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The US income tax system is still a progressive tax system, where those with the most income pay not only the most taxes but also the highest tax rates.
I went to the IRS website (You can Google IRS TAX STATS) and found the breakdowns for income taxes paid for several years. Let’s look at 2020, Trump’s last full year in office…
The richest Americans — those with incomes over 2 million dollars in 2020 — paid an effective tax rate of 26.68%.
The middle class — those with incomes between 75,000 and 200,000 dollars — paid an effective tax rate of 10.12%.
The poorest — those with incomes less than 25,000 dollars — paid an effective rate of 1.04%.
How does this compare to, say, Obama’s last year? Let’s look at 2016…
The poorest Americans paid an effective tax rate of 1.7%. Between 2016 & 2020, their effective tax rate went down by almost half, from 1.7% to 1%.
The middle class paid an effective rate of 11.69% in 2016. Their taxes also went down, but not nearly by almost half. They went from an effective tax rate of 11.69% in 2016 to 10.01% in 2020.
And the richest? They got a break too. But a tiny one. Their effective tax rate went from a rate of 27.0% to 26.67%.
Discussion (36)
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But can they deduct real estate investments?
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Do congress members ever get audited by the irs? Especially when in office?
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This is very interesting. I hope I can find out from the IRS website how they calculate "Effective Tax Rate."
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I would either do away with the income tax and implement a flat VAT, or go to a flat income tax of 10% from dollar one with no deductions. God only asks for 10% - why should the government get more than God?. For capital gains, I would index the basis for inflation ( gains from inflation aren't actual gains ), but otherwise tax capital gains at 10% also.
If everyone paid at the same rate, there would less incentive to raise taxes on your neighbor, because it would also raise taxes on YOU.
If the tax payments were less hidden, more visible, people would be more loath to raise taxes, and possibly less willing to waste money.
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I decided to ask Google how it's calculated, in the hope that it would refer me to the IRS web site. Instead it told me:
The kicker is that phrase, "taxable income." I'll betcha billionaires have a lot more nontaxable income than I do. The interest from municipal bonds is not usually counted as taxable income on federal tax returns. Google tells me that lots of people own municipal bonds in some form or other, but that individual investors are the biggest owners. Individual investors would not include people like me whose investments are almost all in the form of 401k accounts and such. I wish the IRS also published data on something called the "Really Effective Tax Rate" in addition to the "Effective Tax Rate."
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