For most individuals, another tax season has come and gone. If you filed for an extension, you have until October 15 to file.
But how much does the typical American pay in taxes?
According to the Bureau of Labor Statistics, the average American household’s income is $76,664, but this is from a number of sources that are taxed at different rates. Some households earn the majority of their income through wages, while others are self-employed. Others rely on retirement income sources like Social Security.
With that in mind, the average American pays $10,489 in “personal taxes,” representing 14% of the average household’s total income. This includes federal and state income taxes, as well as other taxes such as personal property taxes, vehicle taxes and certain other small taxes.
$8,367 of this amount is federal income taxes, $2,046 is state and local taxes and $75 is other small taxes.
AAII Weekly Survey Question
Ask most people and they will say they pay too much in taxes. Historically, though, taxes are actually fairly low as a percentage of personal income, according to the Bureau of Economic Analysis, and as a percentage of GDP, according to the Organization of Economic Development (OECD). Compared to the rest of the world, Americans pay a comparatively low amount of taxes.
Of 30 developed countries across the world, including all of western Europe plus South Korea, Canada, Mexico, Japan and a handful of eastern European countries, the U.S. ranks fifth lowest measuring as a percentage of GDP, according to the OECD. And that includes state and local taxes plus payroll taxes for unemployment, etc., as well as federal income taxes.
To see whether our readers think they pay too much in taxes to the federal government, last week’s survey question asked:
Do you think the amount of federal income tax you pay is too high?
Here are the results:
In all, 1,878 participated.
Fifty-percent of respondents believe they pay too much in federal income tax. Another 40% believe the amount they pay is just right while only 10% feel they pay too little in federal income tax.
Weekly Special Question
As the survey results indicate, only a fraction of taxpayers feels they pay too little. However, we were curious to know if there were any situations under which readers would be willing to pay more in federal income taxes. So we asked our readers:
Under what circumstances, if any, would you be willing to pay more in federal income taxes?
In all, we received 490 responses.
Surprisingly, the majority of responses offer scenarios under which readers would pay more in federal income taxes (68%). Among this group, roughly one-third (31%) say they would be willing to pay more in federal income taxes in return for improved social programs, health care or infrastructure.
Nearly 17% of those willing to pay more in federal taxes say they would if it went toward lowering the national debt.
On the other end of the spectrum, more than 18% of respondents say that, under no circumstances, would they be willing to pay more in federal income taxes.
Here is a sampling of the responses readers offered regarding under what circumstances they would be willing to pay more in federal income taxes:
- “More to squander on corruption and useless wars? NEVER!”
- “To reduce the debt. The tax increase would have to be paired with a huge reduction in spending.”
- “When the government stops trying to solve everyone’s problems.”
- “None. I’m retired and my income is stretched!”
- “To keep Social Security and Medicare sound and to maintain public education and the infrastructure.”
- “I would be glad to pay more once I start making more.”
- “If the government balanced the budget.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.