Effective tax rates in the United States

I’m confused! Despite trying to make this article as factual as possible, I stopped it. I have corrected but if you read the comments, the initial answers may be vague in light of my changes.

For the most part, the world of personal finance is calm and secure. Not much fighting. The authors (and readers) agree on most of the ideas and most of the solutions. And When we do not disagreeThis is usually because we are coming from different places.

Take it. Getting out of debt, For example. This is one of the topics where people. What Disagree – but they politely disagree.

Hardcore numbers foolishly insist that if you are in debt you must first pay interest. Mathematics says this is the smartest way. Other people, including me, argue that other views are correct. You can repay the loan with emotional goods first. And for some as a baby gets older, he or she will outgrow this. Dave Ramsey’s point of view – Instead of focusing on interest rates.

That said, some money issues can be very, very controversial.

Whenever I write about money and relationships (especially). Divorce), I know the debate will go on. Should You Rent or Buy a Home? This question also provokes people. What is it Definition of retirement? did you Leave your car And find another way to get around?

But of all the subjects I’ve ever met, the slowest, perhaps the most burning tax has been. People have very deep beliefs about taxes, and when they read information that contradicts these beliefs, they don’t appreciate it. Chaos ensues.

Tax facts

when I What Write about taxes – which are not often – I try to stick to the facts and stay away from opinions. Examples:

  • The US tax burden is relatively low compared to other countries.
  • The US tax burden is relatively low compared to the US tax burden in the past.
  • Overall, the United States has a progressive tax system. People who earn more get paid more. That said, some taxes are regressive (meaning that, as a percentage of income, lower earners pay more).
  • A large number of Americans (about one-third) pay. no Federal income tax, of course
  • Despite the harsh rhetoric, no political party is better at taxing and spending. The only period in the last fifty years in which the US government budget was excessive was 1998-2001 under President Bill Clinton and the Republican-controlled Congress.

Even when I state these facts, there are people who do not agree with me. They do not agree that these are facts. Or they may not agree that these facts are relevant.

Also, I sometimes read complaints that the rich are taxed too much. To make their case, the authors state, “50% of taxpayers pay 97% of all federal income tax.” While this statement is true, I don’t think it’s a fair measure of where the tax burden falls.

I believe there is a better and more accurate way to analyze the tax burden.

Effective tax burden.

To me, every person is more important than the nominal tax paid. Efficient Tax burden.

Your effective tax burden is usually defined as your total tax paid as a percentage of your income. If you take every tax dollar you pay – federal income tax, state income tax, property tax, sales tax, and so on – then divide that by how much you’ve earned, what percentage is that?

This morning, while linking the links. Apex Money. – My second personal finance site, dedicated to sharing money stories from the web – I found an interesting infographic from Visual Capital. (VC is a great site by the way. Love it.) They’ve created a graphic that imagines. Effective tax rates by the state.

Here is a summary graph (no Main concept):

State's effective tax rate

As you can see, Average The top 1 income earners in the United States have a state tax rate of 7.4. The average state tax rate is about 10 per 60 workers in the U.S.. And 20 of the earners (which the visual capitalist incorrectly labels as “the poorest Americans”). Wealth and income no the same thingThe effective state tax rate is 11.4%.

Tangent: This clash of Wealth I continue to have nerves with income. I will confirm that there may be a connection between the two, but they are. no the same thing. My income has been low for the last few years. I am 20% below income earners. but I no Poor my total value is 1.5 1.5 million. And I know a lot of people – Hey brother! – With higher income and lower net worth.

It’s important to note – and because of that. I Confusion, which means I had to revisit this article – that visual capital numbers are for state and local taxes. Only. They do not include federal income tax. (Incidentally, I made a similar mistake a decade ago when writing. Minor tax rate. I also had to correct this article. Breath)

GRS readers quickly helped me correct my mistake by pointing to the nonprofit Tax Foundation. Summary of Federal Income Tax Statistics. With a little bit of espionage work, I uncovered this graph of effective federal tax rates in terms of income. Peter G. Patterson Foundation. (Come on. What do parents call their baby Peter Peterson? It means.)

Federal effective tax rate

Let’s put it all together! According to the Institute on Taxation on Economic Policy., This graph represents. Tomorrow Effective tax rates for people of different income levels Note that this graph clearly compares. Expected In 2018, a) current tax laws (in blue) and b) previous tax laws (in gray).

Total effective tax rates in the United States.

Total tax burden vs. total income.

Here is a final graph of the Institute of Taxation and Economic Policy. This is the graph that I find most interesting personally. It compares the share of total taxes paid by each income group to their share of the country’s total income.

Tax burden vs. total income.

Collectively, the bottom 20 total earners in the United States earned 3.5 of the total income. They paid 1.9% of the total tax bill. The top 1 earners in the United States accounted for one-fifth of the country’s total personal income. They paid 22.9% of the total tax.

Is the US tax system correct? Should higher income earners pay more? Do they pay more than their fair share? Should Less-Wire earners get paid more? Are we talking about numbers that are so close to each other that it doesn’t matter? I don’t know and, really, I don’t care. I am worried. Personal Finance is not politics. But I think the facts. And civilization.

The problem with talking about taxes is that people talk about different things. When some people argue, they are talking about modest tax rates. Others are talking about effective tax rates. Still others are talking about real, nominal numbers. When some people talk about wealth, they mean income. The second – correctly – means net worth. It’s all confusing, even for smart people who mean good.


Final note

Under Digital Accountability and Transparency Act 2014, US Treasury Department needed to set up a website – USASpend.gov – Provide information to the American people about how the federal government spends its money. Although the use of the site can be useful, it provides a lot of information, and I am sure it will be one of the tools I use when writing about taxes. (I plan to update some of my older articles this year.)

US federal budget

The USA spending site has one. Data lab Which is currently in public beta testing. This subsite provides equal. More Ways to find out how the government spends your money. (I got another one. Simple budget viewing tool Learn forever from Brad Flynn.)

Well, that’s all I have for today. Let the quarrel begin!