If you think you pay too much money to the IRS a year in taxes, or to your state’s tax system (or both, in the worst case), you are not alone, because most American taxpayers think the same. The complaint is mainly about income tax: 6 out of 10 believe —wrongly— that middle-income households hold most of the heaviest tax burden.
Actually, only 18% of adults managed to correctly identify the group that bears the highest federal tax burden, which are high-income taxpayers, according to a survey published in January by AP-NORC.
Tax Day 2024 is Coming: How About Your Tax Filings?
As the deadline for filing 2023 tax returns approaches —next Monday, April 15— taxes are occupying the minds of millions of Americans. During this period, many expect to receive refunds while others owe outstanding balances. According to an AP-NORC study, only about 27% of taxpayers think their federal income taxes are fair, and 60% think their tax burden is too high.
But here’s the truth: the American tax system is designed to be progressive. This implies that citizens with lower incomes pay a lower percentage of their income in federal taxes than those with higher incomes. On the other hand, people and companies with higher incomes should (at least in theory) pay higher taxes than those with lower incomes.
And to answer that doubt, and contrast the perception of citizens, the Internal Revenue Service (IRS) has a series of revealing statistics that demonstrate what the reality is in terms of how much taxpayers pay in taxes.
Who pays More Taxes to the IRS?
According to the IRS numbers, the average taxpayer’s pay is $14,000 each year in federal income taxes, excluding Social Security and other payroll taxes. The statistic clarifies that the top 1% of taxpayers, those with the highest incomes, pay an average of $653,730, but the top 5% pay an average of $187,468.
The top 10% of taxpayers pay $108,251 a year on average, while the top 25% of those filing income tax returns each pay about $50,963. Moving forward in the IRS’ statistics, the top 50% of better-income taxpayers pay a median of $27,891 in taxes, and from now on, the numbers are different.
In the numbers, the IRS explains that the bottom 50% (those with lower incomes) pay an average of $667 a year, which is a number you must understand is a median: that means that some individuals pay less and others pay more.
Do the Rich Pay More Taxes in the United States?
According to data from the IRS itself, higher-income taxpayers generally pay a higher proportion of taxes compared to middle-income Americans. For example, in fiscal year 2020, taxpayers in the highest income group, representing 1% of filers, paid about 40% of all federal income taxes. In contrast, middle-income taxpayers, who make up the majority, paid about 40% of the total taxes collected.
As we said before, the federal tax system is progressive, for everything we have mentioned, but keep in mind that state taxes work differently in each of the states of the Union, and can modify not only the numbers, at the local level, but also the perception of the citizenry.
