Many left-wing activists push for America to embrace a more expansive welfare system along the lines of what many governments in Western Europe have. However, the resulting level of spending forces governments to impose heavy taxation across the board. Middle class families in America face much lower taxes than comparable families in Europe.
Created May 31, 2023
Source: OECD, Tax Foundation
In European welfare states, middle-class workers—not just the wealthy—shoulder a massive tax burden and get a highly intrusive government for their money. A lower-income European earning $40,000 pays $6,000 more in taxes than a similar American. On the current fiscal course, Americans will face European-style taxes.
Created November 8, 2019
Source: Heritage Foundation Analysis
In 2019, Tax Freedom Day—the day after which Americans have worked enough days of the year to pay their federal, state, and local taxes—occurs just one day after Tax Day, April 15, the deadline for filing federal tax returns. According to the Tax Foundation’s annual “Tax Freedom Day” report, Americans will work for 105 days of the year to pay their collective $5.42 trillion tax bill—a figure equal to about 29% of Americans’ incomes.
Tax reform lowered the U.S. federal corporate tax rate. As a result, the combined federal and state U.S. corporate tax rate fell from almost 40 percent—the highest in the developed world—to below 25 percent. The new rate, slightly above the world average, is making America more competitive in the global economy.
Source: OECD
Payroll taxes, those taxes paid by wage earners for Social Security and Medicare, have become an increasingly important revenue source for the federal government.
Updated March 22, 2023
Source: OMB
In 2023, individual income taxes comprised 48 percent of all federal revenues. This is followed by payroll taxes, which provided 35 percent of all revenues.
Updated August 31, 2023
Source: Congressional Budget Office
Despite the top individual tax rate fluctuating between 91 and 28 percent over the past 50 years, total individual tax receipts have remained fairly stable. The top rate decreased in 2018 and is now at 37 percent.
Additional Sources: Internal Revenue Service
Updated May 16, 2023
Source: Office of Management and Budget
Top earners remain targets for tax increases, but the federal income tax system is already highly progressive. In 2021, the latest year with available data, the top 1 percent of income earners earned 26 percent of all income and paid 46 percent of all federal income taxes – more than the bottom 95 percent combined (33 percent).
Updated June 27, 2024
Source: Internal Revenue Service
Without reforms, spending on Medicare and Social Security is threatening even higher payroll taxes for workers.
Additional Sources: Social Security Administration
Source: Social Security Administration
