When the tax costs of operating in New York are only a fifth of the cost of locating the same operation in Wyoming, something unusual is going on. Yet that’s exactly what we find for new research and development (R&D...
- The Tax Policy Blog
- Even After Deductions and Credits, the Income Tax System ...
Even After Deductions and Credits, the Income Tax System Is Progressive
People mistakenly believe that because the rich benefit from many popular tax deductions and credits, they pay a lower average (or “effective”) tax rate than other taxpayers. This is not the case. The average tax rate for all Americans is about 10.4 percent. However, taxpayers earning over $1 million pay a 23 percent effective rate and taxpayers earning over $250,000 pay a 21 percent effective rate— more than twice the national average.
Meanwhile, “middle class” taxpayers earning between $50,000 and $100,000 pay an effective rate below the national average—just 9 percent. The effective tax rate for Americans making less than $30,000—who owe no income taxes—is actually negative due to refundable credits that give them a check back from the IRS.
For more charts like the one below, see the second edition of our chart book, Putting a Face on America's Tax Returns.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.