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Who pays the most taxes? Experts explain the data ahead of the 2023 deadline.

MoneyWatch: How to not fall behind on paying taxes
MoneyWatch: How to not fall behind on paying taxes 04:35

Tax day arrives on April 18, with about 168 million Americans expected to file individual returns this year. But of those filers — representing everyone from workers to retirees — one group will pay the bulk of the nation's individual income taxes. 

The U.S. tax system is designed to be progressive, indicating that higher-income Americans face higher tax rates, while lower-income people pay a smaller percentage of their earnings toward federal taxes.

Because of the system of tax benefits and transfers, such as taxpayer-funded programs like Medicaid and public housing assistance, the lowest-earning Americans actually receive more from the government than they pay in income taxes, according to a recent analysis of tax data from the Tax Foundation. 

Even so, the U.S. tax system has grown less progressive over the last few decades, with tax legislation such as the 2017 Tax Cuts and Jobs Act enacting large cuts for the rich and corporations. The average top marginal tax rate for the rich stood at 81% between 1944 to 1981, compared with just 37% for the highest earners today. 

That's prompted some policy experts to call for higher taxes on the rich and corporations, an effort that President Joe Biden has has championed with his call for a wealth tax and for bumping up the capital gains tax. 

"When policymakers or taxpayers discuss tax policy, the conversation inevitably turns to who pays, who should pay and how much they should pay," the Tax Foundation's analysts wrote in their report. 

To answer that question, the Tax Foundation examined the combined impact of federal, state and local taxes against the benefits of transfers from federal and state programs such as Medicaid, unemployment income, Social Security and community services. Its analysis is based on 2019 tax, income and other data.

Here's who pays the most

The highest-earning Americans pay the most in combined federal, state and local taxes, the Tax Foundation noted. As a group, the top quintile — those earning $130,001 or more annually — paid $3.23 trillion in taxes, compared with $142 billion for the bottom quintile, or those earning less than $25,000.

The top fifth includes the nation's highest earners, who pay much more in taxes than those at near the $130,001 threshold. 

For instance, the top slice includes the nation's roughly 900,000 households that earn $1 million or more a year. As a group, they are projected to pay $772 billion in federal income taxes for 2022, or 39% of all federal income taxes, according to a projection from the Joint Committee on Taxation.

By comparison, there are 29 million U.S. households with annual income between $50,000 to $75,000. That group is expected to provide the federal government with about $44 billion in taxes, or 2.2% of the total pie, the analysis found.

The average federal income tax rate was 13.6% in 2020, according to a January analysis from the Tax Foundation. But the top 1% of earners paid an average rate of about 26%, while the bottom half of taxpayers had an overall rate of 3.1%, the analysis found.

Money back from the government

But after adding in the impact of transfers, the difference is even more stark, the Tax Foundation noted. 

For instance, the lowest quintile of earners, or those with income of $25,555 or less, have a combined tax and transfer rate of -127%. In effect, that means they receive $1.27 from the government for every dollar they earn. 

The top quintile, meanwhile, have a combined tax and transfer rate of almost 31%, which means they pay about 31 cents for every $1 earned. In effect, the top quintile funds about 90% of all government transfers, the analysis found.

"Due to the highly progressive tax and transfer system, a household in the bottom quintile earned an average of $22,491 in pre-tax and transfer income but had approximately $54,900 in post-tax and transfer income [or money in the form of benefits],since they received an estimated $32,409 in net government transfers," the researchers noted.

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