3,414,447
1995 3,021,884 3,624,997
1996 3,196,723 3,853,983
1997 3,426,368 4,150,657
Total income tax (millions of
dollars):(3)
1986 210,739 272,488
1987 209,404 277,488
1988 224,459 298,920
1989 242,650 323,579
1990 251,973 334,723
1991 253,869 337,081
1992 257,683 345,007
1993 264,637 356,884
1994 280,648 380,418
1995 300,590 410,296
1996 322,691 445,498
1997 350,425 487,431
Average tax rate (percentage):(4)
1986 11.00 12.17
1987 10.01 11.25
1988 10.05 11.28
1989 10.19 11.43
1990 10.09 11.28
1991 9.87 11.04
1992 9.73 10.93
1993 9.70 10.96
1994 9.82 11.14
1995 9.95 11.32
1996 10.09 11.56
1997 10.23 11.74
Adjusted gross income share
(percentage):
1986 75.89 88.70
1987 74.33 87.68
1988 71.49 84.84
1989 72.16 85.81
1990 72.38 86.00
1991 73.17 87.01
1992 71.99 85.77
1993 72.24 86.21
1994 72.15 86.20
1995 71.19 85.40
1996 69.64 83.96
1997 68.21 82.62
Total income tax share (percentage):
1986 57.43 74.25
1987 56.74 75.19
1988 54.38 72.42
1989 56.06 74.76
1990 56.36 74.87
1991 56.62 75.18
1992 54.12 72.46
1993 52.64 70.99
1994 52.48 71.14
1995 51.09 69.74
1996 49.03 67.69
1997 47.92 66.66
N/A-- Not applicable.
(1) The number of returns with negative adjusted gross income, i.e., returns with an adjusted gross deficit, and the corresponding amounts for adjusted gross deficit, were excluded from Tables 5 and 6. By excluding deficit returns, alternative minimum tax reported on some of these returns was also excluded. For Tax Year 1997, there were 6,478 returns with no adjusted gross income that reported income tax, mostly alternative minimum tax, totaling $111.4 million.
(2) For Table 5, constant dollars were calculated using the U.S. Bureau of Labor Statistics' consumer price index for urban consumers (CPI-U, 1982-84=100). See footnote 2 of this article for further details.
(3) Total income tax is the sum of income tax after credits and alternative minimum tax reported on returns that showed a positive amount for adjusted gross income. Therefore, total income tax excludes alternative minimum tax, Form 8814 tax (tax on a child's interest or dividends), and Form 4972 tax (tax on lump-sum distributions from qualified retirement plans) reported on some returns with a negative amount for adjusted gross income. See also footnote 1.
(4) The average tax rate was computed by dividing total income tax (see footnote 3) by (positive) adjusted gross income.
Table 7.--Returns with Positive "1979 Income Concept" Income: Number of Returns, Shares of Income and Total Income Tax, Income Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates, by Selected Descending Cumulative Percentiles of Returns Based on Income Size, Tax Years 1986-1997
[All figures are estimates based on samples]
Descending
cumulative
percentiles
Item, tax year Total Top
1 percent
(1) (2)
Number of returns:(1)
1986 101,988,805 1,019,888
1987 106,191,624 1,061,916
1988 108,879,154 1,088,792
1989 111,328,835 1,113,288
1990 112,717,959 1,127,180
1991 113,823,123 1,138,231
1992 112,687,747 1,126,877
1993 113,721,706 1,137,217
1994 115,061,112 1,150,611
1995 117,333,779 1,173,338
1996 119,487,813 1,194,878
1997 121,555,156 1,215,552
Income floor on percentiles (current
dollars):
1986 N/A 147,863
1987 N/A 145,624
1988 N/A 161,774
1989 N/A 169,603
1990 N/A 174,813
1991 N/A 180,268
1992 N/A 197,031
1993 N/A 199,698
1994 N/A 210,742
1995 N/A 224,523
1996 N/A 246,268
1997 N/A 268,889
Income floor on percentiles (constant
dollars):(2)
1986 N/A 134,912
1987 N/A 128,190
1988 N/A 136,749
1989 N/A 136,777
1990 N/A 133,751
1991 N/A 132,355
1992 N/A 140,436
1993 N/A 138,199
1994 N/A 142,201
1995 N/A 147,325
1996 N/A 156,959
1997 N/A 167,532
Income (millions of dollars):
1986 2,804,691 427,513
1987 2,856,118 363,880
1988 3,153,639 484,675
1989 3,336,571 486,976
1990 3,497,118 504,687
1991 3,577,337 478,756
1992 3,763,002 556,421
1993 3,849,532 554,075
1994 4,033,642 579,584
1995 4,317,506 653,717
1996 4,670,844 772,868
1997 5,112,706 918,007
Total Income tax (millions of
dollars):(3)
1986 366,763 93,128
1987 368,924 89,908
1988 412,549 112,208
1989 432,643 107,508
1990 446,906 110,530
1991 448,177 107,926
1992 476,067 127,361
1993 502,638 142,329
1994 534,693 150,133
1995 588,292 173,877
1996 658,059 208,071
1997 731,123 238,978
Average tax rate (percentage):(4)
1986 13.08 21.78
1987 12.92 24.71
1988 13.08 23.15
1989 12.97 22.08
1990 12.78 21.90
1991 12.53 22.54
1992 12.65 22.89
1993 13.06 25.69
1994 13.26 25.90
1995 13.63 26.60
1996 14.09 26.92
1997 14.30 26.03
Income share (percentage):
1986 100.00 15.24
1987 100.00 12.74
1988 100.00 15.37
1989 100.00 14.60
1990 100.00 14.43
1991 100.00 13.38
1992 100.00 14.79
1993 100.00 14.39
1994 100.00 14.37
1995 100.00 15.14
1996 100.00 16.55
1997 100.00 17.96
Total income tax share (percentage):
1986 100.00 25.39
1987 100.00 24.37
1988 100.00 27.20
1989 100.00 24.85
1990 100.00 24.73
1991 100.00 24.08
1992 100.00 26.75
1993 100.00 28.32
1994 100.00 28.08
1995 100.00 29.56
1996 100.00 31.62
1997 100.00 32.69
Descending cumulative
percentile
Item, tax year Top Top
5 percent 10 percent
(3) (4)
Number of returns:(1)
1986 5,099,440 10,198,881
1987 5,309,581 10,619,162
1988 5,443,958 10,887,915
1989 5,566,442 11,132,884
1990 5,635,898 11,271,796
1991 5,691,156 11,382,312
1992 5,634,387 11,268,775
1993 5,686,085 11,372,171
1994 5,753,056 11,506,111
1995 5,866,689 11,733,378
1996 5,974,391 11,948,781
1997 6,077,758 12,155,516
Income floor on percentiles (current
dollars):
1986 68,362 52,035
1987 69,222 53,094
1988 73,451 55,532
1989 77,542 58,429
1990 80,400 60,623
1991 83,300 62,413
1992 87,370 65,283
1993 88,992 66,685
1994 93,186 69,118
1995 98,420 72,210
1996 103,489 75,574
1997 110,949 79,598
Income floor on percentiles (constant
dollars):(2)
1986 62,374 47,477
1987 60,935 46,738
1988 62,089 46,942
1989 62,534 47,120
1990 61,515 46,383
1991 61,160 45,825
1992 62,274 46,531
1993 61,586 46,149
1994 62,879 46,638
1995 64,580 47,382
1996 65,959 48,167
1997 69,127 49,594
Income (millions of dollars):
1986 796,935 1,097,550
1987 749,240 1,067,438
1988 911,170 1,255,108
1989 947,363 1,317,619
1990 987,582 1,376,162
1991 985,590 1,390,924
1992 1,090,019 1,509,728
1993 1,105,014 1,537,285
1994 1,161,972 1,617,250
1995 1,284,726 1,772,890
1996 1,462,979 1,984,931
1997 1,679,877 2,242,353
Total Income tax (millions of
dollars):(3)
1986 155,553 198,862
1987 158,485 204,050
1988 186,793 235,121
1989 188,588 240,229
1990 192,991 245,856
1991 192,548 246,745
1992 216,303 272,361
1993 235,908 294,238
1994 250,770 314,909
1995 284,036 354,427
1996 331,404 407,726
1997 376,046 459,674
Average tax rate (percentage):(4)
1986 19.52 18.12
1987 21.15 19.12
1988 20.50 18.73
1989 19.91 18.23
1990 19.54 17.87
1991 19.54 17.74
1992 19.84 18.04
1993 21.35 19.14
1994 21.58 19.47
1995 22.11 19.99
1996 22.65 20.54
1997 22.39 20.50
Income share (percentage):
1986 28.41 39.13
1987 26.23 37.37
1988 28.89 39.80
1989 28.39 39.49
1990 28.24 39.35
1991 27.55 38.88
1992 28.97 40.12
1993 28.71 39.93
1994 28.81 40.09
1995 29.76 41.06
1996 31.32 42.50
1997 32.86 43.86
Total income tax share (percentage):
1986 42.41 54.22
1987 42.96 55.31
1988 45.28 56.99
1989 43.59 55.53
1990 43.18 55.01
1991 42.96 55.06
1992 45.44 57.21
1993 46.93 58.54
1994 46.90 58.90
1995 48.28 60.25
1996 50.36 61.96
1997 51.43 62.87
Descending cumulative
percentile
Item, tax year Top Top
25 percent 26 percent
(5) (5)
Number of returns:(1)
1986 25,497,201 50,994,402
1987 26,547,906 53,095,812
1988 27,219,788 54,439,577
1989 27,832,209 55,664,418
1990 28,179,490 56,358,980
1991 28,455,781 56,911,562
1992 28,171,937 56,343,874
1993 28,430,426 56,860,853
1994 28,765,278 57,530,556
1995 29,333,445 58,666,889
1996 29,871,953 59,743,906
1997 30,388,789 60,777,578
Income floor on percentiles (current
dollars):
1986 33,623 17,909
1987 34,165 17,959
1988 35,432 18,534
1989 36,783 19,152
1990 38,026 19,947
1991 38,913 20,302
1992 40,423 21,041
1993 41,013 21,390
1994 42,480 22,000
1995 43,860 22,575
1996 45,508 23,378
1997 47,738 24,551
Income floor on percentiles (constant
dollars):(2)
1986 30,678 16,340
1987 30,075 15,809
1988 29,951 15,667
1989 29,664 15,445
1990 29,094 15,262
1991 28,571 14,906
1992 28,812 14,997
1993 28,383 14,803
1994 28,664 14,845
1995 28,780 14,813
1996 29,004 14,900
1997 29,743 15,297
Income (millions of dollars):
1986 1,732,231 2,368,620
1987 1,741,747 2,411,715
1988 1,973,061 2,683,524
1989 2,085,003 2,838,481
1990 2,182,091 2,973,847
1991 2,224,979 3,038,428
1992 2,369,701 3,206,490
1993 2,422,475 3,278,866
1994 2,544,400 3,436,167
1995 2,754,988 3,692,267
1996 3,025,107 4,015,461
1997 3,353,245 4,409,075
Total Income tax (millions of
dollars):(3)
1986 277,578 342,296
1987 282,970 346,228
1988 320,152 388,631
1989 333,285 407,106
1990 342,926 420,345
1991 345,168 423,180
1992 372,352 451,494
1993 397,261 477,997
1994 423,743 508,540
1995 471,035 560,748
1996 532,750 628,918
1997 595,060 699,131
Average tax rate (percentage):(4)
1986 16.02 14.45
1987 16.25 14.36
1988 16.23 14.48
1989 15.98 14.34
1990 15.72 14.13
1991 15.51 13.93
1992 15.71 14.08
1993 16.40 14.58
1994 16.65 14.80
1995 17.10 15.19
1996 17.61 15.66
1997 17.75 15.86
Income share (percentage):
1986 61.76 84.45
1987 60.98 84.44
1988 62.56 85.09
1989 62.49 85.07
1990 62.40 85.04
1991 62.20 84.94
1992 62.97 85.21
1993 62.93 85.18
1994 63.08 85.19
1995 63.81 85.52
1996 64.77 85.97
1997 65.59 86.24
Total income tax share (percentage):
1986 75.68 93.33
1987 76.70 93.85
1988 77.60 94.20
1989 77.03 94.10
1990 76.73 94.06
1991 77.02 94.42
1992 78.21 94.84
1993 79.04 95.10
1994 79.25 95.11
1995 80.07 95.32
1996 80.96 95.57
1997 81.39 95.62
N/A-Not applicable.
(1) The number of returns in columns 2 through 6. Tables 7 and 8, were processed in thousands and, therefore, reflect differences due to rounding.
(2) For Table 7, constant dollars were Calculated using the U.S. Bureau of Labor Statistics' consumer price index for urban consumers (CPI-U. 1982-84=100). See footnote 2 of this article for further details.
(3) Total income tax is the sum of income tax after credits and the alternative minimum tax.
(4) Average tax rate was computed by dividing total income tax (see footnote 3) by income, using the 1979 income concept (see text and Figure A).
NOTE: See Figure I for the components of the 1979 Income Concept.
Table 8.--Returns with Positive "1979 Income Concept" Income: Number of Returns, Shares of Income and Total Income Tax, and Average Tax Rates, by Selected Ascending Cumulative Percentiles of Returns Based on Income Size, Tax Years 1986-1997
[All figures are estimates based on samples]
Ascending
cumulative
percentiles
Item, tax year Total Bottom
50 percent
(1) (2)
Number of returns:(1)
1986 101,988,805 50,994,402
1987 106,191,624 53,095,812
1988 108,879,154 54,439,577
1989 111,328,835 55,664,417
1990 112,717,959 56,358,980
1991 113,823,123 56,911,562
1992 112,687,747 56,343,874
1993 113,721,706 56,860,853
1994 115,061,112 57,530,556
1995 117,333,779 58,666,890
1996 119,487,813 59,743,907
1997 121,555,156 60,777,578
Income (millions of dollars):
1986 2,804,691 436,071
1987 2,856,118 444,403
1988 3,153,639 470,115
1989 3,336,571 498,089
1990 3,497,118 523,271
1991 3,577,337 538,910
1992 3,763,002 556,512
1993 3,849,532 570,666
1994 4,033,642 597,475
1995 4,317,506 625,239
1996 4,670,644 655,183
1997 5,112,706 703,631
Total income tax (millions of
dollars):(3)
1986 366,763 24,487
1987 368,924 22,698
1988 412,549 23,918
1989 432,643 25,537
1990 446,906 26,562
1991 448,177 24,997
1992 476,067 24,573
1993 502,638 24,641
1994 534,693 26,153
1995 588,292 27,544
1996 658,059 29,142
1997 731,123 31,992
Average tax rate (percentage):(4)
1986 13.08 5.61
1987 12.92 5.11
1988 13.08 5.09
1989 12.97 5.13
1990 12.78 5.08
1991 12.53 4.64
1992 12.65 4.42
1993 13.06 4.32
1994 13.26 4.38
1995 13.63 4.41
1996 14.09 4.45
1997 14.30 4.55
Income share (percentage):
1986 100.00 15.55
1987 100.00 15.56
1988 100.00 14.91
1989 100.00 14.93
1990 100.00 14.96
1991 100.00 15.06
1992 100.00 14.79
1993 100.00 14.82
1994 100.00 14.81
1995 100.00 14.48
1996 100.00 14.03
1997 100.00 13.76
Total income tax share (percentage):
1986 100.00 6.67
1987 100.00 6.15
1988 100.00 5.80
1989 100.00 5.90
1990 100.00 5.94
1991 100.00 5.58
1992 100.00 5.16
1993 100.00 4.90
1994 100.00 4.89
1995 100.00 4.68
1996 100.00 4.43
1997 100.00 4.38
Ascending cumulative
percentiles
Item, tax year Bottom Bottom
75 percent 90 percent
(3) (4)
Number of returns:(1)
1986 76,491,604 91,789,924
1987 79,643,718 95,572,462
1988 81,659,366 97,991,239
1989 83,496,626 100,195,951
1990 64,538,469 101,446,163
1991 85,367,342 102,440,811
1992 64,515,810 101,418,972
1993 85,291,280 102,349,535
1994 86,295,834 103,555,001
1995 68,000,334 105,600,401
1996 89,615,860 107,539,032
1997 91,166,367 109,399,640
Income (millions of dollars):
1986 1,072,460 1,707,142
1987 1,114,372 1,788,680
1988 1,180,578 1,898,531
1989 1,251,567 2,018,952
1990 1,315,027 2,120,956
1991 1,352,358 2,186,413
1992 1,393,300 2,253,273
1993 1,427,057 2,312,247
1994 1,489,242 2,416,392
1995 1,562,518 2,544,615
1996 1,645,537 2,685,713
1997 1,759,461 2,870,353
Total income tax (millions of
dollars):(3)
1986 89,186 167,901
1987 85,954 164,874
1988 92,397 177,429
1989 99,358 192,414
1990 103,980 201,050
1991 103,009 201,432
1992 103,715 203,706
1993 105,377 208,400
1994 110,950 219,783
1995 117,257 233,864
1996 125,310 250,333
1997 136,063 271,450
Average tax rate (percentage):(4)
1986 8.32 9.84
1987 7.71 9.22
1988 7.83 9.35
1989 7.94 9.53
1990 7.91 9.48
1991 7.62 9.21
1992 7.44 9.04
1993 7.38 9.01
1994 7.45 9.10
1995 7.50 9.19
1996 7.62 9.32
1997 7.73 9.46
Income share (percentage):
1986 38.24 60.87
1987 39.02 62.63
1988 37.44 60.20
1989 37.51 60.51
1990 37.60 60.65
1991 37.80 61.12
1992 37.03 59.88
1993 37.07 80.07
1994 38.92 59.91
1995 38.19 56.94
1996 35.23 57.50
1997 34.41 56.14
Total income tax share (percentage):
1986 24.32 45.78
1987 23.30 44.69
1988 22.40 43.01
1989 22.97 44.47
1990 23.27 44.99
1991 22.98 44.94
1992 21.79 42.79
1993 20.96 41.46
1994 20.75 41.10
1995 19.93 39.75
1996 19.04 38.04
1997 18.61 37.13
Ascending cumulative
percentiles
Item, tax year Bottom Bottom
95 percent 99 percent
(5) (6)
Number of returns:(1)
1986 96,889,365 100,968,917
1987 100,882,043 105,129,708
1988 103,435,196 107,790,362
1989 105,762,393 110,215,547
1990 107,082,061 111,590,779
1991 108,131,967 112,684,892
1992 107,053,360 111,560,870
1993 108,035,621 112,584,489
1994 109,308,056 113,910,501
1995 111,467,090 116,160,441
1996 113,513,422 118,292,935
1997 115,477,398 120,339,604
Income (millions of dollars):
1986 2,007,756 2,377,178
1987 2,106,878 2,492,238
1988 2,242,469 2,668,964
1989 2,389,207 2,849,595
1990 2,509,535 2,992,431
1991 2,591,748 3,098,582
1992 2,672,983 3,206,581
1993 2,744,518 3,295,456
1994 2,871,670 3,454,078
1995 3,032,780 3,663,789
1996 3,207,665 3,897,777
1997 3,432,828 4,194,699
Total income tax (millions of
dollars):(3)
1986 211,210 273,635
1987 210,439 279,016
1988 225,756 300,341
1989 244,055 325,135
1990 253,915 336,376
1991 255,629 340,251
1992 259,764 348,706
1993 266,730 360,309
1994 283,923 384,560
1995 304,256 414,415
1996 326,655 449,988
1997 355,078 492,146
Average tax rate (percentage):(4)
1986 10.52 11.51
1987 9.99 11.20
1988 10.07 11.25
1989 10.21 11.41
1990 10.12 11.24
1991 9.86 10.98
1992 9.72 10.87
1993 9.72 10.93
1994 9.89 11.13
1995 10.03 11.31
1996 10.18 11.54
1997 10.34 11.73
Income share (percentage):
1986 71.59 84.76
1987 73.77 87.26
1988 71.11 84.63
1989 71.61 85.40
1990 71.76 85.57
1991 72.45 86.62
1992 71.03 85.21
1993 71.29 85.61
1994 71.19 85.63
1995 70.24 84.86
1996 68.68 83.45
1997 67.14 82.04
Total income tax share (percentage):
1986 57.59 74.61
1987 57.04 75.63
1988 54.72 72.80
1989 56.41 75.15
1990 56.82 75.27
1991 57.04 75.92
1992 54.56 73.25
1993 53.07 71.68
1994 53.10 71.92
1995 51.72 70.44
1996 49.64 68.38
1997 48.57 67.31
N/A-Not applicable.
(1) The number of returns in columns 2 through 6. Tables 7 and 8, were processed in thousands and, therefore, reflect differences due to rounding.
(2) For Table 7, constant dollars were Calculated using the U.S. Bureau of Labor Statistics' consumer price index for urban consumers (CPI-U. 1982-84=100). See footnote 2 of this article for further details.
(3) Total income tax is the sum of income tax after credits and the alternative minimum tax.
(4) Average tax rate was computed by dividing total income tax (see footnote 3) by income, using the 1979 income concept (see text and Figure A).
NOTE: See Figure I for the components of the 1979 Income Concept.
As shown (Figure E and column 5 of Table 1), the tax generated by applying statutory income tax rates to modified taxable income was $738.8 billion. For most taxpayers, tax generated was equal to income tax before credits. However, for others, income tax before credits included special taxes on lump-sum distributions from qualified retirement plans (when a 5- or 10-year averaging method was used) [5]. The earned income credit (EIC) is included in this computation to the extent that its application did not reduce income tax before credits below zero. Any portion of the EIC that is refundable to the taxpayer because it exceeds the taxpayer's liability and any portion of the EIC used to reduce taxes other than regular income taxes are excluded from the computation of income tax after credits [6]. Income tax after credits (Figure E) totaled $727.3 billion. Total income tax of $731.3 billion (Figure A) is thus the sum of income tax after credits and the alternative minimum tax [7].
