Despite perceptions of a broken system, the stark reality of American taxation is revealed by a single jarring statistic: while earning just over a quarter of the nation's income, the top 1% of taxpayers shouldered nearly half of the entire federal income tax burden in 2022.
Key Takeaways
- In tax year 2022, the top 1% of taxpayers paid 45.8% of all federal individual income taxes while earning 26.3% of total adjusted gross income
- The average effective federal income tax rate for the top 1% in 2022 was 25.9%, compared to 3.4% for the middle quintile and 0.6% for the bottom quintile
- In 2022, taxpayers earning between $100,000 and $500,000 paid 23.1% of total federal income taxes despite comprising 13.2% of AGI
- In FY2023, corporate income tax revenue reached $420 billion, 10% of total federal receipts
- Effective corporate tax rate post-TCJA averaged 13.1% from 2018-2022 per JCT estimates
- Fortune 500 companies paid $40 billion in federal taxes in 2022 on $1.8 trillion profits
- In FY2023, state sales tax collections totaled $346 billion across 45 states with sales tax
- Average state sales tax rate was 5.08% in 2024, with combined state-local average 7.52%
- Grocery food sales tax exemptions in 33 states reduced burden on low-income households by $10B
- In 2023, U.S. property tax collections reached $803 billion, 30% of local revenue
- Average effective property tax rate was 1.02% nationally in 2023, highest in NJ at 2.23%
- Residential property taxes comprised 70% of total levies, commercial 25%, other 5% in 2022
- In FY2023, total U.S. tax revenue was $4.4 trillion, 17.3% of GDP
- Federal taxes 50.1% of total, state 39.6%, local 10.3% in 2022 per Census
- Tax-to-GDP ratio U.S. 26.6% vs OECD average 33.9% in 2022
The top 1% of income earners paid nearly half of all federal income taxes in 2022.
Business Taxes
- In FY2023, corporate income tax revenue reached $420 billion, 10% of total federal receipts
- Effective corporate tax rate post-TCJA averaged 13.1% from 2018-2022 per JCT estimates
- Fortune 500 companies paid $40 billion in federal taxes in 2022 on $1.8 trillion profits
- Pass-through businesses (S-corps, partnerships) generated 52% of U.S. business income but 44% of taxes in 2022
- R&D tax credit claimed $25 billion by corporations in 2022, supporting 1.2 million jobs indirectly
- Section 179 expensing allowed $1.16 million deduction per year in 2023 for equipment purchases
- Net Operating Loss (NOL) carryforwards totaled $1.1 trillion on corporate balance sheets in 2022
- GILTI tax regime imposed 10.5-13.125% minimum on foreign earnings, affecting 15,000 entities
- BEAT provision denied deductions exceeding 3% base erosion payments, impacting multinationals
- Corporate AMT repealed by TCJA but proposed OECD Pillar 2 sets 15% minimum globally
- Interest deduction limited to 30% of EBITDA post-TCJA, saving $100 billion in revenue 2018-2027
- Bonus depreciation at 100% through 2022 phased down, claimed on $500 billion assets annually
- 10,000 C-corporations filed returns in 2022, reporting $4.2 trillion gross receipts
- Foreign tax credits redeemed $120 billion by U.S. multinationals in 2022
- Energy investment credits under Section 48 totaled $15 billion for renewables in 2022
- Like-kind exchanges deferred $50 billion in gains for businesses in 2022
- Corporate charitable contributions capped at 10% of taxable income, totaling $20 billion
- Audit rate for large corporations (> $10B assets) was 7.2% in FY2022
- Repatriation under TCJA brought back $1 trillion in overseas profits by 2022
- Opportunity Zone investments raised $75 billion by 2022, deferring capital gains taxes
- FDII deduction provided 37.5% rate reduction on export income, benefiting tech firms
- In 2022, tech sector effective corp rate 12.2%, pharma 15.4%, retail 18.1%
- 91 Fortune 500 paid 0 federal tax on $62B profit 2022 due to credits
- NOL utilization post-CARES suspended limits, used $200B 2020-2022
- QBI 20% deduction cost $80B/year, 95% pass-throughs qualify fully
- Section 174 R&D amortization over 5yrs post-2021 cost $20B revenue
- OECD Pillar 2 15% top-up tax to affect $200B U.S. MNE profits 2024+
- State corporate rates avg 6.5% + 4.8% sales factor, combined 25-28%
- Economic nexus post-Wayfair 50 states, $100K sales threshold avg
- ERC claims $230B by mid-2024, 80% improper per GAO
- PPP forgiveness nontaxable $800B, but expenses nondeductible
- Inventory accounting LIFO $50B preference, repeal proposed
- Captive insurance tax shelters saved $10B, IRS challenging 100s
- Transfer pricing disputes $15B adjustments avg/year IRS APAs
Business Taxes Interpretation
Despite the complex web of credits, deductions, and international maneuvers that let some giants pay nothing, the corporate tax system still vacuumed up a staggering $420 billion, proving that even with a thousand leaks, the ship of state remains stubbornly afloat.
