Some $1.4 trillion in individual income taxes are due to the IRS on April 15. But for many Americans, that’s only the fifty percent of it. The average American pays an income tax rate of 10.1%, the Joint Committee shows, although that varies quite a bit depending on income:
Ten percent seems low, doesn’t it? The official income tax rates start at 10 percent and go as far as 39.6 percent. The Joint Committee is also accounting for lots of income which never gets taxed, such as Medicare and Social Security benefits, employer-paid insurance, and the employer portion of payroll taxes. Also, taxpayers pay the highest rates, above 28 percent, only on earned income above $200,000 or so. The IRS takes far less from the first $200,000 earned, especially after deductions, and from investment income. Finally, as the chart shows, many poor Americans pay zero taxes and even get money back: About 32 million people benefit from that Earned Income Tax Credit.
Just looking at income taxes can be misleading, however. All salaried workers also pay a 7.65 percent payroll tax to cover Social Security and Medicare, and higher earners owe another Medicare tax. Their employers also must pay the same amount in payroll taxes for each worker. Government collected $1 trillion from payroll taxes last year:
Wealthy Americans end up paying taxes at a lower rate than poor and middle-class Americans, because of the fact that the government collects Social Security tax only on annual wages approximately $118,500.
On top of individual income and payroll taxes, the federal government collects $93.4 billion in excise taxes on such things as fuel, cigarettes, alcohol, and plane tickets. The feds take 7.5 percent of every airline fare, plus $4, for example; the gas tax is currently 18.4¢ per gallon.
The tax burden rises progressively with income, with the wealthiest paying a third of their income to the federal government. One exception to the tax rate’s steady rise through the income brackets: Americans who earn less than $10,000 per year, who don’t get enough from their earned income tax credits at tax time to make up for the payroll and excise taxes they pay all year.