What Percentage of Americans’ Income Do They Pay in Taxes?

In a publication called Historical Effective Federal Tax Rates: , the Congressional Budget Office tries to estimate the actual amount of federal taxes typical people pay relative to their incomes. Here is what they discovered (first a word or two on the methodology):

Compared with its rate in , the overall effective tax rate fell by almost 1 percentage point in : to 19.8 percent from 20.7 percent…

CBO’s analysis of effective tax rates assumes that households bear the burden of the taxes that they pay directly (such as individual income taxes and employees’ share of payroll taxes). Excise taxes are assumed to fall on households according to their consumption of taxed goods (such as tobacco and alcohol) or, in the case of excise taxes that affect intermediate goods, in proportion to their overall consumption. Taxes on businesses are also attributed to households. CBO assumes — as do most economists — that employers’ share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid. Therefore, the amount of those taxes is included in employees’ income and the taxes counted as part of employees’ tax burden. Far less consensus exists about how to attribute corporate income taxes. CBO assumes that corporate income taxes are borne by owners of capital in proportion to their income from interest, dividends, rents, and capital gains.…

This analysis focuses on households’ adjusted pretax comprehensive income. That measure includes all cash income (both taxable and tax-exempt), taxes paid by businesses (which are imputed to individuals, as noted above), employees’ contributions to 401(k) retirement plans, and the value of income received in-kind from various sources (such as employer-paid health insurance premiums, Medicare and Medicaid benefits, and food stamps).

That out of the way, in people paid taxes, on average, at the following rates:

TaxPercentage of Income
Total19.8%
Individual income tax8.5%
Social insurance taxes8.4%
Corporate income tax2.0%
Excise taxes0.8%

And here are the tax rates for people in successive income quintiles:

QuintileAverage IncomeTotal Tax Rate
First$14,8004.8%
Second$34,1009.8%
Third$51,90013.6%
Fourth$77,30017.7%
Fifth$184,50025.0%

Under the influence of politicians, masses of people tend to ascribe the responsibility for wars to those who wield power at any given time. In World War Ⅰ it was the munitions industrialists; in World War Ⅱ it was the psychopathic generals who were said to be guilty. This is passing the buck. The responsibility for wars falls solely upon the shoulders of these same masses of people, for they have all the necessary means to avert war in their own hands. In part by their apathy, in part by their passivity, and in part actively, these same masses of people make possible the catastrophes under which they themselves suffer more than anyone else. To stress this guilt on the part of the masses of people, to hold them solely responsible, means to take them seriously.

On the other hand, to commiserate masses of people as victims means to treat them as small, helpless children. The former is the attitude held by genuine freedom fighters; the latter that attitude held by power-thirsty politicians.

— Wilhelm Reich, The Mass Psychology of Fascism (hat tip: Today in Iraq.)

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