The Average Citizen Pays What Percentage of Their Income on Taxes?

Deductions and credits lower the average tax bill.
Deductions and credits lower the average tax bill. (Image: Creatas/Creatas/Getty Images)

Federal and local governments generate revenue from a variety of taxes and fees, but most citizens are familiar with income taxes. The Center on Budget and Policy Priorities reported in April 2011 that income taxes for the average American are at all-time lows. The Obama administration's tax credits and cuts as a response to the 2008 recession reduced the rate that most people pay, continuing a downward trend in tax bills that started in the 1980s. The average citizen has been in the 15 percent tax bracket since 1987, but the amount of income the average person actually gives the government has been steadily decreasing, reaching an all-time low of 3.5 percent in 2008.

Marginal Tax

The United States has a graduated income tax, meaning that people with less money pay a lower percentage of their income than people with more money. Every year, the IRS publishes a table stating the different tax rates for different incomes.These tax rates are called "marginal tax rates" and the average American citizen is in the 15 percent bracket. Very few people--if any--in the 15 percent bracket actually pay 15 percent of their income to the government.

Real Tax

While the average marginal rate may be 15 percent, Americans can take deductions and claim credits on their tax returns. Whenever a person deducts from her income, she declares that she will not pay taxes on the amount that she deducts. The IRS offers a standard deduction that increases every year or allows Americans to itemize their deductions and list donations, health insurance expenses, business expenses, educational costs and more. When a person claims a credit, he subtracts the credit amount directly from his tax bill. As a result, the Tax Policy Center reports that the average American household paid only 4.68 percent of their income in taxes in 2010.

Historical Trends

The Center on Budget and Policy Priorities states that the average American paid a record low amount in taxes in 2008: 3.5 percent, even though the average person was in the 15 percent marginal tax bracket. In 2009 and 2010, the average citizen paid the second and third lowest percentages of their income on record, 4.47 and 4.68, respectively. The average American paid the highest percentage of their income in taxes in 1981 (11.7), after which the average tax bill began to drop.

State and Local Taxes

States and local governments charge an array of taxes in order to raise revenue as well. Most states charge an income tax of anywhere between 15 percent and 1 percent, and some states and city or county governments charge sales tax on some items sold within their jurisdictions. While a number of organizations publish tables comparing state tax rates, none offer an average percentage of income that goes to local taxes.

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