Consumption Taxes
- In FY2023, state sales tax collections totaled $346 billion across 45 states with sales tax
- Average state sales tax rate was 5.08% in 2024, with combined state-local average 7.52%
- Grocery food sales tax exemptions in 33 states reduced burden on low-income households by $10B
- Use tax compliance rate estimated at 10-20% for online purchases, gap of $8-13B annually
- Excise tax on gasoline averaged $0.31/gallon federal + $0.31 state in 2024, generating $50B
- Tobacco excise taxes raised $12.6 billion federally in FY2023, $17B states
- Alcohol excise tax rates: $13.50/proof gallon spirits, $1.07/wine gallon, $0.58/beer barrel
- Hotel occupancy taxes averaged 4.5% in states, generating $40B local revenue 2022
- Rental car excise taxes totaled 10-20% rates, $2.5B revenue in major airports 2022
- Telecom excise taxes collected $10B annually, with 911 fees averaging $1.50/line
- Cannabis excise taxes in 24 states averaged 15-37% potency-based, $3.7B revenue 2022
- Vaping excise taxes raised $1.2B in 20 states by 2023, rates $0.30-$2.00/ml
- Bottled water excise taxes in 4 states generated $50M, rates up to 5¢/bottle
- Firearms/ammo excise taxes at 10-11% federally yielded $1.4B for conservation 2022
- Airline passenger excise tax 7.5% + $4.80/segment, $5.1B revenue FY2023
- Sport fishing equipment excise 10-48%, hunter stamps $15 avg, $1B total 2022
- In 2023, 6 states no sales tax, avg rate 7% combined urban
- Amazon collected $13B sales tax post-Wayfair 2018-2023
- Selective sales taxes on sugary drinks 7 states, $1B revenue 2022
- Luxury auto sales tax 10% federal on yachts> $100K, $300M rev
- Coin-operated machines excise 10¢ avg, $100M small biz revenue
- Heavy truck tire excise $1-$5/tire, $500M highway fund 2022
- Indoor tanning 10% excise, $100M cancer research 2022
- Vaccine excise tax funds $1.8B trust for injuries 2022 claims
- Medical devices 2.3% excise repealed 2013 reimposed proposed
- Private college endowment excise 1.4% on >$500K/student, $100M 2023
Consumption Taxes Interpretation
Our tax system is a complex mosaic of targeted levies, from the essential gasoline that moves us to the sinful indulgences we tax with moral purpose, all while chasing the elusive online purchase and debating which luxuries or vices should fund the collective needs of society.
