Are Taxes Progressive in the US?
Every once in a while we read an article on either how progressive or non-progressive our tax system is in the US. We ran across this article while browsing the Internet and the first thing that struck me is how the word progressive is denoted in these articles as being equal to percentage.
In the article, the author strives to indicate that the richest 1% barely pays more tax than those in the lower income brackets since their overall percentage of income paid to taxes is not much more than lower income earners. They state that even though the federal income tax structure is progressive, all of the other taxes such as payroll taxes, excise, sales, property and other taxes are clearly regressive (in their opinion).
For example, the article states that the lowest 20% of taxpayers pay on average about 19% to taxes. The highest 1% only pay about 29% and the overall average is about 28%.
What the article fails to point out is the amount of overall taxes paid by each bracket. For example, the lowest 20% bracket pays about $2,262 of total taxes, while the upper 1% pays almost $400,000 or about 200 times higher than the lower 20%. The average for the “bottom 99%” is about $16,000 which again is about 25 times lower than the 1%.
As with most of these articles, it is very easy to take a statistic and slant it one way or another using percentage in one case and actual dollars in another. The point is to understand both sides of the spectrum so you can make a more informed decision.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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