Income tax is one of those things we all love to hate. Nobody likes it when the taxman calls, but we all do our duty as upstanding citizens!
There are plenty of things you need to know — and even more that you probably don’t know — about income tax. Some of the income tax statistics out there might surprise you, particularly those to do with how much tax is paid by certain individuals and companies.
With that in mind, we’ve scoured the internet for some of the best facts about income tax. Give them a read, and you’ll learn some fascinating things:
Astonishing Income Tax Statistics (Editor’s Pick)
- The average tax rate in 2017 was 14.64% for all Americans.
- Over $1 trillion is paid in individual income taxes each year.
- Billionaires pay 23% of their earnings in tax, while other Americans pay 28%.
- The top 1% account for 38.5% of the total tax bill.
- Almost $300 billion were paid out in tax refunds as of July 2020.
- Over 155,000,000 tax returns were submitted to the IRS in 2020.
- The bottom 50% of taxpayers had, on average, a tax rate of 4%.
State Individual Income Tax Rates & Bracket Stats
When it comes to income tax, the amount you pay depends on what bracket you’re in. In effect, this refers to the percent of taxes paid by income level. So, to kick off these tax facts, we’ll show you some statistics relating to the tax bracket.
1. The lowest income tax rate is 10%.
This rate is for individual taxable income that’s above $0 but under $9,875.
Basically, if you earn under that amount, you only have to pay 10% in taxes every year, which is the lowest among all federal individual income tax rates.
2. The highest tax rate is 37%.
In total, there are seven different individual income tax rates. You’ve seen the lowest, and this is the highest. Taxable income over $518,400 gets hit with the 37% tax rate.
For reference, the second tier is 12% (between $9,875 and $40,125), the third is 22% ($40,125 to $85,525), the fourth is 24% ($85,525 to $163,300), the fifth is 32% ($163,300 to $207,350), and the sixth is 35% ($207,350 to $518,400).
It’s also important to note that you don’t pay the effective income tax rate for all of the money you earn if you’re in the highest tax bracket. What we mean is that for the first $9,875, you pay the 10%, then 12% on your money up to $40,125, and so on. As such, you don’t give away 37% of your total earnings if you earn $518,400 per year!
3. In 2017, all Americans paid, on average, a tax rate of 14.64%.
This refers to the national average, so it takes into account every person who pays income tax in the US.
When you look at how the average federal income tax rate differs depending on earnings, it’s pretty remarkable.
4. The bottom 50% of taxpayers had an average rate of just 4%.
Now, when we break things down and look at the income statistics, we see that the bottom 50% of earners in the country had an average rate of just 4%.
This is well below the national average, so what could be pushing it up so high? Well, let’s look at what the super-rich paid on average, and it will all become more clear…
5. The top 1% of earners had a tax rate averaging 26.8%.
The latest income tax data suggests that the very top 1% of earners paid an average of 26.8% in taxes last year. That’s more than six times what the bottom 50% paid. Let that sink in for a second. They paid a rate that was six times as high as half of the population!
In fact, there are some very interesting tax statistics by income level, particularly for people in the upper echelons of society. So much so that we’ve decided to dedicate an entire section to them!
Tax Statistics by Income Level: For High Earners
Everyone is always keen to know what rich people pay in taxes. There’s always an assumption that billionaires and the top 1% don’t pay as much tax as everyone else. Well, we’ve looked at the US tax statistics, and this is what we discovered:
6. Tax statistics 2018 show that billionaires paid 23% of their income in taxes.
Taxes statistics from 2018 suggest that billionaires pay under a quarter of their income in taxes.
On its own, this means nothing, right? It might seem like quite a high number, but how does it compare to other individuals who earn less?
7. In 2018, all other Americans paid 28% of their income in taxes.
There you have it. One of the shocking facts about taxes, which shows that the average American paid more of their income in taxes than billionaires!
Let’s break that down for a second just to explain what we mean. Technically speaking, it doesn’t mean that billionaires paid less tax in terms of the amount of money paid. Obviously, 23% of a billionaire’s earnings are still greater than 28% of the average person’s income.
Instead, it means that they paid less tax relative to their income, and the individual tax rates 2018 could attest to this.
8. For the first time in 2018, billionaires paid a lower percentage ever than the rest of the population.
Reports showing the percentage of taxes paid by income level in 2018, suggest that the rest of the US paid a higher percentage of their income in tax than billionaires. And this happened for the first time ever!
Usually, billionaires pay a bit more, but the percentages are pretty similar. This seems fair as it means that people are still paying the same proportion of their earnings regardless of how much money they have.
9. The top 1% of Americans own 40% of the country’s wealth, grounded on income tax facts.
We’ll give you a minute to take that in. 40% of all the wealth in the United States is owned by the top 1% of earners. This means that the remaining 99% share the other 60% between them. It’s a remarkable statistic that speaks volumes about income inequality in the country.
