A lot of Americans feel like they’re getting cheated at tax time. In a Pew Research Center poll last year, 61 percent said it bothered them “a lot” that “some wealthy people don’t pay their fair share.”
Try defining “fair share.” But you can learn a lot about the U.S. tax burden by looking at five simple charts.
Certain well-paid people pay out a good chunk of their salaries. This year, a single filer owes the Internal Revenue Service 39.6 percent of any income over $415,050. That’s up from 35 percent as recently as 2012, though it’s nowhere near the rates the wealthy paid from the 1930s to the 1970s. (Click on the charts to enlarge.)
Of course, wealthy people don’t often pay 39.6 percent. Many of them lower their rate with deductions, including those for charitable donations and mortgage interest. Also, that top rate mostly applies to salary income. Investors pay a top rate of 20 percent on qualified dividends and long-term capital gains, along with a 3.8 percent net investment income tax. That’s one reason a well-paid executive, doctor, or lawyer often ends up paying a higher tax rate than a wealthy heir living off investments.
How much do Americans pay in taxes overall?
That doesn’t include state income taxes, which can add 10 percentage points or more to your tax burden depending on where you live.
Meanwhile, seven states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two more, New Hampshire and Tennessee, tax only interest and dividend income. Other states also have relatively low rates: