U.S. Taxes in Charts

Few things animate Americans more than taxes. As it is now cliche to point out, it was matters of taxation that in large part precipitated the revolutionary war that birthed the United States. Taxes are indicative of a society’s relationship with its government, as well as its priorities, policies, and even social views — and yet for all the passion and debate they entail, they are among the least well-understood aspects of our country.

The Atlantic clears up this complex and often dicey issue  with over a dozen charts detailing how taxes work in the U.S. While the source material is from 2010 to 2013, much of the data and fundamentals remain relevant as of this post. (Note that I am sharing most, but not all, the charts from the cited piece.)

tax graph 25.png

The federal government is funded mostly by taxes on income and payroll, the latter being split between workers and their employers. Over 80 percent of that revenue in turn goes to just three kinds of spending: defense, social security, and health programs like Medicare and Medicaid.


And while the federal government takes center-stage in most discussions about taxes and tax policy, municipalities and states levy taxes, too, mostly to fund education and health programs.


As indicated by the light blue portion, state taxes are generally spread out over a wide variety of programs and policies, ranging from parks to state police.

One thing all levels of taxes — local, state, and federal — have in common is that they are increasingly, albeit presently not at the highest they have ever been.


Indeed, despite all the ballyhooing about onerous taxation rates, all income group are paying proportionally less into the federal government than they used to.


Contrary to popular belief, most Americans do pay taxes, including the 50 percent of households that do not pay a federal income tax but do contribute to payroll taxes (which represent an almost equal proportion of government revenue), in addition to local and state taxes (which tend to be more regressive, e.g. inflict a larger burden on poor people).


Moreover, of those who do not pay federal taxes, the vast majority are very poor — we’re talking families with a total annual income of only $30,000 or less, who again still end up paying other kinds of taxes.


As noted before, in contrast to payroll taxes, income taxes are more progressive: the top one percent of Americans pay more than taxes than the bottom 60 percent, although they make more money than 40 percent of the population.


Again, this is in sharp contrast to the relatively more regressive nature of local and state taxes, which are drawn largely from property and sales transactions.


Finally, by the standards of the developed world (and indeed even compared to some developing nations), Americans pay among the least in taxes; only citizens of South Korea and Turkey pay less.


The more we understand taxes, the better we can appreciate their importance as well as devise informed, effective ways to raise them (or not, in certain cases).

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