Table 4 provides estimates on the type of tax computation for returns with modified taxable income. For 1997, the number of children under age 14 who had investment income over $1,300 increased 39 percent to over 507,000. Using Form 8615 to compute their tax (as if their incomes were treated as the marginal incomes of their parents or guardians), these children showed $677.1 million in tax generated (column 7). If these same children had had all their incomes taxed as ordinary income, income tax before credits (regular tax computation) would have totaled $548.3 million (column 6). Thus, the difference resulting from the special tax computation was $128.8 million (column 8) in additional tax, down 17.0 percent from the $155.1 million calculated for 1996 (column 4) [8]. This decrease in the margin of additional tax for 1997 was in part the result of the reduction in the capital gain tax rate, which lowered the marginal rate at which the long term capital gains were taxed on the parents' (and, therefore, the children's) returns.
Table 4.--Returns with Modified Taxable Income: Tax Classified by Type of Tax Computation and by Size of Adjusted Gross Income, Tax Years 1996 and 1997
(All figures are estimates based on samples--money amounts are in thousands of dollars]
Tax Year 1996
Income tax before credits
(regular tax computation)(1)
Number of
returns Amount
(1) (2)
Returns with regular tax
computation only
Total 93,702,787 467,560,382
Under $5,000(3) 3,546,149 299,315
$5,000 under $10,000 6,628,794 2,076,609
$10,000 under $15,000 9,637,027 6,605,270
$15,000 under $20,000 10,733,244 12,382,513
$20,000 under $25,000 9,433,163 16,633,620
$25,000 under $30,000 7,951,182 19,243,325
$30,000 under $40,000 12,477,550 42,820,283
$40,000 under $50,000 9,505,812 46,646,622
$50,000 under $75,000 14,210,586 104,485,195
$75,000 under $100,000 5,575,167 69,977,962
$100,000 under $200,000 3,412,067 74,522,221
$200,000 under $500,000 496,520 36,004,736
$500,000 under $1,000,000 68,068 14,366,637
$1,000,000 or more 27,459 21,496,074
Returns with Form 8615
tax computation
Total 364,783 451,697
Under $5,000(3) 287,648 80,354
$5,000 under $10,000 38,647 36,858
$10,000 under $15,000 15,977 28,393
$15,000 under $20,000 (*)9,238 (*)22,756
$20,000 under $25,000 (*)3,669 (*)11,008
$25,000 under $30,000 (*)1,112 (*)4,602
$30,000 under $40,000 (*)3,578 (*)21,585
$40,000 under $50,000 (*)1,112 (*)9,662
$50,000 under $75,000 (*)1,112 (*)13,912
$75,000 under $100,000 (*)1,025 (*)20,937
$100,000 under $200,000 (*)521 (*)20,849
$200,000 under $500,000 (*)1,027 (*)71,892
$500,000 under $1,000,000 -- --
$1,000,000 or more 118 108,890
Returns with Schedule D
tax computation
Total 2,434,556 214,315,357
Under $5,000(3) -- --
$5,000 under $10,000 -- --
$10,000 under $15,000 -- --
$15,000 under $20,000 -- --
$20,000 under $25,000 -- --
$25,000 under $30,000 -- --
$30,000 under $40,000 -- --
$40,000 under $50,000 -- --
$50,000 under $75,000 88,414 1,255,641
$75,000 under $100,000 221,372 3,857,928
$100,000 under $200,000 1,196,565 36,276,961
$200,000 under $500,000 699,570 54,052,985
$500,000 under $1,000,000 145,454 31,489,468
$1,000,000 or more 83,182 87,382,373
Tax Year 1996
Tax
generated Difference
due to
special tax
Amount computation(2)
(3) (4)
Returns with regular tax
computation only
Total 467,560,388 N/A
Under $5,000(3) 299,311 N/A
$5,000 under $10,000 2,076,614 N/A
$10,000 under $15,000 6,605,268 N/A
$15,000 under $20,000 12,382,513 N/A
$20,000 under $25,000 16,633,615 N/A
$25,000 under $30,000 19,243,327 N/A
$30,000 under $40,000 42,820,292 N/A
$40,000 under $50,000 46,646,623 N/A
$50,000 under $75,000 104,485,195 N/A
$75,000 under $100,000 69,977,962 N/A
$100,000 under $200,000 74,522,221 N/A
$200,000 under $500,000 36,004,736 N/A
$500,000 under $1,000,000 14,366,637 N/A
$1,000,000 or more 21,496,074 N/A
Returns with Form 8615
tax computation
Total 606,821 155,125
Under $5,000(3) 129,619 49,265
$5,000 under $10,000 66,106 29,248
$10,000 under $15,000 55,113 26,720
$15,000 under $20,000 (*)45,987 (*)23,231
$20,000 under $25,000 (*)20,172 (*)9,164
$25,000 under $30,000 (*)10,118 (*)5,515
$30,000 under $40,000 (*)26,258 (*)4,673
$40,000 under $50,000 (*)16,885 (*)7,223
$50,000 under $75 000 (*)20,808 (*)6,896
$75,000 under $100,000 (*)27,947 (*)7,011
$100,000 under $200,000 (*)21,042 (*)194
$200,000 under $500,000 (*)68,161 (*)-3,731
$500,000 under $1,000,000 -- --
$1,000,000 or more 98,605 -10,285
Returns with Schedule D
tax computation
Total 198,407,296 -15,908,060
Under $5,000 3 -- --
$5,000 under $10,000 -- --
$10,000 under $15,000 -- --
$15,000 under $20,000 -- --
$20,000 under $25,000 -- --
$25,000 under $30,000 -- --
$30,000 under $40,000 -- --
$40,000 under $50,000 -- --
$50,000 under $75,000 1,249,234 -6,408
$75,000 under $100,000 3,810,737 -47,192
$100,000 under $200,000 35,786,778 -490,183
$200,000 under $500,000 51,820,236 -2,232,749
$500,000 under $1,000,000 29,378,648 -2,110,820
$1,000,000 or more 76,361,664 -11,020,709
Tax Year 1997
Income tax before credits
(regular tax computation)(1)
Number of
returns Amount
(5) (6)
Returns with regular tax
computation only
Total 84,194,722 418,718,163
Under $5,000(3) 2,707,280 180,900
$5,000 under $10,000 6,077,713 1,830,617
$10,000 under $15,000 8,789,983 5,997,291
$15,000 under $20,000 9,751,460 10,776,922
$20,000 under $25,000 8,965,821 15,622,866
$25,000 under $30,000 7,327,817 17,714,227
$30,000 under $40,000 11,659,588 39,262,200
$40,000 under $50,000 8,438,661 40,485,309
$50,000 under $75,000 12,334,355 88,728,609
$75,000 under $100,000 4,594,914 56,247,837
$100,000 under $200,000 2,931,078 66,533,836
$200,000 under $500,000 513,643 36,524,115
$500,000 under $1,000,000 72,897 15,350,460
$1,000,000 or more 29,511 23,462,974
Returns with Form 8615
tax computation
Total 507,367 548,261
Under $5,000(3) 373,876 105,794
$5,000 under $10,000 86,100 80,855
$10,000 under $15,000 30,153 49,478
$15,000 under $20,000 (*)4,797 (*)11,505
$20,000 under $25,000 (*)3,655 (*)12,774
$25,000 under $30,000 (*)2,400 (*)8,232
$30,000 under $40,000 -- --
$40,000 under $50,000 -- --
$50,000 under $75,000 (*)4,480 (*)49,147
$75,000 under $100,000 (*)1,128 (*)18,950
$100,000 under $200,000 (*)349 (*)13,839
$200,000 under $500,000 (*)157 (*)15,367
$500,000 under $1,000,000 (*)85 (*)17,211
$1,000,000 or more 189 165,110
Returns with Schedule D
tax computation
Total 13,960,749 351,652,758
Under $5,000(3) 596,662 118,639
$5,000 under $10,000 335,911 192,613
$10,000 under $15,000 458,433 381,076
$15,000 under $20,000 594,033 717,465
$20,000 under $25,000 611,754 1,102,959
$25,000 under $30,000 618,401 1,484,874
$30,000 under $40,000 1,203,440 4,285,501
$40,000 under $50,000 1,301,056 6,870,981
$50,000 under $75,000 2,794,270 22,862,789
$75,000 under $100,000 1,838,346 24,650,831
$100,000 under $200,000 2,429,972 62,492,309
$200,000 under $500,000 880,623 67,425,621
$500,000 under $1,000,000 186,211 40,197,032
$1,000,000 or more 111,638 118,870,067
Tax Year 1997
Tax
generated Difference
due to
special tax
Amount computation(2)
(7) (8)
Returns with regular tax
computation only
Total 418,718,201 N/A
Under $5,000(3) 180,909 N/A
$5,000 under $10,000 1,830,617 N/A
$10,000 under $15,000 5,997,303 N/A
$15,000 under $20,000 10,776,932 N/A
$20,000 under $25,000 15,622,868 N/A
$25,000 under $30,000 17,714,227 N/A
$30,000 under $40,000 39,262,200 N/A
$40,000 under $50,000 40,485,309 N/A
$50,000 under $75,000 88,728,609 N/A
$75,000 under $100,000 56,247,842 N/A
$100,000 under $200,000 66,533,836 N/A
$200,000 under $500,000 36,524,115 N/A
$500,000 under $1,000,000 15,350,460 N/A
$1,000,000 or more 23,462,974 N/A
Returns with Form 8615
tax computation
Total 677,107 128,846
Under $5,000(3) 153,545 47,750
$5,000 under $10,000 135,511 54,655
$10,000 under $15,000 83,561 34,083
$15,000 under $20,000 (*)18,843 (*)7,338
$20,000 under $25,000 (*)24,036 (*)11,262
$25,000 under $30,000 (*)14,295 (*)6,063
$30,000 under $40,000 -- --
$40,000 under $50,000 -- --
$50,000 under $75,000 (*)62,201 (*)13,054
$75,000 under $100,000 (*)16,574 (*)-2,376
$100,000 under $200,000 (*)12,025 (*)-1,814
$200,000 under $500,000 (*)12,168 (*)-3,199
$500,000 under $1,000,000 (*)17,797 (*)586
$1,000,000 or more 126,553 -38,556
Returns with Schedule D
tax computation
Total 316,035,356 -35,617,402
Under $5,000 3 102,890 -15,749
$5,000 under $10,000 170,408 -22,205
$10,000 under $15,000 351,023 -30,053
$15,000 under $20,000 672,226 -45,239
$20,000 under $25,000 1,046,476 -56,483
$25,000 under $30,000 1,418,086 -66,788
$30,000 under $40,000 4,133,858 -151,643
$40,000 under $50,000 6,659,311 -211,670
$50,000 under $75,000 22,168,320 -694,469
$75,000 under $100,000 23,873,377 -777,454
$100,000 under $200,000 59,965,967 -2,526,342
$200,000 under $500,000 62,402,268 -5,023,353
$500,000 under $1,000,000 36,073,307 -4,123,725
$1,000,000 or more 96,997,838 -21,872,229
(*) Estimate should be used with caution due to the small number of sample returns on which it is based.
(1) Includes special tax not included in tax generated.
(2) The difference between the amount of tax resulting from using provisions of one of the special tax computations and the amount of tax resulting from the regular tax computation.
(3) Includes returns with adjusted gross deficit.
