How Much Americans Really Pay in Taxes

How Much Americans Really Pay in Taxes
It’s more – and less – than you think

Bloomberg.com
By Ben Steverman

4/10/15

Some $1.4 trillion in individual income taxes are due to the IRS on April 15. But for many Americans, that’s only the half of it. A new report from the U.S. Congress’s Joint Committee on Taxation shows that looking only at income taxes misses most of what we pay to the federal government each year. 

The average American pays an income tax rate of 10.1 percent, the Joint Committee shows, although that varies quite a bit depending on income: 

Ten percent seems low, doesn’t it? The official income tax rates start at 10 percent and go all the way to 39.6 percent. The Joint Committee is also accounting for lots of income that never gets taxed, such as Medicare and Social Security benefits, employer-paid insurance, and the employer portion of payroll taxes. Also, taxpayers pay the highest rates, above 28 percent, only on earned income above $200,000 or so. The IRS takes far less from the first $200,000 earned, especially after deductions, and from investment income. Finally, as the chart shows, many poor Americans pay zero taxes and even get money back: About 32 million people benefit from that Earned Income Tax Credit. 

Just looking at income taxes can be misleading, however. All salaried workers also pay a 7.65 percent payroll tax to cover Social Security and Medicare, and higher earners owe another Medicare tax. Their employers also must pay the same amount in payroll taxes for each worker. The government collected $1 trillion from payroll taxes last year:

Wealthy Americans end up paying taxes at a lower rate than poor and middle-class Americans, because the government collects Social Security tax only on annual wages up to $118,500. 

On top of individual income and payroll taxes, the federal government collects $93.4 billion in excise taxes on such things as fuel, cigarettes, alcohol, and plane tickets. The feds take 7.5 percent of every airline fare, plus $4, for example; the gas tax is currently 18.4¢ per gallon.

Add up all the categories of taxes paid by individuals—income, payroll, and excise—and this is what each income group will end up paying this year, the Joint Committee estimates: 

The tax burden rises progressively with income, with the wealthiest paying a third of their income to the federal government. One exception to the tax rate’s steady rise through the income brackets: Americans who earn less than $10,000 per year, who don’t get enough from their earned income tax credits at tax time to make up for the payroll and excise taxes they pay all year. 

President’s 2016 Budget in Pictures

National Priorities Project
By Jasmine Tucker
2/9/15

President Obama recently released his fiscal year 2016 budget proposal. Budgets are about our nation’s priorities: What are we going to spend money on? How are we going to raise the money we want to spend?

Though the budget ultimately enacted by Congress may look very different from the budget request released by the president, the president’s budget is important. It’s the president’s vision for the country in fiscal year 2016 and beyond, and it reflects input and spending requests from every federal agency.

These pictures tell the story of the priorities found in the president’s budget.


President’s Proposed 2016 Budget: Total Spending

This chart shows how President Obama proposed allocating $4.1 trillion* in total federal spending in fiscal year 2016, an increase of more than 5 percent over the total 2015 spending level. This includes every type of federal spending, from funding for discretionary programs like infrastructure improvements and job training to mandatory spending programs like Social Security and Medicare, as well as interest payments on the federal debt. Social Security and labor, Medicare and health programs, and military spending will make up 76 percent of the total budget, leaving just 24 percent, or $957 billion of the $4.1 trillion total, to spend on all other programs.

* Spending on Government (administration) is less than zero and omitted in the total spending pie chart. Lower than zero spending can occur when segments of government have surpluses from previous years that they return to the federal government.

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