The U.S. progressive tax system makes it difficult to pin down an “average” taxpayer. There are seven tax brackets ranging from 10% to 37%, so the average tax rate might be expected to be 24.57%. Conveniently, there is a 24% tax bracket. So is this what the average American pays in taxes?
Not really. Different spans of income are taxed at different rates. For example, a single taxpayer who earns $89,076 would pay the 24% rate on only one dollar of income in 2022—the dollar over the $89,075 ceiling for the 22% bracket. Here’s how it breaks down.
- For the tax year 2022, the federal income tax brackets range from 10% to 37%.
- The top 50% of taxpayers paid 97.1% of all federal income taxes in recent years.
- The OECD reported that the U.S. tax wedge for the average single worker decreased by 1.2 percentage points from 27.2% in 2020 to 28.4% in 2021.
How Tax Brackets Impact Rates
The 24% bracket applies only to income from $89,075 through $170,150, at least for single taxpayers. These income thresholds vary by filing status. Here’s how the brackets for the single filing status break down for tax year 2022:
|Marginal Tax Rate||Income Threshold|
|10%||$0 to $10,275|
|12%||$10,275 to $41,775|
|22%||$41,745 to $89,075|
|24%||$89,075 to $170,050|
|32%||$170,050 to $215,950|
|35%||$215,950 to $539,900|
|37%||$539,900 or more|
The 24% rate wouldn’t affect an unmarried taxpayer earning $35,000 a year. They would be in the 12% tax rate bracket—but only on income over $10,275. The first $10,275 would be taxed at just 10%.
These income spans are up somewhat from what they were in the tax year 2021 because they’re tweaked annually to keep pace with inflation. In 2022, for example, the federal income tax brackets range from 10% to 37%, which for single filers will span from $0 to $10,275 at the lowest marginal rate to $539,900 or more at the top rate, respectively.
"Median" Might Be a Better Term
It might be easier to understand the median tax burden of American taxpayers instead. The median is the number that falls in the middle of a data set. Theoretically, half of all taxpayers would pay less than a median figure, and half would pay more.
The top 50% of taxpayers paid 97.1% of all federal income taxes in 2018, the last tax year for which comprehensive and vetted statistics are available, according to the Tax Foundation. As a result, the bottom 50% paid just 2.9%.
Based on these and other figures, the Tax Foundation derives an average tax rate of 14.6% for the top 50% of taxpayers, just 3.4% for the bottom 50%, and an average of 13.3% overall.
But this is just one way of looking at the equation. There’s also something known as the “tax wedge,” and the figures from the Tax Foundation reflect only income taxes. Social Security and Medicare also take a percentage of Americans’ earnings. Technically, these should be considered when weighing an average tax burden, too.
The Tax Wedge
The tax wedge is the ratio between what the average worker pays in taxes and what they would have taken home in earnings if they didn't have to pay those taxes. In economic terms, what this worker would have earned had they not paid taxes is referred to as the “total labor costs” for the employer—or what the employer would have paid the worker otherwise.
The Organisation for Economic Co-Operation and Development (OECD) calculates tax wedges annually for the U.S. and dozens of other developed countries. The tax wedges are based on the pay and tax brackets of single individuals, and the idea is that the higher the tax wedge, the less likely it becomes that some taxpayers will see any benefit in holding down a job.
Calculating the Tax Wedge
Tax wedge calculations include income taxes and FICA taxes—Social Security, Medicare, and the Additional Medicare tax, where applicable. But the federal income tax represents the biggest burden on American taxpayers.
Employers’ and employees’ Social Security and Medicare shares are used to calculate the OECD tax wedge. Even if an employee doesn’t have to pay their employer’s share out of pocket, that money would have otherwise been paid to them without that contribution. The Social Security tax rate for wages paid in 2022 is set at 6.2% for both employers and employees, while the rate for self-employment income is 12.4%. The Medicare tax takes 1.45% for employers and employees and 2.9% for self-employed individuals.
The U.S. Tax Wedge
The OECD reported that the U.S. tax wedge for the average single worker decreased by 1.2 percentage points from 27.2% in 2020 to 28.4% in 2021, which is still less than the OECD average for all countries—34.6% in the same year. Meanwhile, after taxes and benefits, the take-home pay of an average single U.S. worker was 77.4% of their gross wage, compared with the OECD average of 75.4%.
According to the OECD, pandemic-based legislation is thought to have contributed to the tax wedge decrease.
So what does this mean in dollars? Assuming a median yearly salary of $53,924, a tax wedge of 28.4% works out to about $15,314.42, meaning the average worker contributed that much to the federal government.
The OECD tax wedge only includes these three taxes: income, Social Security, and Medicare. It doesn’t include sales, property, vehicle, or state income taxes.
Frequently Asked Questions (FAQs)
What is the average tax rate in the U.S.?
In 2021, the average tax rate was 22.6% in the U.S., according to the Organisation for Economic Cooperation and Development.
How much does the average person pay in taxes?
According to the latest data released, the average U.S. citizen had an average tax rate of about 8.2%.
How much tax do you have to pay on $1,000,000?
Because the tax system is progressive, a single tax-payer with no children who earned $1 million would pay taxes in each tax bracket, paying 37% only on the income that exceeded $539,900. This equates to a little more than $332,000 in federal taxes.
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2021."
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2022."
The Tax Foundation. “Summary of the Latest Federal Income Tax Data, 2021 Update.”
Organisation for Economic Co-operation and Development. "Tax Wedge."
Social Security Administration. "Contribution and Benefit Base."
Organisation for Economic Co-operation and Development. "Taxing Wages 2022 - The United States," Pages 1, 2.
Organisation for Cooperation and Economic Development. "Taxing Wages 2022: Impact of COVID-19 on the Tax Wedge in OECD Countries."
Bureau of Labor Statistics. "Usual Weekly Earnings of Wage and Salary Workers First Quarter 2022."