N/A - Not applicable.
NOTE: Detail may not add to totals because of rounding.
For 1997, almost 14.0 million returns using the Schedule D capital gain tax computation generated $316.0 billion in tax (column 7). However, if long-term capital gains had been taxed the same as ordinary income, the amount of income tax before credits (regular tax computation) for these same taxpayers would have been $351.7 billion (column 6). Therefore, the reduction in tax generation resulting from use of the Schedule D tax computation was $35.6 billion (column 8), more than twice the $15.9 billion shown for 1996 (column 4) where only 2.4 million taxpayers received some benefit from lower capital gain taxes (column 1). Most of these tax savings (61.4 percent) were reported by taxpayers in the "$1,000,000 or more" income-size class. For 1997, 5.7 million taxpayers with an AGI of less than $50,000, who were previously unaffected by the capital gain tax rate, were able to take advantage of new lower capital gain tax rates and accounted for almost $600 million, or 1.7 percent of the tax savings.
Alternative Minimum Tax
The Revenue Act of 1978 established the alternative minimum tax to ensure that a minimum amount of income tax was paid by taxpayers who might otherwise use certain provisions of the tax code meant to stimulate economic activity and generate "economic income" to reduce, or even eliminate, their regular tax liabilities. The AMT provisions may recapture some of these tax reductions by recomputing income to achieve "alternative minimum taxable income," or AMTI, the tax base for AMT. Form 6251, Alternative Minimum Tax--Individuals, is used to calculate AMT. (See Appendix E for an explanation of the computation of AMTI.)
Figure F presents statistics, by size of AGI, on the AMT reported by taxpayers filing Form 6251 with their returns. For 1997, an AMT liability of $4.0 billion was reported based on AMTI of $700.4 billion. Generally, AMTI is only shown on filed tax returns if the taxpayer's liability is affected by the AMT. The AMT amount for 1997 represents a 42.4-percent increase from the $2.8 billion in AMT for 1996 based on $569.8 billion of AMTI. This increase was at least partially attributed to the substantial increase in net long-term capital gain (less loss), which was taxed at 28 percent (the same as the maximum rate for the AMT) or lower rates. Also, the size of the AMT exemptions and the AMT income level at which the rate increases from 26 percent to 28 percent have not been indexed for inflation annually, whereas the widths of regular income tax rate brackets and the sizes of personal exemptions have been inflation-adjusted. Thus, year-to-year inflation may cause more taxpayers to be affected by the AMT and increase the amount of AMT liability.
Figure F
Returns with Alternative Minimum Tax Computation Reported on Form 6251: Total Adjustments and Preferences, and Alternative Minimum Taxable Income and Tax, Tax Years 1996 and 1997
[Money amounts are in thousands of dollars
Total adjustments
and preferences
Size of adjusted Number of returns Amount
gross income
(1) (2)
All returns 4,413,784 72,535,818
No adjusted gross income(2) 91,143 1,421,451
$1 under $10,000 427,322 1,225,108
$10,000 under $20,000 337,837 1,667,360
$20,000 under $30,000 276,787 1,381,384
$30,000 under $40,000 269,507 1,571,678
$40,000 under $50,000 301,931 1,846,573
$50,000 under $75,000 629,507 4,875,382
$75,000 under $100,000 471,911 5,243,941
$100,000 under $200,000 842,114 12,658,352
$200,000 under $500,000 555,196 15,834,686
$500,000 under $1,000,000 125,911 6,494,152
$1,000,000 or more 84,619 18,315,749
Tax year 1996
All returns 4,001,833 61,523,205
No adjusted gross income(2) 87,560 1,170,955
$1 under $10000 456,172 1,255,547
$10,000 under $20,000 328,415 1,750,411
$20,000 under $30,000 285,140 1,514,715
$30,000 under $40,000 217,970 1,201,865
$40,000 under $50,000 290,451 1,761,979
$50,000 under $75,000 575,968 4,556,520
$75,000 under $100,000 434,685 4,248,173
$100,000 under $200,000 712,939 10,808,261
$200,000 under $500,000 442,156 12,306,907
$500,000 under $1,000,000 104,195 6,262,981
$1,000,000 or more 66,184 14,684,892
Alternative minimum
taxable income(1)
Size of adjusted Number of returns Amount
gross income
(3) (4)
All returns 4,416,738 700,352,427
No adjusted gross income(2) 89,940 -4,015,600
$1 under $10,000 430,484 1,795,924
$10,000 under $20,000 337,844 3,968,847
$20,000 under $30,000 276,787 5,801,791
$30,000 under $40,000 269,510 8,525,792
$40,000 under $50,000 301,931 12,037,276
$50,000 under $75,000 629,874 35,084,875
$75,000 under $100,000 471,911 36,728,677
$100,000 under $200,000 842,124 106,113,664
$200,000 under $500,000 555,648 153,703,666
$500,000 under $1,000,000 126,002 80,060,355
$1,000,000 or more 84,683 260,547,164
Tax year 1996
All returns 4,006,470 569,843,530
No adjusted gross income(2) 88,052 -4,752,241
$1 under $10000 456,171 1,737,678
$10,000 under $20,000 328,464 4,135,439
$20,000 under $30,000 285,249 6,439,434
$30,000 under $40,000 217,970 6,815,734
$40,000 under $50,000 291,602 11,960,719
$50,000 under $75,000 577,319 32,111,286
$75,000 under $100,000 434,782 34,053,987
$100,000 under $200,000 713,668 89,914,043
$200,000 under $500,000 442,660 123,753,421
$500,000 under $1,000,000 104,297 66,778,330
$1,000,000 or more 66,237 196,895,699
Alternative minimum tax
Size of adjusted Number of returns Amount
gross income
(5) (6)
All returns 618,072 4,005,101
No adjusted gross income(2) 5,949 111,300
$1 under $10,000 14,666 9,517
$10,000 under $20,000 5,538 5,191
$20,000 under $30,000 3,143 4,668
$30,000 under $40,000 4,642 4,966
$40,000 under $50,000 8,832 11,036
$50,000 under $75,000 39,995 81,204
$75,000 under $100,000 86,641 212,517
$100,000 under $200,000 196,043 652,446
$200,000 under $500,000 200,635 1,533,144
$500,000 under $1,000,000 34,107 453,955
$1,000,000 or more 17,882 925,157
Tax year 1996
All returns 477,898 2,812,746
No adjusted gross income(2) 3,266 120,386
$1 under $10000 11,375 3,723
$10,000 under $20,000 2,480 3,762
$20,000 under $30,000 3,159 5,305
$30,000 under $40,000 4,267 5,271
$40,000 under $50,000 10,309 12,565
$50,000 under $75,000 47,512 59,182
$75,000 under $100,000 58,951 86,219
$100,000 under $200,000 161,683 465,223
$200,000 under $500,000 136,415 893,742
$500,000 under $1,000,000 25,691 467,983
$1,000,000 or more 12,789 689,384
(1) See Figure K-1 for the calculation of alternative minimum taxable income.
(2) Includes returns with adjusted gross deficit.
NOTE: Detail may not add to totals because of rounding.
Figure G shows the highest marginal tax rates on ordinary income, capital gains, and AMTI for each of the years 1986 through 1997. The amount of AMT reported for each of the 12 years is also shown. For 1986, after TRA86 was introduced but before it became effective, when the highest marginal tax rate on ordinary income was 50 percent, and the highest capital gain rate and highest AMT rate were both 20 percent, the AMT reported was $6.7 billion. After 1986, both the highest capital gain rate and the highest AMT rate increased, while the highest marginal ordinary tax rate declined. In addition, capital gains were fully included in AGI. For 1987, AMT decreased dramatically to $1.7 billion. From 1988 to 1990, AMT revenue continued to decrease, to a low of $830.3 million for 1990. For 1991, when the AMT rate increased to 24 percent, the AMT increased 46.1 percent to $1.2 billion. From 1992 to 1993, when the highest marginal tax rate on ordinary income and the highest AMT rate increased again (while the highest capital gain rate remained the same), the AMT liability increased 51.3 percent to nearly $2.1 billion. From 1994 through 1996, the amount of the AMT increased gradually every year. But for 1997, the AMT spiked 42.4 percent to $4.0 billion, the highest level reported since 1986. This also coincides with the large increases in long-term capital gains receiving favorable tax rates, cited previously.
Figure G
Marginal Tax Rate, Capital Gain Rate, Alternative Minimum Tax Rate, and Alternative Minimum Tax, Tax Years 1986-1997
[Tax rates are in percentages--money amounts are in thousands of dollars]
Highest Highest
marginal Highest statutory
Tax statutory capital alternative
year tax rate on gain tax minimum
ordinary rate tax
income rate
(1) (2) (3)
1986 50.0 20(1) 20
1987 38.5 28 21
1988 28.0(2) 28(2) 21
1989 28.0(2) 28(2) 21
1990 28.0(2) 28(2) 21
1991 31.0 28 24
1992 31.0 28 24
1993 39.6 28 28
1994 39.6 28 28
1995 39.6 28 28
1996 39.6 28 28
1997 39.6 28 28
Alternate minimum tax
Tax
year Number
of Amount
returns
(4) (5)
1986 608,907 6,713,149
1987 139,779 1,674,898
1988 113,562 1,027,884
1989 117,483 831,012
1990 132,103 830,313
1991 243,672 1,213,426
1992 287,183 1,357,063
1993 334,615 2,052,790
1994 368,964 2,212,094
1995 414,106 2,290,576
1996 477,898 2,812,746
1997 618,072 4,005,101
(1) This tax rate was based on 60 percent of long-term capital gains (in excess of short-term capital losses) being excluded from income. The remaining 40 percent of capital gains were taxed at the maximum rate of 50 percent, creating a top capital gain rate of 20 percent.
(2) The tax rate schedule provided only two basic rates: 15 percent and 28 percent. However, taxable income between certain amounts was subject to an additional 5 percent tax, creating an "effective" 33-percent tax rate.
Income and Tax Shares
Historical statistics on income and tax by cumulative percentiles (based on numbers of returns) are presented in Tables 5 through 8. Distributions of AGI, as defined for each year, and tax, by descending and ascending cumulative percentiles of returns, are presented in Tables 5 and 6. These tables can be used to make comparisons across cumulative percentile classes within each year, among years within the ERTA81 period (i.e., Tax Years 1982 through 1986), and among years within the post-TRA86 period (i.e., Tax Years 1987 through 1997). Since TRA86 redefined AGI, Tables 5 and 6 are not as useful for comparisons between pre- and post-TRA86 years. Thus, Tables 7 and 8, which are based on a consistent definition of income (i.e., using the 1979 Income Concept), are included to facilitate such comparisons.
Tables 5 and 7 are based on percentiles of returns cumulated downward from the highest income returns. The data are shown for the top 1, 5, 10, 25, and 50 percent of returns. In contrast, Tables 6 and 8 are based on returns cumulated upward for the lowest income returns. Data are shown for the bottom 50, 75, 90, 95, and 99 percent of all returns.
