Who Pays the Most in Federal Taxes in the US?

The question of who shoulders the primary burden of federal taxes in the United States is complex, as the answer depends on the metric used. The tax burden can be assessed by the total dollar amount contributed by different groups or by the percentage of income each group pays. This overview explores the main sources of federal revenue and breaks down how the responsibility for paying these taxes is distributed across various income levels.

The Major Federal Taxes

The federal government relies on several primary sources of revenue to fund its operations. In fiscal year 2023, the government collected over $4.4 trillion, with individual income taxes accounting for nearly half of that total at $2.18 trillion. These taxes are levied on various forms of personal income, including wages, salaries, investments, and business profits. The system uses a series of tax brackets, meaning different portions of a person’s income are taxed at progressively higher rates.

Payroll taxes represent the second-largest source of federal revenue, contributing about 36% of the total in fiscal year 2023. These taxes are specifically designated to fund Social Security and Medicare. Established by the Federal Insurance Contributions Act (FICA), these taxes are split evenly between employees and employers. For 2025, the Social Security tax is 6.2% for both the employee and employer on wages up to $176,100, while the Medicare tax is 1.45% for both, with no wage limit.

Corporate income taxes are levied on the profits of corporations and accounted for approximately 9% of federal revenues in 2023. The current federal corporate tax rate is a flat 21%. This tax applies to C corporations, while profits from pass-through businesses, such as sole proprietorships and partnerships, are reported on the owners’ individual income tax returns.

A smaller portion of federal revenue comes from excise taxes, which are levied on specific goods and services like gasoline, tobacco, and alcohol. These taxes can discourage certain behaviors or fund related government programs. For instance, the federal gas tax generates revenue that is dedicated to the Highway Trust Fund. Customs duties, or tariffs on imported goods, also contribute to this category of revenue.

Tax Burden by Income Group

Analyzing the distribution of the federal tax burden reveals two ways of looking at who pays the most: the total share of taxes paid and the average tax rate. Data shows that higher-income households pay the vast majority of federal income taxes in total dollars. In 2022, the top 1 percent of earners, those with an adjusted gross income (AGI) of $663,164 or more, paid 40.4% of all federal income taxes, despite earning 22.4% of the nation’s total AGI.

The top 50 percent of taxpayers paid 97% of all federal individual income taxes in 2022, while the bottom 50 percent contributed the remaining 3%. This disparity in the share of taxes paid is a long-term trend. In 2022, the top 1 percent of taxpayers paid more in income taxes ($864 billion) than the bottom 90 percent combined ($599 billion).

When the tax burden is measured as an average effective tax rate, a clear progressive pattern emerges for the federal income tax. In 2022, the top 1 percent of taxpayers paid an average income tax rate of 26.1 percent. This was seven times higher than the 3.7 percent average rate paid by the bottom half of taxpayers, making under $50,339. As income rises, so does the average tax rate, with taxpayers in the 10th to 5th percentiles ($178,611 to $261,591) paying an average rate of 14.3%.

When all federal taxes are considered, including payroll taxes, the picture shifts slightly. The Congressional Budget Office (CBO) found that in 2021, the highest-earning quintile (top 20%) of households paid an average federal tax rate of 23.9%. In contrast, the lowest quintile faced a negative effective tax rate, receiving more back in refundable tax credits than they paid. The average household in the top 1% paid over $931,000 in total federal taxes in 2021.

Understanding Tax Progressivity

The distribution of the federal tax burden is a direct result of the progressive structure of the individual income tax. This system applies higher tax rates to higher portions of income. For 2025, the federal income tax system has seven marginal tax rates, and a taxpayer’s income is not taxed entirely at their highest rate. Instead, different segments of their income fall into different brackets, with each segment taxed at the corresponding rate.

• 10%
• 12%
• 22%
• 24%
• 32%
• 35%
• 37%

Tax deductions and credits also shape the progressivity of the income tax system. The standard deduction allows taxpayers to reduce their taxable income by a set amount, creating a zero-tax bracket for the first portion of their earnings. Refundable tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit can reduce a household’s tax liability below zero, resulting in a net payment from the government. These provisions benefit low- and middle-income families and are a primary reason why many households have no federal income tax liability.

In contrast to the progressive income tax, payroll taxes are often considered regressive. This is because the Social Security tax only applies to earnings up to an annual limit ($176,100 in 2025). As a result, lower- and middle-income workers pay the tax on their entire income, while high-income earners pay it on only a fraction of their earnings. The Medicare tax is more proportional, as it applies to all wage income, though an additional 0.9% tax applies to earnings above $200,000 for single filers.

The Role of Corporate and Investment Taxes

The discussion of who bears the tax burden extends to taxes on corporate profits and investment income. The corporate income tax is levied on a corporation’s profits, but economists debate who ultimately bears the economic cost. This concept, known as tax incidence, suggests the burden does not necessarily fall on the entity that pays the government but can be passed on to different groups in the economy.

One perspective is that the burden falls on the owners of capital, meaning shareholders, through lower investment returns. If this is the case, the tax is largely progressive, as stock ownership is concentrated among higher-income households. Another view is that the tax is shifted to workers in the form of lower wages. A third possibility is that corporations pass the cost to consumers through higher prices. Government bodies like the CBO and the Treasury Department assume the burden is split, with the majority falling on capital owners and a smaller portion on labor.

The taxation of investment income also has implications for the overall distribution of the tax burden. Long-term capital gains—profits from the sale of an asset held for more than one year—and qualified dividends are taxed at preferential rates that are lower than the rates for ordinary income. For 2025, these rates are 0%, 15%, or 20%, depending on the taxpayer’s overall taxable income.

These lower rates primarily benefit higher-income individuals, who receive a disproportionate share of their income from investments. For example, a single filer with a taxable income up to $48,350 in 2025 would pay a 0% rate on long-term capital gains, while someone with an income over $533,400 would pay 20%. This structure means that a wealthy individual whose income is primarily from long-term investments could have a lower overall effective tax rate than someone who earns a high salary.