Individual Income Tax Rates and Shares, 2006 - Tax Year and Rate Structure Summary

Sep 19, 2026

Individual income tax rates and tax shares for 2006 are analyzed, including the computation of “total income tax” and the distinction between average tax rates and marginal tax rates. The discussion quantifies taxpayer filing totals, AGI growth, and income share concentration among the top 1% and top 5%. It explains selected terms, the income and tax concepts behind rate measurement, and outlines how tax bracket structures evolved across 1986–2006 under major tax-law changes. Data sources and limitations are also addressed.

LanguageEnglish

CategoryPaper Templates

FormatPDF

Pages41

Reading Time14 min

AccessFree to download

Income tax Rates

Average tax Rates

Marginal tax Rates

Taxpayer Distribution and Tax Shares

| Individual Income tax Rates and Shares, 2006
by Kyle Mudry and Justin Bryan | | | --- | --- | | axpayers filed 138.4 million individual income tax returns for Tax Year 2006, of which 92.7
bmleonurnr 6A7ta. perablceentretu) wrnrseacseifitheaashas
total income tax greater than $0. This represents an increase of 2.4 percent in taxable returns from 2005. Adjusted gross income (AGI) on these taxable returns rose 8.5 percent to $7,439 billion for 2006, while total income tax rose 9.5 percent to $1,024 billion. The average tax rate for taxable returns rose, approximately 0.2 percentage points to 13.8 percent for 2006.
Taxpayers with an AGI of at least $388,806, the top 1 percent of taxpayers, accounted for 22.1 percent of AGI for 2006. This represents an increase in income share of 0.9 percentage points from the previous year. These taxpayers accounted for 39.9 percent of the total income tax reported, an increase from 39.4 percent in 2005. The top 5 percent of taxpayers accounted for 36.7 percent of AGI and 60.1 percent of total income tax. To be included in the top 5 percent, a taxpayer must have reported AGI ofat least $153,542, whereas, in 2005, the cutoff for this group was $145,283 .
This article discusses individual income tax ratesand tax shares and the computation of“total income tax” for 2006. It provides explanations of selected terms and describes income tax structure, certain tax law changes, income and tax concepts (the “1979 Income Tax Concept,” “modified” taxable income, and marginal tax rates), the computation of“alternative minimum taxable income,” and data sources and limitations.
Income tax Rates
Discussions of income tax rates generally center on measuring two distinct tax rates: average tax ratesand marginal tax rates. Average tax rates are calculated by dividing some measure of tax by some measure of income. For statistics in this article, the average tax rate is “total income tax”(see Explanation of Selected Terms) 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 Income and Tax Concept) .
The following sections describe the measurement of the average and marginal tax rates in more detail and discuss statistics based on these rates for 2006.
Average tax Rates
Figure A presents income statistics for 1986 through 2006 (based on each year’s definition of AGI and on the common 1979 Income Concept) and taxes reported (see Income and Tax Concepts) . These tax years can be partitioned into seven distinct periods:
(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) . For 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 ofTRA86 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 for some upper-income taxpayers.
(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 for some upper-income taxpayers.
es: 15 percent and 28 p

FAQs

What distinguishes average tax rates from marginal tax rates in the article?

Average tax rates are computed by dividing a tax measure by an income measure. Marginal tax rates focus on the statutory rate applied to the last (or next) dollar of taxable income.

How is “total income tax” used in the calculation of average tax rates?

The article states that the average tax rate for the statistics is “total income tax” divided by AGI reported on returns showing some income tax liability.

How do the top 1% and top 5% contribute to AGI and income tax in 2006?

Taxpayers with AGI at least $388,806 (top 1%) accounted for 22.1% of AGI and 39.9% of total income tax. The top 5% accounted for 36.7% of AGI and 60.1% of total income tax.

Sep 19, 2026

Upload by Quinn Holloway