NCPA - National Center for Policy Analysis

Total Federal Tax Burden Remarkably Flat

December 15, 2000

When you combine employment and income taxes, we have a remarkably flat tax structure. The tax burden on people who have trouble making ends meet is almost as great as on the affluent, measured as a percent of income.

The Joint Economic Committee of Congress calculated the average income tax, employment tax and total tax rate for each fifth of households.

  • Those in the bottom 20 percent of income earn an average of $11,265 a year and had a negative total tax burden after considering the Earned Income Tax Credit (EITC).
  • The remaining 80 percent, however, pay taxes at rates that ranged from 18.8 percent to 24 percent.

The EITC is in part a rebate to low-income workers of payroll taxes for Social Security and Medicare. Once minuscule, these employment taxes now loom larger than the income tax for all but the top group.

  • The 4th quintile -- the bottom 20 percent to 40 percent -- average $25,955 in income and pay income taxes of $1,273 compared to combined (employer/employee) employment taxes of $3,972, for a total tax burden of $5,245, or 18.8 percent of income.
  • Those in the middle 40 percent to 60 percent earn $40,637, pay income taxes of $3,611, and employment taxes of $6,218, for a total of $9,829, absorbing 22.6 percent of their income.
  • The near-affluent 60th to 80th percentile earn $59,457, pay $5,636 in income taxes and $9,096 in employment tax, a total of $14,732 or 23.0 percent.
  • The top 20 percent average $119,453 in pay, pay $18,927 in income taxes and employment taxes of $11,052, for total taxes of $29,979, or 24.0 percent.

The most important fact is that the federal government taxes all of us -- regardless of income level -- very heavily.

Source: Scott Burns, "Both parties share a secret on tax cuts," Dallas Morning News, November 26, 2000; Joint Economic Committee, "Payroll Taxes and the Redistribution of Income," July 1997.


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