Individual Income Taxes
- In tax year 2022, the top 1% of taxpayers paid 45.8% of all federal individual income taxes while earning 26.3% of total adjusted gross income
- The average effective federal income tax rate for the top 1% in 2022 was 25.9%, compared to 3.4% for the middle quintile and 0.6% for the bottom quintile
- In 2022, taxpayers earning between $100,000 and $500,000 paid 23.1% of total federal income taxes despite comprising 13.2% of AGI
- The IRS reported 153.6 million individual income tax returns filed in 2022, with total tax liability of $2.1 trillion
- For tax year 2021, the effective tax rate for the top 400 taxpayers averaged 23.1%, paying $36.3 billion in federal income taxes
- In 2022, 57.5% of U.S. households paid no federal income tax due to credits like EITC and CTC
- The standard deduction for single filers in 2023 was $13,850, reducing taxable income for 90% of filers
- Itemized deductions totaled $1.2 trillion in 2022, with mortgage interest and state taxes being the largest categories
- Earned Income Tax Credit (EITC) benefited 25 million taxpayers in 2022, averaging $2,500 per claim
- Child Tax Credit claims reached 40 million in 2022, providing up to $2,000 per qualifying child
- Capital gains taxes contributed $245 billion to federal revenue in FY2023, with long-term rates at 0-20%
- Alternative Minimum Tax (AMT) affected 203,000 taxpayers in 2022, generating $9.1 billion
- Self-employment tax rate is 15.3% on net earnings up to $168,600 in 2024
- In 2022, 14.8 million taxpayers claimed the home office deduction, averaging $1,200 per claim
- Student loan interest deduction capped at $2,500 annually, claimed by 5.6 million in 2022
- Medical expense deductions over 7.5% of AGI totaled $15 billion in claims for 2022
- IRA contributions deducted amounted to $85 billion in 2022 for 12 million taxpayers
- The Pease limitation phased out itemized deductions for high earners, affecting top 3% in 2022
- Net Investment Income Tax of 3.8% applied to 2.5 million taxpayers in 2022, yielding $17 billion
- Kiddie tax applied to 1.2 million unearned income reports over $2,500 in 2022
- In 2022, average tax refund was $3,089 for 93 million refunds issued by IRS
- Tax year 2022 saw 1.6 million audits of individual returns, with 0.5% audit rate for top 1%
- Qualified Business Income Deduction (QBID) under Section 199A claimed by 3 million, averaging 20% reduction
- Education credits (AOTC and LLC) totaled $25 billion for 10 million students in 2022
- Saver's Credit encouraged 1.5 million low-income savers with up to $1,000 credit in 2022
- In 2022, 28% of filers used tax software, processing 90 million returns electronically
- Phaseout for personal exemptions effectively zero since TCJA, impacting family tax calculations
- In 2022, top 1% paid 42% federal taxes, 72% income taxes, per Tax Foundation
- Middle 60% paid 35.7% of income taxes on 42.3% AGI in 2022
- Bottom 50% share of income taxes fell to 2.3% in 2022 from 3% prior
- 2023 brackets: 37% top rate over $578,125 single, indexed 7.2% inflation
- Lifetime Learning Credit up to $2,000, nonrefundable, 6M claims $12B 2022
- Adoption credit $15,950 refundable max in 2024, 20K families benefited
- Electric vehicle credit up to $7,500, 1.2M claims post-IRA 2023
- Mortgage interest deduction capped $750K debt post-TCJA, $30B cost 2022
- SALT deduction cap $10K cost $100B revenue gain since 2018
- 401(k) contributions $7,000 limit 2024, 60M participants $500B assets growth
- Roth IRA conversions surged 20% post-Sunset fears, $50B converted 2022
- Gig economy 1099 filers 50M+, Schedule C net loss $20B avg
- Audit rate bottom 50% 2.4/1,000 vs top 400 14.2% in FY2022
- Innocent spouse relief granted 10K cases/year, $1B adjustments
- Offer in Compromise accepted 25K annually, settling $5B debt avg
- Penalty for late filing 5%/month up to 25%, abated 30% cases reasonable cause
- Estimated tax payments underpaid by 10M filers, $10B penalties 2022
Individual Income Taxes Interpretation
While the top 1% of earners shoulder nearly half of all federal income taxes, the system's intricate web of credits, deductions, and differing audit rates reveals a landscape where the tax burden is intensely concentrated at the top, yet the vast majority of filers navigate a complex code designed to alleviate their share through specific benefits and provisions.
