How We Pay Taxes: 11 Charts

I'll come right out and say it: Taxes are awesome.

Yes, awesome. If you care about national values, or the relationship of citizens to their government, or the way we choose to award and discourage behavior, there is nowhere better to start than the gnarled and fascinating world of levies and tax breaks. Tax week gives American families a reason to consider moving to Bermunda, but it also gives me an excuse to spend the day finding my favorite, most controversial, and most illuminating graphs about taxes. Here they are. If you've think I've picked the wrong ones, or if you've got a better chart yourself, leave it in the comment section. I'm rounding up your favorite tax graphs tomorrow.

Off we go.


Washington has two main sources of revenue, which together account for 80 percent of all federal income: (1) payroll taxes, which are split between employers and employees to fund programs like Social Security, and (2) income taxes, which you're all too familiar with now that it's the middle of April. The media tends to focus on income taxes, because they are the main arena of battle between Republicans and Democrats fighting over deficits, and Buffett Rules, and millionaires. But, surprise!, payroll taxes make up a nearly equivalent share of government revenue, especially since corporate income taxes have shriveled in the last 60 years as a share of the total pie. [Source: Tax Policy Center]

tax graph 25.png


The federal government was once elegantly described by Ezra Klein as a big fat insurance company surrounded by a standing army. It's a useful quip, because our government is basically in the business of security. Social Security, income security, health care security for the elderly, poor and veterans, and guns-and-helmets security account for about 80% of government spending. That's what we pay for when we pay taxes. [CBPP]

where taxes go.png


Here's something you've probably read: Half of Americans don't pay taxes. There's just one problem with this maxim: It's totally wrong. While it's true that around 50% of families don't pay a positive federal income tax, remember than an equal share of government revenue comes from payroll taxes. Practically all earners in their prime working years pay a total federal tax. [Hamilton Project]


The U.S. tax code is very complicated, but it follows one general rule (Buffett, notwithstanding): Richer people pay more. In fact, the top 1% pays more federal taxes than the bottom 60% combined. Is that outrageous? You might think so. But consider also that the top 1% also makes more than the bottom 40% combined. That's the thing about being rich in America: You make lots and lots of money and you get taxed at a progressive rate on it.

tax graph 1.png

Here's another way to look at tax burden by quintile. The top 20% makes a little more than half the money and pays about two-thirds of the federal taxes. That's progressive taxation at work. Whether it's too progressive or not progressive enough is a debate for another post. [Tax Policy Center]

tax graph2.png


Every April comes with a slew of stories about that horrible half of the U.S. population that pays no federal income taxes thanks to exemptions and tax credits. Who are these people? They are the poor. About 80 percent of the households not owing federal income tax earn less than $30,000 a year. Since 2000, the poorest 40% of households have averaged a federal income tax rate below zero.  [The Atlantic]



This is an impossible question to answer definitively. As Michael Linden of the Center for American Progress pointed out to me, the U.S. ranks in the bottom five among OECD countries in total government revenue as a share of GDP. We're just above South Korea and Turkey. We tax less than Australia, Canada, and just about every country in Europe. A fun way to look at this issue is to compare total tax rates on $100,000 of gross income across the developed world. Once again, we're behind most advanced countries when it comes to taxing even middle-class income. As for upper-class income ... keep scrolling. [The Economist]

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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