For example, consider the data in Table 5 for the 121.5 million returns filed for 1997 with positive AGI [9]. The average tax rate for these returns was 14.6 percent, the highest level since 1986 (14.5 percent). For the first time since 1990, the average tax rate on the top 1, 5 and 10 percentiles decreased (mostly due to the new capital gain tax rates), while the average tax rate on all other percentiles continued to increase. For 1997, the returns in the top 1 percentile reported 17.4 percent of total AGI and 33.2 percent of total income tax. The amount of AGI needed for inclusion in this percentile group (i.e., the AGI floor) was $250,736. For 1996, the returns in this percentile group (i.e., those with at least $227,546 in AGI) reported 16.0 percent of total AGI and 32.3 percent of total income tax. For 1997, the returns in the top 5 percentile group (returns reporting AGI of $108,048 or more) reported 31.8 percent of total AGI and 51.9 percent of total income tax, higher than the 30.4 percent and 51.0 percent, respectively, for 1996 (when the AGI floor was $101,141). For 1997, returns in the top 10 percentile group (returns with AGI of at least $79,212) showed 42.8 percent of AGI and 63.2 percent of total income tax. For 1996, the returns in this percentile group (with AGI of $74,986 or more) reported 41.6 percent of total AGI and 62.5 percent of total income tax.
The statistics by percentile in Tables 5 and 6 (for years prior to 1991) and Tables 7 and 8 (for years prior to 1994) were estimated, using a mathematical technique called "osculatory interpolation," applied to aggregated data tabulated by income-size classes, in order to distribute the tax returns within each class [10]. For 1991 and later years, the statistics by percentiles in Tables 5 and 6 (and Tables 7 and 8 for 1994 through 1997) were computed based on an actual ranking of the returns in the statistical sample that served as the basis for Individual Statistics of Income estimates. The differences under the two methods were judged to be minor enough so that the pre-1991 and post-1990 data are believed to be comparable.
Figure H presents percentage shares of income and total income tax for various percentile groups, using the 1979 Income Concept, for 1986 through 1997. While shares of income for the top 1 percent and bottom 50 percent of taxpayers have been close over the years, 1997 marks the third consecutive year that that the income shares of the top 1 percent of taxpayers were higher than the corresponding shares of the bottom 50 percentile. The income share for the top 1 percent of taxpayers grew to the largest it has been in the previous 12 years, reaching 18.0 percent for 1997, while the bottom 50 percent of taxpayers reported the lowest share of income over the corresponding period at 13.8 percent. This constitutes the largest difference in income shares between the two percentile groups over the previous 12 years, 4.2 percentage points. Similar to this recent trend in shares of income, the shares of total income tax for the top 1 percent and bottom 50 percent of taxpayers have diverged over time. The total income tax shares for the top 1 percent have, despite fluctuations, risen from 25.4 percent for 1986 to a high of 32.7 percent for 1997. Shares of total income tax for the bottom 50 percent of taxpayers have decreased from 6.7 percent for 1986 to a low of just under 4.4 percent for 1997. The difference between shares of income for the top 5 percent and bottom 75 percent of taxpayers, which has converged over time, continued this trend for 1997. Income shares increased from 28.4 percent for 1986 to 32.9 percent for 1997 for the top 5 percent of taxpayers and decreased from 38.2 percent for 1986 to 34.4 percent for 1997 for the bottom 75 percent of taxpayers. Shares of total income tax for the top 5 percent and bottom 75 percent of taxpayers have also diverged over the past 12 years. Percentage shares of total income tax for taxpayers in the top 5 percentile rose from 42.4 percent for 1986 to a high of 51.4 percent for 1997, while shares of total income tax for the bottom 75 percent of taxpayers have decreased from 24.3 percent for 1986 to 18.6 percent for 1997.
[Figure H ILLUSTRATION OMITTED]
Notes and References
[1] For Tax Years 1988 through 1990, the tax rate schedules provided only two basic rates: 15 percent and 28 percent. However, taxable income over certain levels was subject to a 33-percent tax rate to phase out the benefit of the 15-percent tax bracket (as compared to the 28-percent rate) and the deduction for personal exemptions. At the taxable income level where these benefits were completely phased out, the tax rate returned to 28 percent.
[2] U.S. Department of Labor, Bureau of Labor Statistics, Monthly Labor Review. The consumer price index (CPI-U) represents annual averages of monthly figures and reflects the buying of typical urban consumers (1982-84=100):
Year CPI-U Year CPI-U 1997 160.5 1990 130.7 1996 156.9 1989 124.0 1995 152.4 1988 118.3 1994 148.2 1987 113.6 1993 144.5 1986 109.6 1992 140.5 1985 107.6 1991 136.2
[3] For further information on the Tax Reform Act of 1986, see U.S. Congress, Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1986 (H.R. 3838, 99th Congress, Public Law 99-514), May 4, 1987.
[4] Nontaxable (i.e., tax-exempt) forms of income, such as interest on State and local government obligations, were not included in AGI and generally did not affect the marginal tax rate. However, the receipt of some forms of tax-exempt income could have influenced the taxability of other income, such as Social Security benefits. When this situation occurred, the income made taxable by the receipt of other forms of nontaxable income was included in AGI.
[5] The income amounts on which these special computations were based were not reflected in current-year AGI or current-year taxable income.
[6] For 1997, the total earned income credit was $30.4 billion. This amount includes the amount used to reduce the regular income tax ($3.8 billion), the amount used to reduce other taxes reported on individual income tax returns ($2.2 billion), and the amount refunded to taxpayers ($24.4 billion). Table 2.5 in Statistics of Income--1997, Individual Income Tax Returns, shows these amounts.
[7] Total income tax does not include certain other taxes reported on the individual income tax return, such as self-employment tax (the Social Security tax on income from self-employment), the Social Security tax on certain tip income, tax from the recapture of prior-year investment or low-income housing credits, tax applicable to early withdrawals from an Individual Retirement Arrangement (IRA) or other qualified retirement plans, tax on trusts, accumulation and distributions, and household employment taxes. The statistics for "total tax liability," shown in Statistics of Income--1997, Individual Income Tax Returns, include these taxes. For Tax Year 1997, total tax liability reported on 95.7 million returns was $762.3 billion.
[8] The difference resulting from the special tax computation does not reflect the provisions of TRA86, which lowered standard deductions for dependents (compared to other taxpayers) and prevented these children from claiming their own personal exemptions.
[9] The percentile groupings of tax filers exclude returns with zero or negative AGI.
[10] For an explanation of the osculatory interpolation technique, see Oh, H. Lock, "Osculatory Interpolation with a Monotonicity Constraint," 1977 Proceedings of the American Statistical Association, Section on Statistical Computing, 1978.
Appendix A: Explanation of Selected Terms This appendix provides brief explanations of the major tax concepts discussed. For more extensive definitions, see Section 4 in Statistics of Income--1997, Individual Income Tax Returns.
Adjusted Gross Income.--Adjusted gross income is "total income," as defined by the tax code, less "statutory adjustments" (primarily business, investment, or certain other deductions, such as payments to a Keogh self-employed retirement plan, certain deductible contributions to an Individual Retirement Arrangement (IRA), and self-employed health insurance deductions). Total income includes, for example, salaries and wages, taxable interest, dividends, alimony, and net amounts from such sources as business income, rents and royalties, and sales of capital assets.
Difference Due to Special Tax Computation.--For this article, the tax difference is the amount of tax resulting from using provisions of one of the special tax computations (Form 8615 or Schedule D) less the amount of tax that would have resulted from not having used these provisions (regular tax computation).
Form 8615 Tax Computation.--Form 8615 was used to compute the tax on investment income of children under age 14 who had investment income of more than $1,300. Generally, such income was taxed at the marginal tax rate of the parents.
Income Tax Before Credits (Regular Tax Computation).--This amount consisted of the tax liability on ordinary income, computed by using the tax table or applying the rates from one of the four tax rate schedules, plus any additional tax (tax on lump-sum distributions from qualified retirement plans). When Form 8615 tax was payable on investment income of children, for this concept, all the income was taxed at the child's rate rather than at the rate of the parents. When the Schedule D tax was payable on net long-term capital gains, the tax was based on the regular tax rates rather than the 28-percent tax rate for capital gains.
Marginal Taxable Income.--See Appendix D.
Marginal Tax Rate.--See Appendix D.
Regular Tax Computation.--Depending on marital status and size of taxable income, the taxpayer used the tax table or applied rates from one of the four tax rate schedules to determine tax. Returns of taxpayers who had taxes computed by the Internal Revenue Service were classified under the regular tax computation method.
Schedule D Tax Computation.--Schedule D was used to compute the 10-percent, 20-percent, 25-percent, and 28-percent tax on net long-term capital gains (in excess of net short-term capital losses), if such a computation was beneficial to the taxpayer. Any investment interest allocated to long-term capital gains (on Form 4952) was excluded from this computation.
Taxable Income.--Taxable income is AGI less the sum of personal exemptions amounts and either the standard deduction for non-itemizers or total itemized deductions. The amounts for personal exemptions and total itemized deductions are net of any reductions because of taxpayers' income exceeding certain income thresholds.
Taxable Returns.--A return is classified as "taxable" based on the presence of "total income tax" (the sum of income tax after credits and the alternative minimum tax). The following additional taxes were not taken into account for this purpose: self-employment, household employment, Social Security, Railroad Retirement Tax Act (RRTA) taxes, tax from recomputing prior-year investment or low-income housing credits, penalty taxes on Individual Retirement Arrangements, section 72 penalty taxes, advance earned income credit payments, or "golden parachute" payments (made to key employees as compensation under certain circumstances).
Tax Generated.--This is the amount of tax computed on modified taxable income either from the tax rate schedules or the tax table. Tax generated does not take into account the alternative minimum tax or the effect of tax credits. For most returns (those without the special tax on lump-sum distributions from qualified retirement plans), tax generated equals "income tax before credits."
Total Income Tax.--Total income tax is the sum of income tax after credits and the alternative minimum tax.
Appendix B: Income Tax Structure
Each year, taxpayers must file an income tax return if they meet certain minimum filing requirements. The filing requirements for 1997 were based on the amount of "gross income," filing status, age, and, to a lesser extent, dependency and blindness [B1]. Generally, the minimum level of income for which a return was required to be filed equaled the sum of the standard deduction for the particular filing status and the amount of the personal exemption deduction allowed for the taxpayer or taxpayers (but not for any dependents). In addition to the general filing requirements, individuals were required to file a return for Tax Year 1997 if they had net earnings from self-employment of at least $400; liability for Social Security or Medicare tax on unreported tip income; Social Security, Medicare, or Railroad Retirement tax on reported tip income or group-term life insurance; "alternative minimum tax"; tax on qualified retirement plan distributions, including an Individual Retirement Arrangement (IRA) or a Medical Savings Account (MSA); tax on the recapture of investment credit or low-income housing credit; recapture tax on the disposition of a home purchased with a Federally-subsidized mortgage; any advance earned income credit payments; or wages of $108.28 or more from a church or qualified church-controlled organization that was exempt from Social Security taxes.
Gross income includes all income received as money, goods, property, or services that was not expressly exempt from tax [B2]. Adjusted gross income (AGI) is equal to gross income less deductions for certain expenses [B3]. "Taxable income," the base on which income tax before credits is computed, equals AGI less the amount for personal exemptions and less either total allowable itemized deductions for taxpayers who itemize deductions, or the standard deduction (including the additional amounts for age and blindness) for all other taxpayers.
