10 Surprising Statistics About Income Tax and US Taxpayers

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They say two things are inevitable: death and taxes. But while most Americans have to pay taxes, they do not necessarily pay the same amount or share the same tax bracket. In fact, there are some significant disparities among taxes paid that might just astonish you. We’ve gathered some of the more surprising statistics about income tax and U.S. taxpayers for you to check out.

See: Pros and Cons of Living in a State With No Income TaxSee More: All the States That Don’t Tax Social Security

The bottom 50% only accounted for 4% of individual income taxes.

This statistic doesn’t mean that the bottom 50% of taxpayers are shirking their taxes. It means that the bottom 50% aren’t making enough money to have to pay much in taxes, according to Legal Jobs. It points a stark finger at income inequality in this country.

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The top 1% of earners paid 38.5% of federal income taxes.

Staying on the topic of the top 1%, it makes sense that they contribute the most amount of money in income taxes, because they make the most. Their share of the bill, as of 2018, amounted to around 38.5% of all taxes paid, Legal Jobs said. However, keep in mind that with as much money as they make, they should probably be paying a lot more than that.

Billionaires are paying a smaller percentage in taxes than the average American.

According to Legal Jobs, as of 2018, billionaires were paying about 23% of their income, or less than a quarter, while the rest of Americans paid 28%. While it adds up to billionaires paying more dollars, in terms of the ratio of taxes to income, billionaires are paying a significantly smaller percentage of their income than you and me.

The wealthiest 400 families in the country pay just 8.2% of their income.

Talk about income disparity. According to CBS News, the Biden administration is trying to pass legislation that will increase the amount of taxes the richest 400 families pay. Between 2010 and 2018, these families, on average, only paid 8.2% of their income in taxes, and these are families that earned at least $2.1 billion in income. The reason they get away with paying so little has to do with the way the tax code deals with the kinds of income that are earned on existing wealth, including stocks, which earns money over time, as opposed to wages.

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The top 1% of Americans own 40% of the country’s wealth.

Although not a tax-specific fact, it is related to the issues with how little some wealthy people pay in taxes. All the money that the top 1% is saving is adding up really quickly. According to Legal Jobs, the top 1% owns 40% of all the wealth in the United States. That leaves the remaining 60% to be split between 99% of people. Another piece of evidence about income inequality.

You’re not taxed in an individual bracket.

Tax brackets are not as simple and straightforward as they seem. While a snapshot of your tax bracket would show that an individual making between $10,000 and $41,000 approximately is in the 22% tax bracket, and a married couple filing jointly and earning roughly between $89,000 and $170,000 would be in the 24% tax bracket, there’s a more complex breakdown, according to Kiplinger.

For a single person earning $90,000 in taxable income in 2021, you’d only be taxed 10% on the first $9,950. Then 12% on the next $30,575. Then 22% on the next $45,850 and finally 24% on the remaining $3,625, Kiplinger explains. That’s less than if this hypothetical person were taxed at the total their income falls into, which is 24%. In essence, your tax bracket equals the highest amount of tax you will pay on income over a certain amount. And yes, this is why it’s super helpful to have a tax accountant.

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A failed tax law in 2020 would have cost billionaires billions.

Sen. Ron Wyden attempted a piece of legislation in 2020 to tax the capital gains of the richest billionaires, about 20 individuals including Elon Musk and Jeff Bezos, according to Forbes. Had the legislation passed, these 20 billionaires would have had to pay a collective $345 billion in additional taxes. Wyden hasn’t given up trying, however. He’s back with a new bill.

The IRS makes trillions in taxes.

While IRS employees aren’t out taking fancy vacations with your tax money, the agency took in an estimated $1.7 trillion in taxes in 2021, according to Wallet Hub.

Billions worth of tax payments have to be enforced.

Not all of that tax money is willingly handed over, however. The IRS relies upon tax enforcement to collect as much as $59 billion in taxes each year, Wallet Hub states. This can include criminal investigations and audits, according to IRS.gov, as well as wage levies, where money is taken out of your paycheck automatically.

Many wealthy people have engaged in tax evasion.

Avoiding taxes is not just reserved for average people struggling to get by; numerous celebrities have been penalized for this blue-collar crime, according to FindLaw.com. Famous tax evaders include Martha Stewart, Wesley Snipes, Nicolas Cage, Willie Nelson and Lil Wayne. One of the most famous cases of tax evasion ultimately took down mafia boss Al Capone.

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.

 

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