Overall Tax Revenue
- In FY2023, total U.S. tax revenue was $4.4 trillion, 17.3% of GDP
- Federal taxes 50.1% of total, state 39.6%, local 10.3% in 2022 per Census
- Tax-to-GDP ratio U.S. 26.6% vs OECD average 33.9% in 2022
- Individual income taxes 41.5% federal revenue, payroll 36.5%, corporate 9.5% FY2023
- EITC fraud estimated at $15B annually, 25-30% improper payments rate
- Tax gap 2017-2019 averaged $496B/year, 20% of liability
- Offshore tax evasion costs $100B+ annually per IRS estimates 2023
- FATCA recovered $15.5B in back taxes from 100K+ accounts by 2023
- IRS funding increase via IRA added 87K agents, projected $200B revenue over decade
- Effective tax rates by income: bottom 20% -6.9% (transfers), top 1% 30.3% incl state 2021
- U.S. statutory corporate rate 21% vs global avg 23.5% in 2023
- VAT absent in U.S., reliance on income taxes increases progressivity per OECD
- State tax progressivity highest in CA, NY; regressive in NH, TX per ITEP 2023
- Billionaire minimum tax proposal targets unrealized gains, estimated $500B/decade
- TCJA reduced revenue $1.9T over 2018-2027 per JCT dynamic score
- In 2022, 278M taxpayers, voluntary compliance rate 83.8% for individuals
- Digital services taxes in 10 states raised $500M, targeting tech giants
- Wealth taxes proposed but none active federally, 3 states had until 1930s
- Carbon tax proposals estimate $1T revenue/decade at $50/ton
- In 2023, global tax revenue $22T, avg 34% GDP OECD
- U.S. 2nd lowest corp tax OECD after Hungary 9%
- Progressivity Gini after-tax U.S. 0.37 vs OECD 0.31 2022
- IRS collected $4.7T gross, $80B enforcement 2023, ROI 5:1
- BEPS Pillar 1 reallocate $220B digital profits taxing 100M users
- State rainiest day funds $100B tax stabilization 2023
- Universal basic income tax funded proposals $3T/decade cost
- Estate tax 40% over $13M couple 2024, 2K estates $17B rev
- GTET green energy transfer excise voluntary $1B 2023
Overall Tax Revenue Interpretation
America, where the tax code is a sprawling epic of noble progressivity besieged by a half-trillion-dollar "tax gap," armed with a newly funded IRS cavalry, and endlessly debating whether to further soak the rich, all while keeping its overall take notably lighter than its peer nations.
Property Taxes
- In 2023, U.S. property tax collections reached $803 billion, 30% of local revenue
- Average effective property tax rate was 1.02% nationally in 2023, highest in NJ at 2.23%
- Residential property taxes comprised 70% of total levies, commercial 25%, other 5% in 2022
- Property tax caps like California's Prop 13 limit increases to 2% annually since 1978
- Homestead exemptions reduced taxes by average $500/home in 40 states 2023
- Assessment ratios average 90% market value, with appeals overturning 40% cases
- Local governments rely on property taxes for 72% of own-source revenue excluding intergov aid
- Multi-family rental properties face 1.2% avg rate, contributing $100B revenue 2023
- Senior property tax freezes/deferrals in 20 states benefit 2M households, saving $2K avg
- Commercial property revaluations post-COVID increased taxes 15-20% in urban areas 2023
- Tax increment financing (TIF) districts captured $50B in property tax increments 2022
- Green building property tax abatements in 30 states average 5-year exemptions
- Vacant land property taxes penalize blight with 2-3x rates in 15 cities 2023
- Manufactured home property taxes averaged $800/year, often personal vs real property
- Utility property taxes on transmission lines totaled $15B, rates 20-30% assessed value
- In TX, avg home property tax $4,000 on $300K value, 1.68% rate 2023
- IL property taxes highest burden 3.7% income, $5K avg home 2023
- Split-roll reforms CA prop proposals shift burden commercial $12B
- PILOT payments universities $1B voluntary 2022 50 institutions
- Solar panel property tax exemptions 40 states, 10yr avg
- Personal property taxes on biz equipment $30B state-local 2022
- Reassessments lag 5-10yrs rural areas, inequities 20-30% ratios
- Disaster property tax abatements post-2023 fires/floods $2B relief
- Condo fees indirectly raise effective property tax 0.5% avg urban
Property Taxes Interpretation
American property taxes are a sprawling ecosystem where homeowners fund the town hall, commercial landlords post-COVID foot a larger bill, and a tangled web of caps, breaks, and appeals means your neighbor’s nearly identical house might just be subsidizing your new fire truck.
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