Speaking of which, it probably comes as no surprise to see the following fact.
10. Income inequality remains at its highest ever level, with 0.486 Gini index of income inequality in 2018.
The US Census Bureau has collected the latest income inequality in America statistics. In 2018, the Gini index was 0.486, which denotes a significant increase in the income gap from a Gini index of 0.397 in 1967 when the Census Bureau started analyzing income inequality. This means that we’re still at the highest level of income inequality.
What does this mean to the average person?
Well, the rich are getting much richer, but the rest of us aren’t. It’s creating a society where wealth is unevenly and unfairly distributed.
IRS Statistics of Income
The IRS is responsible for handling all the tax data in the US. They recently released the statistics of income, which contain lots of interesting facts about how tax was paid relating to income levels.
We should put a little disclaimer here to say that, although these findings were released in 2019, they relate to the 2017 tax year!
11. Federal income tax statistics say that the top 1% of earners paid a 38.5% share of federal income taxes in 2018.
The federal income tax data shows that the top 1% contribute the largest amount of money to the total income taxes.
If you’re confused, don’t worry — we were as well. It’s a lot to take in when you see the other percentages we threw around earlier. While the top 1% pay a smaller percentage of their income in taxes, this still amounts to 38.5% of all taxes paid.
Interestingly, this is close to the 40% figure that details how much of the wealth they own. Realistically, they should be paying 40% of the total income tax collection, so where does the additional 1.5% go?
12. The top 50% of taxpayers paid 97% of all individual income taxes based on the IRS statistics of income 2018 report.
How much do rich pay in taxes?
When you broaden the scope to include the top 50% of earners, you find they paid almost all the income tax in the previous tax year.
You can also use this stat to say that around 60% of taxes were paid by 49% of earners in the country.
13. The bottom 50% only accounted for 4% of individual income taxes.
Again, pretty shocking, and it shows the disparity in the percentage of taxes paid by income. Half of the US population only paid enough tax to contribute towards 4% of the overall tax bill.
If there was ever a stat that shows how bad income inequality is in the country, then this is surely it. It’s a painful reminder of how little the bottom 50% of the country earns in comparison to the top 50.
General Income Tax Statistics
The IRS statistics of income are fascinating, as they really show how much people in the higher ends of society make compared to the average person. But it’s time to move on from that and look at some of the more general United States tax statistics. There are some massive figures involved, so let’s jump straight in.
14. Tax statistics 2019 reported that there are $5.3 trillion in taxes collected last year.
Fun fact, this equates to 24.9% of the US economy. So, if you’ve ever wondered just how important taxes are, now you know. They make up around a quarter of the overall economy, so you can see why the IRS are so keen to clamp down on tax avoiders, even if that means people going bankrupt, as many bankruptcy statistics illustrate this.
15. On average, every individual in the US paid just over $16,000 in taxes in 2019, statistics of income tax affirm.
To be exact, the figure is $16,219 for each person.
Naturally, you have to take this fact with a pinch of salt. Some individuals paid far more than that, while others paid a lot less. Still, it’s interesting to see how things averaged out.
16. United States income tax statistics reveal that $3.4 trillion of all tax came from federal taxes.
The remaining $1.9 trillion came from State and Local taxes. Federal taxes accounted for just 16% of the US economy.
17. 50% of federal tax was collected from individuals based on the tax return data IRS presented.
Of all the federal tax collected, half of it came from individual income tax. As a comparison, only 4% was collected from corporations.
This raises many questions, the main one being how corporations managed to account for such a low percentage. Especially when you consider how much money they make compared to the average US person.
18. IRS household income statistics show that there are $1.6 trillion individual income taxes paid.
By looking at the tax returns by income data, we found that a total of $10.9 trillion was earned in taxable income by US taxpayers. In turn, $1.6 trillion of this was paid in taxes.
19. The average tax refund in July 2020 was $2,741.
Tax refunds are given out when individuals have paid too much tax. As of July 2020, the IRS has paid out almost $300 billion in tax refunds.
All in all, there have been 102,904,000 tax refunds given out this year so far, amounting to $282.033 billion. So, that leads to an average refund of $2,741.
20. Over 155,000,000 tax returns have been received by the IRS in 2020.
The exact figure is 152,875,000 — as of July. Tax return statistics are updated every month, and we expect this number to rise considerably towards the end of the year!
The Key Takeaways
There’s a lot to ponder when you look at the tax statistics in the US. So, we’ve got a few key things that you should take with you after reading all of these facts.
Here’s the deal:
The tax rate averages around 15%, and the top 1% of earners are paying a lower percentage of their wages than the rest of the population. Income tax also reveals a lot about the struggles the US has with income inequality.
Hopefully, our income tax statistics have made you look at certain things in a new light. Or, you’ve found out some vital information that you didn’t know about before. Either way, thanks for reading, and we hope to see you again soon!