Income tax before credits is calculated from taxable income using: The tax table or tax rate schedules, both of which vary with taxpayer filing status (single, married filing jointly, surviving spouse, married filing separately, and head of household); Form 8615 or Form 8814 for children's investment income; Schedule D worksheet for net long-term capital gains; or some combination of the above [B4]. For 1997, the tax rates for each filing status were 10, 15, 20, 25, 28, 31, 36, and 39.6 percent. The tax rates of 10, 20, and 25 percent were only for net long-term capital gains (in excess of net short-term capital losses). (See Appendix C for further details on these rates.)
To calculate their Federal income tax liabilities for 1997, taxpayers used either the tax table or the tax rate schedules. Taxpayers with taxable income less than $100,000 were required to use the tax table, while those with taxable income of $100,000 or more were required to use the tax rate schedules. The tax table was based on income tax "brackets" up to $50 wide [B5]. The tax within each bracket was based on the tax calculated at the midpoint of the bracket and then rounded to the nearest whole dollar. As a result, the tax table and the tax rate schedules could produce different amounts of tax for the same amount of taxable income. Use of the tax table could have produced either a slightly higher or lower amount of tax than that produced by the tax rate schedules. For taxpayers using the tax table with taxable income that was subject to the 36-percent marginal rate, the maximum difference in tax between the tax rate schedules and the tax table was $8.75 [B6]. However, the actual difference in tax was smaller for most taxpayers.
Notes to Appendix B
[B1] Taxpayers fall into one of five filing statuses: single, married filing jointly, married filing separately, head of household, and surviving spouse. Being age 65 or older or being legally blind affects the amount of the standard deduction and, hence, the filing requirements. Those taxpayers who are (or could be) dependents of other taxpayers have different filing requirements. For more information on the general filing requirements for 1997, see Statistics of Income--1997, Individual Income Tax Returns or Publication 17, Your Federal Income Tax.
[B2] As defined under section 61 of the Internal Revenue Code, gross income includes amounts from wages and salaries, interest and dividends, alimony, bartering income, canceled debt income, gambling winnings, rents and royalties, and gains from property sales or exchanges, as well as gross profits from sole proprietorships and farming, income from partnerships and S Corporations, and distributions from estates and trusts. This definition of gross income is slightly different from the Form 1040, U.S. Individual Income Tax Return, concept of "total income," which is a component of the adjusted gross income (AGI) calculation on Form 1040. Total income includes net amounts rather than gross amounts (income prior to deductions) from such items as business income and rents and royalties.
[B3] As defined under Internal Revenue Code section 62, deductible expenses are those incurred in the course of a trade or business or in connection with rents and royalties; losses from property sales or exchanges; and certain statutory adjustments, such as deductible contributions to an IRA or Keogh plan, moving expenses, or the health insurance deduction for certain self-employed taxpayers.
[B4] Income tax before credits includes tax on lump-sum distributions from qualified retirement plans.
[B5] For taxable income between $0 and $5 and between $5 and $25, the tax brackets were $5 and $10 wide, respectively. For taxable income between $25 and $3,000, the brackets were $25 wide. All brackets for taxable income above $3,000 were $50 wide.
[B6] For example, assume a taxpayer filing as "married filing separately" reported taxable income of $85,000. Using the tax table, the tax would be $22,643, but using the tax rate schedules, the tax would be $22,634.25, a difference of $8.75.
Appendix C: Changes in Law for 1997
Adoption Credit.--New for 1997, certain taxpayers were able to take a nonrefundable tax credit for qualifying expenses paid in connection with the adoption of an eligible child. The credit could be as much as $5,000 for each child ($6,000 for a child with special needs), and would be phased out for AGI's between $75,000 and $115,000. There is also an income exclusion of up to $5,000 for employer-provided adoption expenses. Both the credit for non-special needs adoptions and the exclusion will expire on December 31,2001. This was a provision in the Small Business Protection Act of 1996.
Capital Gain Distributions.--Beginning with Tax Year 1997, all capital gain distributions had to be reported on Schedule D, even if there were no other capital gains or losses.
Capital Gain Rates.--The maximum long-term capital gain tax rate for sales or exchanges of property after May 6, 1997, was reduced to 20 percent (10 percent for taxpayers in the 15-percent tax bracket). Capital gains realized between May 7, 1997, and July 28, 1997, were taxed at this lower long-term capital gain rate if held for 12 months or more. Capital gains realized after July 28, 1997, were taxed at the long-term rate if held for 18 months or more. Most other long-term gains were still taxed at a maximum of 28 percent. However, the maximum rate on gains from the sale of certain depreciable real property was reduced only to 25 percent. Therefore, for 1997, the long-term capital gain tax rate could be 10 percent, 20 percent, 25 percent, 28 percent, or a combination of those rates. Previously, the maximum rate was 28 percent. The new capital gain rates were also used in figuring the alternative minimum tax.
Earned Income Credit.--Several changes were made to the earned income credit for 1997. The maximum amount of the earned income credit increased to reflect indexing for inflation, as did the amounts of earned income and AGI an individual could have and still claim the credit. Taxpayers with more than $2,250 of investment income (up from $2,200 for 1996) were not eligible for the earned income credit. For most people, investment income includes interest (taxable and tax-exempt), dividend income, and capital gain net income. The maximum credit for taxpayers with no qualifying children increased 2.7 percent for 1997, from $323 to $332. For these taxpayers, earned income and AGI had to be less than $9,770 (up from $9,500 for 1996). For taxpayers with one qualifying child, the maximum credit for 1997 increased 2.7 percent, from $2,152 to $2,210. For taxpayers with two or more qualifying children, the maximum credit increased 2.7 percent to $3,656 for 1997. To be eligible for the credit, a taxpayer's earned income and AGI had to be less than $25,760 for one qualifying child (up from $25,078 for 1996), or less than $29,290 for two or more qualifying children (up from $28,495 for 1996).
Exemption Amount.--Indexing for inflation allowed most taxpayers to claim a $2,650 deduction for each personal or dependant exemption to which he or she was entitled for 1997, a $100 increase over the amount allowed for 1996. The AGI threshold for the reduction of exemption amounts was also indexed for inflation, from $117,950 to $121,200 for single filers; $176,950 to $181,800 for married persons filing jointly and surviving spouses; $147,450 to $151,500 for heads of household; and $88,475 to $90,900 for married persons filing separately.
Individual Retirement Arrangements (IRA 's).--For 1997, married couples filing a joint tax return could contribute up to $2,000 to each spouse's IRA, even if one spouse had little or no compensation. Therefore, the couple's total combined IRA contributions could be as high as $4,000 for the year. Previously, if one spouse had no compensation or elected to be treated as having no compensation, the total combined IRA contributions could not be more than $2,250.
Itemized Deductions.--If a taxpayer's AGI was greater than $121,200 ($60,600 if married filing separately), some types of his or her itemized deductions were limited; this threshold increased from $117,950 ($58,975) for 1996 as a result of indexing for inflation. The limitation did not apply to deductions for medical and dental expenses, investment interest expenses, casualty or theft losses, and gambling losses; all other deductions were subject to the limitation. To arrive at allowable itemized deductions, total itemized deductions were reduced by the smaller off (1) 80 percent of the "non-limited" deductions or (2) 3 percent of AGI in excess of the limitation threshold.
Medical Savings Accounts.--A new statutory adjustment for 1997, this pilot program for tax deferred medical savings was included in the Health Insurance Portability and Accountability Act of 1996. Eligible taxpayers either had to be self-employed or participate in a high deductible employer-sponsored health play (limited to employers of no more than 50 employees over the preceding 2 years). Maximum annual contributions were limited to 65 percent of the deductible for individual coverage and 75 percent of the deductible for family coverage. Any distributions for qualified medical purposes were not taxed. However, if other distributions were made before age 65, disability, or death, they would be included in income and subject to an additional 15-percent tax.
Sale of a Home.--Taxpayers who sold their primary residences after May 6, 1997, were generally able to exclude from income up to $250,000 ($500,000 for married couples filing a joint tax return) of the gain on the sale of their homes.
Self-Employed Health Insurance Deduction.--Included in the Health Insurance and Portability Act of 1996 was a provision to increase the maximum percentage of self-employed health insurance premiums that a taxpayer could deduct as a statutory adjustment, from 30 percent in 1996 to 40 percent in 1997.
Self-Employment Tax.--The ceiling on taxable "self-employment income" was increased for 1997 due to indexing. The maximum amount of net earnings applied to the Social Security part of self-employment tax increased to $65,400 from $62,700 for 1996.
Standard Deduction.--The basic standard deduction and additional standard deduction for age or blindness increased for 1997 as a result of inflation indexing. For single filers, the basic standard deduction rose from $4,000 to $4,150; for married persons filing jointly or surviving spouses, from $6,700 to $6,900; for married persons filing separately, from $3,350 to $3,450; and for heads of household, from $5,900 to $6,050. The basic standard deduction claimed by filers who were dependents of other taxpayers remained at $650. The additional standard deduction for people age 65 or older or the blind remained at $1,000 for single filers and heads of households, and $800 for married persons filing jointly, surviving spouses, and married persons filing separately.
Tax Brackets.--To reflect the effects of inflation, the boundaries for the tax brackets were widened. The 15-percent bracket applied to taxable income equal to or below $24,651 ($24,000 for 1996) for single filers; $41,200 ($40,100 for 1996) for joint filers or surviving spouses; $20,600 ($20,050 for 1996) for married persons filing separately; and $33,050 ($32,150 for 1996) for heads of household. The 28-percent tax bracket applied to taxable income in excess of the 15-percent bracket ceiling and equal to or below $59,750 ($58150 for 1996) for single filers; $99,600 ($96,900 for 1996) for joint filers or surviving spouses; $49,800 ($48,450 for 1996) for married persons filing separately; and $85,350 ($83,050 for 1996) for heads of household. The 31-percent tax bracket applied to taxable income in excess of the 28-percent bracket ceiling and equal to or below $124,650 ($121,300 for 1996) for single filers; $151,750 ($147,700 for 1996) for joint filers or surviving spouses; $75,875 ($73,850 for 1996) for married persons filing separately; and $138,200 ($134,500 for 1996) for heads of households. The 36-percent tax bracket applied to taxable income in excess of the 31-percent bracket ceiling and equal to or below $271,050 ($263,750 for 1996) for single filers, joint filers or surviving spouses, and heads of households and $135,525 ($131,875 for 1996) for married persons filing separately. The 39.6-percent tax rate applied to taxable income in excess of the upper boundary for the 36-percent tax bracket.
Appendix D: Income and Tax Concepts
As discussed in Appendix B, gross income is all income received that is not exempt from tax. Total income is the net amount of gross income after certain expenses (i.e., business or rent and royalty expenses) have been deducted. Adjusted gross income (AGI) is the result of total income less statutory adjustments to income (i.e., deductible contributions to an IRA or Keogh plan).
