Rdan and Dale Coberly at Angry Bear give us a short summary of the true effective tax rate for different groups of taxpayers. The *effective tax rate* is basically: TotalTax$Paid / Income = Eff.Tax Rate%. Note this is different from the *marginal tax rate* which is the percent of the next (additional) dollar of income that will be paid as taxes. Many people get the two rates confused. Adding more confusion is that deductions, tax credits, etc. are most often available to higher-income payers and not to lower-income households. There’s a reason the low income households use the 1040-EZ form. Anyway, here’s what they found for 2008:

The richest one percent of the population, who make more than 410 thousand dollars per year (AGI) pay an income tax rate of 22%. (Rdan…Does not include less taxed capital gains and estate income)

The next top 4% of the population, earning over 160k but less than 410k, pay an income tax rate of 18%

The 5% of the population earning over 113k but less than 160k, pay an income tax rate of 13%

The 15% of the population earning over 67k but less than 113k, pay an income tax rate of 9%

The 25% of the population earning over 33k but less than 67k, pay an income tax rate of 7%

The 50% of the population earning less than 33k, pay an income tax rate of 3%.

Now these numbers are excluding capital gains from the income numbers. Capital gains, the money earned from investments, is taxed at a lower rate. Capital gains are also significant sources of income for the upper 5%, but not very significant for those making less than $200,000.

Finally, these numbers don’t include the Social Security/Medicare payroll taxes which all wage earners pay on incomes up to approx. $100,000, but incomes over that are exempt from payroll taxes. So, just out of curiousity, I decided to add the payroll tax number to the above numbers to get a better idea of just how big of a bite the Federal government is taking out of our paychecks. Now the employee’s porton of the payroll tax is just a little over 7.5%, The employer also pays an additional 7.5% to make approx. 15% in total, but the employee doesn’t see the employer share reported on his/her check stub. Now since, the above numbers from Angry Bear are already rounded, I’ll just use 7% as the SS/Medicare tax bite. Without the detailed income numbers for the top 3 brackets, we’ll have to estimate, so I assumed the minimum level of income. The revised numbers become:

The richest one percent of the population, who make more than 410

thousand dollars per year (AGI) pay an income tax rate of ~~22%. ~~**no more than 24%**

The next top 4% of the population, earning over 160k but less than 410k, pay an income tax rate of ~~18%~~ *no more than 24%*

The 5% of the population earning over 113k but less than 160k, pay an income tax rate of ~~13%~~ **no more than 19%**

The 15% of the population earning over 67k but less than 113k, pay an income tax rate of ~~9%~~ **16%**

The 25% of the population earning over 33k but less than 67k, pay an income tax rate of ~~7%~~ *14%*

The 50% of the population earning less than 33k, pay an income tax rate of ~~3%.~~ **10%**

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