The U.S. tax system explained in 10 simple charts.

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Income and payroll taxes cover about two-thirds of government spending. In 2014,
about 15 percent of the government’s spending will be financed by deficits.
Where Does Government Financing Come From?
1
Individual income
taxes
$1,382
Payroll taxes
$1,033
Corporate income
taxes
$351
Other
$265
Borrowed
$492
(Billions of dollars projected to be collected in 2014)
Source: CBO, April 2014 budget projections

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Average Federal Tax Rate Paid By Household
Source: CBO, “The Distribution of Household Income and Federal Taxes, 2010”
2
All income groups pay taxes, with the highest earners facing the highest tax rates.
1.5%
7.2%
11.5%
15.6%
24.0%
29.4%
18.1%
0%
5%
10%
15%
20%
25%
30%
35%
Bottom 20% Second 20% Middle 20% Fourth 20% Top 20% Top 1% All Taxpayers
Individual Income Tax Payroll Taxes
Coporate Income Tax Excise Taxes

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Who Pays Federal Taxes?
Source: CBO, “The Distribution of Household Income and Federal Taxes, 2010”
3
Bottom 20%
0.4%
Second 20%
4%
Middle 20%
9%
Fourth 20%
18%
81st to 90th
Percentiles
16%91st to 95th
Percentiles
12%
96th to 99th
Percentiles
17%
Top 1%
24%
The top 20% of households pay almost 70% of the nation’s taxes. The top 1% is
responsible for paying nearly a quarter.
(Percentage of the tax burden paid by households ranked by income level)

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14%
16%
18%
20%
22%
24%
Spending
Revenue
Revenues Are Insufficient for Current Level of Spending
Source: Congressional Budget Office
20.4%SPENDING
AVERAGE
17.4%REVENUES
AVERAGE
4

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$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Over $1 Trillion in Tax Expenditures
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The number of “tax expenditures” – all the deductions, credits, and exclusions – has
grown over time and is almost the same as the amount of income tax collected.
Income Tax Revenues
Revenue Lost to Tax Expenditures
Source: OMB historical data, compiled by the National Priorities Project..
Note: Summing tax expenditure estimates is a useful gauge of size but does not take into account possible
interactions among individual tax expenditures.
Billions of 2013 dollars

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In order to stabilize Debt at 60% of the economy by 2021:
Tax
Expenditures
28%
Health
Spending
17%
Other
Mandatory
11%
Social Security
17%
Non-Defense
Discretionary
14%
Defense
Discretionary
13%
Source: Congressional Budget Office, Joint Committee on Taxation (2013)
Tax Expenditures Are Similar to Spending
Many of these tax expenditures are similar to government spending programs. For
instance, $1,000 given out in Pell grants is economically identical to $1,000 given out
through education tax credits
Tax expenditures would make up more than a quarter of the federal budget if they were
counted as spending.
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Tax Expenditures Bigger than Some Spending Programs
7
$68.5
$34.2
$145.4
$49.6
$35.6
$74.3
$0
$20
$40
$60
$80
$100
$120
$140
$160
Mortgage Interest Deduction vs. HUD
Budget*
Secondary Education Tax Provisions vs.
Pell Grants**
Refundable Credits vs. Cash Aid
Spending***
Billions$
Tax Expenditures
Program Spending
*Source: Office of Management and Budget, President’s Budget FY 2015; Joint Committee on Taxation
**Tax expenditures include the American Opportunity credit, Lifetime Learning credit, personal exemption for students, exclusion of scholarship
income, tuition & fees deduction, and other smaller deductions. Source: CLASP, Reforming Student Aid
*** Refundable credits include EITC and Child Tax Credit. Spending includes SSI,TANF, and Foster Care Assistance. Source: House Budget
Committee, War on Poverty
Billions, FY2012
Spending through the tax code exceeds government spending on the cash assistance
programs and support for housing.

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Distribution of Select Major Tax Expenditures by Income Group
Source: CBO, “The Distribution of Major Tax Expenditures in the Individual Income Tax System.” “Other Major
Tax Expenditures” includes interactions between the provisions.
Note: Graph represents select income tax expenditures as identified by CBO which make up two-thirds of total
tax expenditures
8
While refundable credits benefit low-income taxpayers, most other tax
expenditures are regressive.
0%
2%
4%
6%
8%
10%
12%
14%
Lowest Quintile 2nd Quintile 3rd Quintile 4th Quintile 5th Quintile Top 1 Percent
Other Tax Expenditures
Refundable Credits
Capital Gains and Dividends Preferences
PercentChangeinAfter-TaxIncome

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Renewable Energy
Production Tax Credit
$13
Other
Energy
$7 Research Credit
$15
Active Financing
Income
$10
Bonus Depreciation
$3
Other Business
$20
Sales Tax
Deduction
$6
Other
Individual
$10
Business Provisions
57%
Energy Provisions
23%
Individual Provisions
20%
What’s a Tax Extender?
Congress is considering renewing over 50 tax provisions that expired at the end of last
year. Extending them all for two years would cost about $85 billion. Three-fifths go to
businesses.
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68%
70%
72%
74%
76%
78%
80%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Extenders and Bonus Depreciation
Extenders
PAYGO Baseline*
Debt Worsens if Tax Breaks Are Not Paid For
10
Percent of GDP
75.5%
77.8%
79.0%
Source: Congressional Budget Office
*PAYGO Baseline assumes a continuation of current law, along with a drawdown in war spending.
If Congress extends the expired tax cuts, they should pay for the additional cost.

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Where Tax Dollars Went in 2013
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Share of each $100 paid in taxes
Defense and Military Benefits $ 27.70
Social Security $ 23.39
Health $ 22.23
Medicare $ 14.24
Medicaid $ 7.68
Other Health $ 0.30
Interest $ 6.41
Transportation $ 2.65
Civilian Federal Retirement $ 2.65
Refundable Credits $ 2.43
Food Stamps $ 2.39
Supplemental Security Income (SSI) $ 1.53
Unemployment Insurance $ 2.00
Housing assistance $ 1.35
Education $ 1.32
Foreign aid $ 0.97
Agriculture $ 0.85
Other $ 2.13
Total $100

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