1979 Income Concept
To analyze changes in income and taxes over a period of years, a consistent definition of income should be used. Because the components of AGI may vary from year to year as the law changes, the "1979 Income Concept" was developed to provide a more uniform measure of income across tax years. By including the same income and deduction items in each year's income calculation and using only items available on Federal individual income tax returns, the definition of the 1979 Income Concept is consistent throughout the base years and can be used for future years to compare income by including only income components common to all years. Tax Years 1979 through 1986 were used as base years in identifying the income and deduction items included in this concept. The 1979 Income Concept applied to 1997 includes many income and deduction items that are also components of AGI (Figure I). However, unlike AGI, the 1979 Income Concept also includes nontaxable (i.e., tax-exempt) amounts of income reported on individual income tax returns and disallowed passive loss deductions. In addition, only straight-line deductions for depreciation are included in the 1979 Income Concept [D1].
Figure I
Components of the 1979 Income Concept, Tax Year 1997
Income or Loss: Salaries and wages (1) Interest(1) Dividends (1) Taxable refunds (1) Alimony received (1) Capital gains reported on Schedule D minus allowable losses (1) Other gains and losses (Form 4797) (1) Business net income or loss (1) Farm net income or loss (1) Rent net income or loss (1) Royalty net income or loss (1) Partnership net income or loss (1) S Corporation net income or loss (1) Farm rental net income or loss (1) Estate or trust net income or loss (1) Unemployment compensation (1) Depreciation in excess of straight-line depreciation (2) Total pension income (3, 4) Other net income or loss (5) Net operating loss (1) Deductions: Disallowed passive losses (Form 8582) (6) Moving expenses (1) Alimony paid (1) Unreimbursed business expenses (6)
(1) Included In adjusted gross income (less deficit) (AGI) for Tax Year 1997.
(2) Adjustment to add back excess depreciation (accelerated over straight-line depreciation) deducted in the course of a trade or business and included in net income (loss) amounts shown above.
(3) Includes taxable and tax-exempt pension and retirement distributions, including IRA distributions.
(4) Not fully included In AGI for Tax Year 1997.
(5) Includes an adjustment to add back amounts reported for the "foreign-earned income exclusion."
(6) Not included in AGI for Tax Year 1997.
Modified Taxable Income
This concept is relevant only for "prior-year returns." For current-year returns, modified taxable income is identical to taxable income.
This is the term used for the statistics to describe "income subject to tax," the actual base on which tax is computed. Each year, a small number of returns for prior tax years are filed during the same calendar year in which the tax returns for the current tax year are being selected for the Statistics of Income sample. Some of these returns are selected for the sample and act as proxies for returns for the current tax year that will be filed during a later calendar year. The tax on these returns is based on a previous year's tax law (which may reflect different tax rates and income concepts). For the statistics in this article, the taxable income reported on these prior-year returns is modified to equal an amount necessary to generate the tax actually shown on these returns using current-year rates.
Marginal Tax Rates
Under the progressive U.S. tax rate structure, different portions of taxable income are taxed at different rates. Figure J illustrates how income tax is determined for a single taxpayer with AGI of $280,000 using the standard deduction. As shown in the example, five different tax rates are applied to the taxable income to arrive at total tax. The first $24,650 of taxable income were taxed at the 15-percent rate; the next $35,100 were taxed at the 28-percent rate; the next $64,900 were taxed at the 31-percent rate; the next $146,400 were taxed at the 36-percent rate; and the remaining portion, $4,800, was taxed at the 39.6-percent rate. For purposes of this article, the tax rate applied to the last dollar of income (given certain assumptions about which source of income provided the last dollar of income subject to tax) is the marginal tax rate for that return. The example shown has a marginal tax rate of 39.6 percent.
Figure J
Income Tax Calculation for a Single Taxpayer With One Exemption Who Used the Standard Deduction, Tax Year 1997
[Money amounts are in whole dollars]
Item 1997
Adjusted gross income 280,000
Less: Exemption amount 0(1)
Standard deduction amount 4,150
Equals: Taxable income 275,850
Tax based on tax rates for single taxpayers:
First $24,650 taxed at 15 percent 3,698
Next $35,100 taxed at 28 percent 9,828
Next $64,900 taxed at 31 percent 20,119
Next $146,400 taxed at 36 percent 52,704
Next $4,800 taxed at 39.6 percent 1,901
Total tax from tax rate schedule 88,250
(1) The exemption amount was phased out completely because AGI exceeded $243,700.
Since the individual income tax structure includes various types of income, deductions, exclusions, credits, and taxes which are not subject to the same treatment under tax laws, determining marginal tax rate can be difficult. For instance, investment income of a dependent under age 14 in excess of a specific amount is treated differently than salaries and wages of the same dependent. The investment income in excess of $1,400 was taxed at the marginal tax rate of the parents, while the salaries and wages were taxed at the dependent's own rate.
Calculating marginal tax rates for a specific individual income tax return generally depends on the types and amounts of income reported and the assumptions made about the order in which the income is taxed, in particular, which type of income is assumed to be received "last." This determination is complicated by the presence of such items as the alternative minimum tax and various tax credits.
For this article, it is assumed that the income taxed at the marginal rate was the "last" income received. The alternative minimum tax and income tax credits, such as the earned income credit, are excluded in determining the marginal tax rates. The marginal tax rate is defined as follows:
(1) If a return showed taxable income, the marginal tax rate of the return was the highest rate at which any amount of taxable income reported on the return was taxed.
(2) If the return had no taxable income except for net long-term capital gains and that amount was less than or equal to the 15-percent tax bracket limit, the return was defined as having a "10-percent rate" marginal tax rate. If the return had taxable income (from other than net long-term capital gains) to which only the 15-percent tax rate applied, as well as net long-term capital gains to which the 20-percent or 25-percent rate on the net gain applied, the return was defined as having a marginal tax rate equal to the maximum rate at which the net gains were taxed. If the return had taxable income (from other than net long-term capital gains) to which the 28-percent tax rate applied as the highest rate, as well as net long-term capital gains to which the maximum 28-percent rate on net gain applied, the return was defined as having a "28-percent (capital gain)" marginal tax rate. However, if the return had taxable income (from other than net long-term capital gains) above the maximum amount to which the 28-percent applied, as well as net long-term capital gains to which the 28-percent rate on the net gain applied, the return was classified as having the highest rate at which any amount of taxable income reported on the return was taxed.
(3) For returns of dependents with a Form 8615 attached when the use of this form resulted in the taxation of some of the dependent's income as if it were that of the parents, the return was classified as having a "Form 8615" marginal tax rate (the returns in the Form 8615 classification are not distributed by tax rate).
(4) For returns of parents choosing to report interest and dividend income of a dependent under age 14 on their own (i.e., the parents') return using Form 8814, when the dependent's income generated the only tax liability on the parent's return, the return was classified with a "Form 8814" marginal tax rate.
The classification of returns into marginal tax rate categories for Statistics of Income purposed was essentially a function of filing status, size of taxable income, presence of net long-term capital gains (in excess of net short-term capital losses), and presence of Form 8615 or Form 8814. Returns were classified into one of the following eleven mutually exclusive marginal tax rate categories: (1) 10-percent rate; (2) Form 8814 (15-percent rate with no tax liability other than that generated by the dependent's income); (3) 15-percent rate; (4) 20-percent rate; (5) 25-percent rate; (6) 28-percent rate; (7) 28-percent rate with net long-term capital gains [D2]; (8) 31-percent rate; (9) 36-percent rate; (10) 39.6-percent rate; and (11) Form 8615 (with income taxed at any rate) [D3].
Table 1 presents statistics by marginal tax rate classification and filing status for returns with modified taxable income. For each marginal rate classification, modified taxable income and "income tax generated" were computed "at all rates" and "at marginal rate." The "at all rates" computations (columns 3 and 5) show the total amount of modified taxable income or tax generated, tabulated by the marginal tax rate specified; each tax rate classification is mutually exclusive. The "at marginal rate" computations (columns 4 and 6) report the specific amounts of modified taxable income taxed and the tax generated at the marginal tax rate shown, for all returns in each of the marginal rate classifications. For example, consider returns in the "joint returns and returns of surviving spouses" filing status that were included in the "39.6-percent" marginal tax rate classification. The total modified taxable income for the 590,431 returns in this classification "at all rates" was $491.7 billion (column 3), and the total tax generated was $164.7 billion (column 5). More than $244.0 billion (column 4) of the modified taxable income for 1997 were subject to tax at the marginal tax rate of 39.6 percent. This modified taxable income generated $96.6 billion (column 6) in tax at the 39.6-percent tax rate with the remainder generated at the lower seven tax rates. The alternative minimum tax was not included in the statistics by marginal tax rate.
Table 2 provides statistics on the tax generated, in total and at each marginal tax rate bracket, for returns with modified taxable income. Returns in this table are classified by size of AGI rather than by the marginal tax rate classifications used in Table 1. The tax generated at each marginal tax rate was computed based on the modified taxable income for each individual return. For example, the approximately 1.4 million returns included in the "$200,000 under $500,000" income-size classification showed total modified taxable income of $345.8 billion and generated total tax of $99.1 billion. Of the $345.8 billion of modified taxable income, $0.4 billion were taxed at the 10-percent rate, $54.5 billion were taxed at 15 percent, $25.2 billion were taxed at 20 percent, $1.2 billion were taxed at 25 percent, $74.5 billion were taxed at 28 percent (ordinary income), $15.0 billion were taxed at 28 percent (net long-term capital gains), $66.2 billion were taxed at 31 percent, $85.5 billion were taxed at 36 percent, and $23.2 billion were taxed at 39.6 percent, with the remainder consisting of income related to Forms 8814 and 8615. Approximately $0.04 billion of the total tax generated were from the 10-percent rate, $8.2 billion of the total tax generated were from the 15-percent rate, $5.0 billion were from the 20-percent rate, $0.3 billion were from the 25-percent rate, $20.9 billion were from the 28-percent rate (ordinary income), $4.2 billion were from the 28-percent rate (net long-term capital gains), $20.5 billion were from the 31 -percent rate, $30.8 billion were from the 36-percent rate, and $9.2 billion were generated at the 39.6-percent rate, with the remainder from tax related to Forms 8814 and 8615.
Table 3 presents statistics on the income and tax generated at each marginal tax rate (as in Table 2, columns 5 through 28) by filing status, instead of size of AGI, for returns with modified taxable income. Almost 0.6 million of the nearly 43.5 million returns with modified taxable income filed jointly had some income taxed at the 39.6-percent tax rate. For these returns, the taxable income subject to this rate was $244.0 billion, and the tax generated was $96.6 billion.
Notes to Appendix D
[D1] For more details on the income computation under the 1979 Income Concept for 1997, see Statistics of Income--1997, Individual Income Tax Returns.
[D2] The "28-percent (capital gain)" marginal tax rate category consists of returns that have a top tax rate of 28 percent, but have net long-term capital gains (in excess of net short-term capital losses), which would have been taxed at a higher rate if they had been some other form of income.
[D3] For some taxpayers, the statutory marginal tax rate may differ from the actual marginal tax rate. For example, extra income received by certain taxpayers may result in the phaseout of their personal exemptions as well as some of their itemized deductions. Therefore, an extra dollar of income could add more than $1 of taxable income. While this taxpayer could face a statutory marginal tax rate of 31 percent, the actual marginal rate faced by the taxpayer would be somewhat higher.
