Now with fact-check Add On from another Wise Old Economist ...
I plan to do more research on this, but according to a couple of Boston economists, most everybody in America has a 40% tax rate (give or take):
... In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.
Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.
As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.
The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points. ...
In the linked piece above, there's a dandy chart detailing the levels of taxes that different income brackets pay.
Anecdotally, I know people who shell out way below 40%. And of course Warren Buffett claims he pays a rate of 16.5%.
But for most of us mortals, maybe I'm not calculating property taxes, sales taxes, and all the other nicks and cuts everybody gets year after year. (I recently paid a large fine on a "red light camera" ticket that I was subsequently told I didn't have to pay because citations from red light cameras are -- as of January 2011 -- unenforceable in California. Live and learn. So I guess I ended up making a generous donation to the city of San Bernadino. Yippee.)
But I thought the article, although a few years old, was interesting enough to throw up here, even though it's somewhat off our usual track. (But everybody pays taxes, right? So it's not that far off.)
Add On: John Hagens, PhD, weighs in:
Kotlikoff is reliable and I suspect that his conclusion is broadly correct for most, but not for the super rich such as Buffett.
I was wondering why 30-yr-olds with $50k of income have a tax rate of 24%, which is so much lower than every other cell. ... Maybe he is including employer payroll taxes. ...
That 5% is the standard deviation, meaning that 2/3 of people pay between 35% and 45%. 95% of people pay +/- 2x5%, meaning 30% and 50%.
I just noticed one other thing in the table: these are marginal tax rates, not average tax rates. ... Marginal tax rates drop when income goes above the payroll tax ceiling, and then rise when the income tax bracket jumps to 35% for incomes above $200k.
The people who get whacked are the two-earner couples, both with incomes below the payroll tax ceiling – the $150k joint income range for 30 and 45 yr olds. This is the real news in this table! It's the great middle class that is getting the shaft. Did you know that day care for these two-earner families is about $1300 per kid per month? And then, they have to pay back seriously large college loans as well, since many of their folks have stagnant incomes or didn’t save.
So there you have it. Who's getting screwed here in the Land of the Free, and who is not, from three different economists. (Note that there is still, according to the Wise Old Economists, a considerable range: from 30% to 50% for 95% of tax-payers, and 35% to 45% for 67% of tax-payers.)