The bottom 43 to 45% of taxpayers don’t pay in any money for federal income taxes.
So, it is unsurprising, that most Americans pay more in payroll taxes than in income taxes. Based on the structure of the Social Security payroll tax, poor and working-class people actually pay higher rates than the rich. As a percentage of income. But those taxes come back to them through Social Security and Medicare.
Under the federal income tax, as your income goes up, your tax rate does as well. High-income Americans pay high rates, and low-income Americans pay low rates. But the cost of government is under the burden of 57 to 55% of US taxpayers who pay income tax.
Because the richest Americans make most of their income from interest, dividends and long-term capital gains, their overall tax rate is closer to 20% than to 37%. Since the 7.65% of FICA is calculated on earned income only.
While the bottom 95% of the income distribution generate less than 1% of their income from capital gains. For the richest 1% of households, on the other hand, capital gains are 20% of income. But they are contributing to the cost of government.
There is no simple solution to the taxing issues. But both political parties have solutions to take more money out of your pockets.