March 29, 2011

Effective Income Tax Rates by Income Level

When you hear about taxes you usually hear the marginal tax rates discussed most.   People talk about being in the 25% tax bracket or maybe discuss a new law proposing an increase in the top tax bracket.  The marginal tax rate is what you pay in taxes on each additional dollar earned.    A better picture of your actual tax obligations is your effective tax rate.   Today I'll show what the effective tax rates are for different income levels.

I got the numbers from the IRS statistics site.  The latest figures there were for 2008.

There were 142M total tax filers in 2008.   The total effective tax rate for all payers was 13.9%.  

87% of tax filers had AGI of under $100,000 and paid an effective tax rate below 10%.

Here is at table showing the number of tax filers in each income group and their respective effective tax rates:

# filers % of AGI
No adjusted gross income 2,489,989 0.0%
$1 under $5,000 11,638,707 5.0%
$5,000 under $10,000 12,139,638 2.6%
$10,000 under $15,000 11,702,056 2.9%
$15,000 under $20,000 11,076,002 3.8%
$20,000 under $25,000 9,866,247 5.2%
$25,000 under $30,000 8,743,581 6.2%
$30,000 under $40,000 14,554,280 6.8%
$40,000 under $50,000 11,087,123 7.5%
$50,000 under $75,000 19,196,461 8.5%
$75,000 under $100,000 11,729,485 9.3%
$100,000 under $200,000 13,851,341 12.7%
$200,000 under $500,000 3,476,747 19.6%
$500,000 under $1,000,000 577,618 24.1%
$1,000,000 under $1,500,000 140,635 24.8%
$1,500,000 under $2,000,000 59,460 25.0%
$2,000,000 under $5,000,000 86,329 24.8%
$5,000,000 under $10,000,000 21,390 24.0%
$10,000,000 or more 13,480 21.1%

Here is the data shown graphically :

For the picture I chopped off the data at the $1M income level just to make the picture cleaner.


  1. % of AGI ?

    Who cares ?

    How about % of TOTAL income ?

  2. I'd like to see "percent of gross income paid to the government". Using just the Federal income tax doesn't tell anywhere near the whole picture. If you're at $10,000 income, you're going to be paying 7.65% *MINIMUM*, because that's what you pay for Social Security and Medicare. (Okay, I suppose if you're only making $10k, you might be having the government pay you due to EIC, but you get the point.)

  3. Social Security tax shouldn't count against Federal Income Tax becuase that goes for Social Security ... at least that's what you are being told... right :-)

  4. I think that if payroll taxes were taken into account, there's a big bulge (high %) effective rate around $100,000. Tax rates are lower in Communist countries; I wonder why?

  5. Actually there isn't a 'bulge' in the effective rate. THe marginal rate has a bulge but the effective rate does not.

    The handful of nations that call themselves communist do not really conduct their economies in a communist manner. They are closer to fascist dictatorships than communist.



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