The IRS recently released the new inflation adjusted 2023 tax brackets and rates. Explore updated credits, deductions, and exemptions, including the standard deduction & personal exemption, Alternative Minimum Tax (AMT), Earned Income Tax Credit (EITC), Child Tax Credit (CTC), capital gains brackets, qualified business income deduction (199A), and the annual exclusion for gifts.
The latest IRS data shows that the U.S. federal individual income tax continued to be progressive, borne primarily by the highest income earners.
How do current federal individual income tax rates and brackets compare historically?
Reviewing reported income helps to understand the composition of the federal government’s revenue base and how Americans earn their taxable income. The individual income tax, the federal government’s largest source of revenue, is largely a tax on labor.
Although the U.S. has a progressive tax system and a relatively low tax burden compared to the OECD average, average-wage workers still pay more than 30 percent of their wages in taxes.
Different taxes have different economic effects, so policymakers should always consider how tax revenue is raised and not just how much is raised.
All Federal Tax Data
As Congress considers several tax proposals designed to raise taxes on high-income earners, it’s worth considering the distribution of the existing tax code.
Top Tax Rate on Pass-through Business Income Would Exceed 50 Percent in Most States Under House Dems’ Plan
Under the House Democrats’ reconciliation plan, the top tax rate on pass-through business income would exceed 50 percent in most states. Pass-through businesses, such as sole proprietorships, S corporations, and partnerships, make up a majority of businesses and majority of private sector employment in the United States.
Corporations in Most States Would Face Income Tax Rate Exceeding 30 Percent Under Ways and Means Proposal
Under the House Democrats’ tax plan, companies in 21 states and D.C. would face a higher corporate tax rate than in any country in the OECD.
The Biden corporate tax plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.
It is important to understand how the SALT deduction’s benefits have changed since the SALT cap was put into place in 2018 before repealing the cap or making the deduction more generous. Doing so would disproportionately benefit higher earners, making the tax code more regressive.
How do current federal corporate tax rates and brackets compare historically?