In the United States, high-income households pay most of the federal taxes. The Congressional Budget Office found that in 2022 the top 1 percent of households paid about 27 percent of all federal taxes, and the top 20 percent paid roughly 70 percent of the total.1Congressional Budget Office. The Distribution of Household Income, 2022 That headline hides a more interesting story, though, because federal revenue comes from several different taxes and each one falls on a different part of the population. Income taxes tilt sharply toward the top. Payroll taxes spread across the middle. Excise taxes weigh more heavily on the bottom. To understand who really pays, you have to look at each piece.
Income Tax Falls Hardest on Top Earners
The individual income tax is the largest single source of federal revenue, and it is where the concentration at the top is most visible. IRS Statistics of Income data shows the top 1 percent of filers, generally those with adjusted gross income above roughly $680,000, paying close to 46 percent of all individual income taxes collected while earning about 26 percent of national income. The top 10 percent contribute around 76 percent of income tax revenue. The bottom 50 percent of filers account for only about 2 to 3 percent, and many lower-income households owe nothing at all in federal income tax once refundable credits like the Earned Income Tax Credit and the Child Tax Credit are applied.
This concentration is built into the structure of the tax. Section 1 of the Internal Revenue Code sets seven progressive brackets ranging from 10 percent to 37 percent, so each additional dollar you earn above a threshold is taxed at a higher rate.2Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed Two additional levies then raise the effective rate on high earners beyond what the brackets alone would suggest. The Alternative Minimum Tax sets a floor by limiting certain deductions; for 2026 the AMT exemption is $90,100 for single filers and $140,200 for joint filers, phasing out at $500,000 and $1,000,000 respectively.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The 3.8 percent Net Investment Income Tax then applies to investment earnings once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.4Internal Revenue Service. Topic No. 559, Net Investment Income Tax
Why the Effective Rate Is Lower Than the Top Bracket
Long-term capital gains and qualified dividends are taxed at preferential rates of 0, 15, or 20 percent rather than at ordinary income rates.5Internal Revenue Service. Revenue Procedure 2025-32 – 2026 Adjusted Items Because wealthier households receive a disproportionate share of their income from investments, these lower rates pull their overall effective tax rate below the 37 percent top bracket. The Net Investment Income Tax adds 3.8 percentage points back for high earners, bringing the top combined rate on long-term gains to 23.8 percent. Even so, this is why the top 1 percent’s share of income taxes, while large in absolute terms, does not translate into an effective rate anywhere near the top statutory bracket.
Payroll Taxes Land on Wage Earners
Payroll taxes, formally FICA, fund Social Security and Medicare and represent the second-largest source of federal revenue. They are structured very differently from the income tax. The Social Security tax is 12.4 percent of wages, split evenly between you and your employer at 6.2 percent each. Medicare adds 2.9 percent total, also split.6Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Two features push this burden toward middle-income workers. First, the Social Security portion only applies to wages up to an annual cap. For 2026 that wage base is $184,500.7Social Security Administration. Contribution and Benefit Base Every dollar earned above that amount is exempt. A worker earning exactly $184,500 and an executive earning $5 million pay the same dollar amount in Social Security tax. As a share of total earnings, the middle-income worker pays far more. Second, FICA applies only to wages. Much of the income at the very top comes from capital gains and dividends, which are not subject to payroll tax at all.
Medicare has no wage cap, and earners above $200,000 owe an Additional Medicare Tax of 0.9 percent on the excess.6Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Even so, for families in the bottom 20 percent of the income distribution, payroll taxes are often the single largest federal tax obligation, frequently exceeding whatever they owe in income tax. This is the tax that middle-income America pays.
The Corporate Income Tax Ultimately Falls on Shareholders
C-corporations pay a flat 21 percent rate on profits under Section 11 of the Internal Revenue Code.8Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed Corporations write the checks, but economists generally agree the real economic cost falls on individuals. The Congressional Budget Office assigns this burden to households based on their share of capital income, primarily through reduced dividends and lower stock valuations for shareholders and secondarily through suppressed wage growth for workers.
Because stock ownership is heavily concentrated among higher-income households, the top 10 percent of earners effectively bear the majority of the corporate tax. If you hold substantial investments in taxable or retirement accounts, the corporate tax reduces your returns even though you never see a line item for it. Lower-income workers absorb a smaller but real share through slower wage growth over time.
Excise Taxes Hit Lower Incomes Hardest
Federal excise taxes on fuel, alcohol, tobacco, air travel, and certain other goods generate a relatively small share of total federal revenue, roughly $101 billion projected for fiscal year 2026 compared with over $5.3 trillion in total receipts. But they are among the most regressive taxes in the federal system. A household earning $30,000 a year spends a higher percentage of its income on gasoline and tobacco than a household earning $500,000, even when the wealthier household spends more in absolute dollars.
Tobacco excise taxes are particularly regressive. The share of total tobacco tax paid by the bottom 20 percent of earners is nearly as large as the share paid by the top 20 percent. Fuel and alcohol excise taxes tilt more toward higher-income households in total dollars but still consume a greater fraction of lower incomes.
Estate Tax Reaches Only the Wealthiest
The federal estate tax applies only to estates that exceed the basic exclusion amount, which for 2026 is $15 million per individual. A married couple can effectively shelter up to $30 million through portability of the unused exclusion. Because of this high threshold, the estate tax touches only a tiny fraction of households, almost exclusively those in the top 0.1 percent of wealth. The annual gift tax exclusion is $19,000 per recipient for 2026.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Estate and gift taxes produce a small slice of total federal revenue, but nearly all of that revenue comes from the wealthiest households.
Putting the Pieces Together
Add up income taxes, payroll taxes, corporate taxes, excise taxes, and estate taxes, and the overall federal system remains weighted toward high earners, though less dramatically than income taxes alone. The Congressional Budget Office’s analysis of 2022 data found the top 1 percent of households paid about 27 percent of all federal taxes, up from 14 percent in 1979. The top 20 percent paid roughly 70 percent of the total.1Congressional Budget Office. The Distribution of Household Income, 2022
The average federal tax rate across all households was 20.6 percent of income in 2022, and effective rates climb steeply with income.1Congressional Budget Office. The Distribution of Household Income, 2022 The lowest quintile faced a negative average individual income tax rate of about −10 percent, meaning refundable credits exceeded their tax liability. The highest quintile had an average individual income tax rate of 17 percent. Households in the bottom 20 percent pay only a sliver of total federal revenue when everything is combined, largely because refundable credits offset their payroll and excise contributions. The middle 20 percent pays a moderate share, chiefly through payroll taxes that fund Social Security and Medicare.
The distinction between income tax shares and total tax shares is the key to reading any of these numbers. While the top 1 percent pay close to half of all individual income taxes, their share of total federal taxes is closer to a quarter, because payroll taxes are spread broadly across all workers and excise taxes fall disproportionately on lower and middle incomes. In practical terms, top earners fund the bulk of general government operations. Middle-income workers fund the bulk of social insurance.