Appendix E: Computation of Alternative Minimum Taxable Income (AMTI)
AMTI was computed by adding certain "tax preferences" (i.e., deduction or exclusion amounts identified as potential sources of tax savings disallowed for AMT purposes) and "adjustments" (i.e., regular tax deduction amounts recomputed or excluded for AMT purposes) to taxable income before any deductions for personal exemptions (Figures K-1 and K-2). Although itemized deductions for some taxpayers were limited for regular tax purposes, the full amounts of such itemized deductions were included as adjustments. To compensate for this, the overall limitation on itemized deductions was subtracted from taxable income for AMT purposes. The "net operating loss deduction" was recomputed to allow for the exclusion of the "tax preference items" and" adjustments" used to reduce regular tax liability. The recomputed net operating loss deduction, termed the "alternative net operating loss deduction," was limited to 90 percent of AMTI (with certain minor exceptions for 1997).
Figure K-1
Calculation of Alternative Minimum Taxable Income (AMTI), Tax Year 1997
Taxable income before deduction for personal exemptions PLUS: Adjustments and preferences (See Figure K-2) PLUS: Net operating loss deduction MINUS: Overall itemized deductions limitation MINUS: Alternative tax net operating loss deduction(1) EQUALS: Alternative minimum taxable income
(1) Limited to 90 percent of AMTI, except when depletion is present on Form 6251. In this case, AMTI is recalculated, and the alternative tax net operating loss deduction is limited to 90 percent of the recomputed amount.
Figure K-2
Alternative Minimum Tax Adjustments and Preferences, Tax Year 1997
* Standard deduction
* Medical and dental expenses from Schedule A (the lesser of deductible medical and dental expenses or 2.5 percent of AGI)
* Deductions for State and local income, real estate, personal property, and foreign taxes
* Deductions for interest on certain home mortgages not used to buy, build, or improve the taxpayer's main home or second home
* Miscellaneous itemized deductions subject to the 2-percent-of-AGI limitation
* Refunds of State and local income, real estate, personal property, and foreign taxes previously deducted (negative)
* Investment interest expense (the result could be negative)
* Excess of depreciation on property placed in service after 1986 over less liberal methods allowed for alternative minimum tax (AMT) purposes (straight-line or 150-percent declining balance method, depending on the type of property; the result could be negative)
* Adjustment of gain or loss on property, the basis of which was affected by accelerated depreciation or rapid amortization and which was reduced for AMT purposes (the result could be negative)
* Incentive stock options which were exercised after 1987 (the amount by which the value of the option when exercised exceeded the price paid by the taxpayer; the result could be negative)
* Passive activity gains and losses allowed for regular tax purposes for activities acquired before October 23, 1986, taking into account AMT adjustments and preference items and any AMT prior-year unallowed losses (the result could be negative)
* Difference between income distributions to beneficiaries of estates and trusts for regular tax purposes and the amounts refigured for AMT purposes (the result could be negative)
* Tax-exempt interest from private activity bonds issued after August 7, 1986
* Excess of deduction for carryover of charitable contributions refigured for AMT purposes using AMT, instead of regular tax (the result could be negative)
* Excess of circulation expenditures paid or incurred after 1986 over allowable amortization if the expenditures were capitalized (the result could be negative)
* Excess of percentage depletion deduction for sections 611 and 613 property over the adjusted basis (the result could be negative)
* Excess of accelerated depreciation on property placed in service before 1987 over straight-line depreciation as refigured for AMT purposes
* Adjustment from disallowing the installment sales method of accounting for sales of inventory and stock in trade after March 1, 1986, with certain exceptions (the result could be negative)
* Amount by which excess intangible drilling costs deducted currently over allowable amortization (if these costs were capitalized) was more than 65 percent of the taxpayer's "net income" from oil, gas, and geothermal wells, with exceptions for independent oil producers and royalty owners
* Deferred income from long-term contracts entered into after February 28, 1986, with certain exceptions and limitations (the result could be negative)
* Adjustment for refigured loss from activities in which allowable losses from partnerships or S corporations were limited by "at-risk" and other rules, taking into account AMT adjustments and preference items (the result could be negative)
* Excess of mining exploration and development costs paid or incurred after 1986 over allowable amortization if the expenditures were capitalized (the result could be negative)
* Adjustment for taxable distributions received from a cooperative (total AMT patronage dividend and per-unit retain allocation adjustment)
* Excess of rapid amortization of pollution control facilities placed in service after 1986 over otherwise allowable depreciation (the result could be negative)
* Excess of research and experimental expenditures paid or incurred after 1986 over allowable amortization if the expenditures were capitalized (the result could be negative)
* Adjustment for refigured tax shelter farm losses, taking into account AMT adjustments and preference items (the result could be negative)
* Related adjustments, refigured for AMT purposes, including section 179 expense deduction, expenses for business or rental use of the home, conservation expenses, taxable IRA distributions, self-employed health insurance deduction, Keogh retirement plan or self-employed SEP deduction, and IRA deductions (the result could be negative)
AMTI was reduced by an exemption amount dependent upon the filing status of the individual and subject to phaseout at higher AMTI levels. For 1997, the AMTI exemptions for single filers (and heads of households) was $ 33,750; for joint filers and surviving spouses, $45,000; and for married persons filing separately, $22,500. The exemption was reduced (but not below zero) by 25 percent of the amount by which the AMTI exceeded threshold levels of $112,500 for single filers (and heads of households), $150,000 for joint filers, and $75,000 for married persons filing separately. The exemptions was phased out completely for individuals whose filing status was single (or head of household), married filing jointly, and married filing separately, at $247,500, $330,000, and $165,000, of AMTI, respectively.
After reduction by the exemption, the first $175,000 ($87,500 if married filing separately) of the remaining AMTI was subject to tax at a 26-percent rate, with any excess taxed at a 28-percent rate. However, capital gains (recalculated for AMT purposes) that were taxed at lower rates (10, 20, and 25 percent) were tax at these rates for AMT as well. The rest of AMT was taxed at the rates mentioned above (26 percent or 28 percent). The resulting tax was reduced by the "alternative minimum tax foreign tax credit," which produced a "tentative minimum tax." Tentative minimum tax was further reduced by the individual's regular tax before credits (excluding tax on lump-sum distributions from qualified retirement plans) less the foreign tax credit (for regular tax purposes) to yield the alternative minimum tax.
Dependents under the age of 14 with investment income over a certain amount who filed their own returns were subject to special rules for AMT purposes. These rules required that the dependents pay the same amount of AMT as their parents would have paid if the parents included the dependents' incomes on their own tax returns. (Dependents filing their own returns were limited to an AMT exemption of $1,300 plus their "earned incomes." The dependent's AMT could be reduced if the parents had regular tax greater than the child's own tentative minimum tax, or if any other dependent under age 14 of the same parents had regular tax greater than this dependent's own tentative minimum tax.)
Appendix F. Data Sources and Limitations
The statistics for Tax Year 1997 are based on a stratified probability sample of unaudited individual income tax returns (Forms 1040, 1040A, 1040EZ, and 1040PC, including electronic returns) filed with the Internal Revenue Service during Calendar Year 1998. Returns in the sample were stratified based on: (1) the larger of positive income or negative income; (2) the size of business and/or farm receipts; (3) the presence or absence of specific forms and schedules; and (4) usefulness of returns for Treasury Department tax modeling purposes [F1]. Returns were then selected at rates ranging from 0.022 percent to 100 percent. The sampling resulted in 124,913 returns selected to represent the 123,045,360 returns filed during 1998.
Since the data presented in this article are estimates based on a sample of returns filed, they are subject to sampling error. To properly use the statistical data provided, the magnitude of the potential sampling error must be known; coefficients of variation (CV's) are used to measure that magnitude. (For information about the samples used for the other tax years referred to in the statistics, for example, in Tables 5 through 8, see the Statistics of Income reports for those years.) Figure L presents estimated CV's for the number of returns and money amounts for selected income items. The appendix to this issue of the Bulletin discusses the reliability of estimates based on samples, and the use of coefficients of variation for evaluating the precision of estimates based on samples.
Figure L
Coefficients of Variation for Selected Items, Tax Year 1997
[Coefficients of variation are percentages]
Modified taxable income Tax
generated
Size of adjusted Number of
gross income returns Amount Amount
(1) (2) (3)
Total 0.23 0.19 0.22
Under $2,000(1) 4.57 5.29 5.68
$2,000 under $4,000 4.65 5.18 5.61
$4,000 under $6,000 4.40 4.72 4.96
$6,000 under $8,000 3.98 4.90 5.04
$8,000 under $10,000 3.17 3.69 3.73
$10,000 under $12,000 3.19 3.53 3.55
$12,000 under $14,000 2.90 3.37 3.37
$14,000 under $16,000 2.65 3.22 3.23
$16,000 under $18,000 2.73 3.23 3.24
$18,000 under $20,000 2.69 3.11 3.12
$20,000 under $25,000 1.72 1.93 1.94
$25,000 under $30,000 1.88 2.06 2.06
$30,000 under $40,000 1.32 1.39 1.41
$40,000 under $50,000 1.36 1.41 1.46
$50,000 under $75,000 1.05 1.09 1.13
$75,000 under $100,000 1.45 1.48 1.53
$100,000 under $200,000 1.44 1.28 1.26
$200,000 under $500,000 1.32 1.13 1.12
$500,000 under $1,000,000 1.15 1.04 1.05
$1,000,000 or more 0.88 0.39 0.38
Income tax Total income
after credits tax
Size of adjusted
gross income Amount Amount
(4) (5)
Total 0.23 0.23
Under $2,000(1) 15.30 8.71
$2,000 under $4,000 5.58 5.64
$4,000 under $6,000 4.96 4.96
$6,000 under $8,000 5.31 5.31
$8,000 under $10,000 3.83 3.83
$10,000 under $12,000 3.60 3.60
$12,000 under $14,000 3.58 3.58
$14,000 under $16,000 3.55 3.55
$16,000 under $18,000 3.71 3.71
$18,000 under $20,000 3.60 3.60
$20,000 under $25,000 2.10 2.10
$25,000 under $30,000 2.10 2.10
$30,000 under $40,000 1.42 1.42
$40,000 under $50,000 1.47 1.47
$50,000 under $75,000 1.14 1.14
$75,000 under $100,000 1.59 1.59
$100,000 under $200,000 1.27 1.26
$200,000 under $500,000 1.13 1.13
$500,000 under $1,000,000 1.06 1.05
$1,000,000 or more 0.38 0.38
(1) Includes returns with adjusted gross deficit.
Notes to Appendix F
[F1] Returns in the sample were stratified based on the presence or absence of one or more of the following forms or schedules: Form 2555, Foreign Earned Income; Form 1116, Foreign Tax Credit (Individual, Fiduciary, or Nonresident Alien Individual); Schedule C, Profit or Loss from Business (Sole Proprietorship); and Schedule F, Profit or Loss from Farming.
David Campbell and Michael Parisi are economists with the Individual Returns Analysis Section. This article was prepared under the direction of Jeff Hartzok, Chief.
COPYRIGHT 2000 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group