How much income tax do Americans pay?

Question

We're taxed to hilt in Britain. People say that the American rates of tax are a fraction of what they are here in Britain. Is this true?

Answer 1

Those who say that Americans pay a lot of tax have obviously never experienced life abroad. There are basically six tax rates - 10%, 15%, 25%, 28%, 33% and 35%. Dividends and gains on most assets held over one year are taxed at either 5% or 15%. However, what really reduces the tax bill is the deductions. everyone gets a personal exemption of $3,300 (it goes up in line with inflation each year) and that includes minor children. So a family man supporting a wife and two children gets to take four exemptions angainst his income, which doesn't happen in the UK unless you are wealthy enough to be able to pass investment income to your family.

There is a standard deduction (married couples get the most at $10,300) but what really helps is itemized deductions. You can deduct mortgage interest, property taxes and medical expenses amongst other things. In the UK, mortgage interest disappeared as a deduction in the 1990's and the very limited relief for health insurance did too. To my knowledge, rates or council tax has never been deductible in the UK unless you run a business from home.

For comparison, my wife and I are at the top end of the 15% bracket, but our effective rate is 8% because of all the deductions we can take. We can afford to live in a large four-bedroomed house in a nice neighborhood. Our smaller car is a 2.2 litre. We can do that because petrol is 28p a litre, if my conversion is accurate.

You can see from the table below how little income we have in UK terms (divide dollars by two to get an approximation) yet we have a comfortable life - more comfortable than we could have in the UK.

In summary, income taxes are much lower than the UK. Sales tax in most places is 6 or 7% although it is creeping up. Compare that with 17.5% VAT. Petrol is taxed much less. I'm not sure how property taxes compare. In some states it costs about $5,000 for what might be a band D house in the UK, so that's about $2,500 give or take.

If you are thinking of moving here, just make sure you have medical insurance! If there is a downside, that is it.

Answer 2

I started to give you a complicated explanation, but it was just too much. Basically, I can give you an example: at about $40k/yr, filing as head-of-household, with one dependant, my effective tax rate is between 5-6% of my gross income. The lower the income, the smaller the percentage. The higher the income, the higher the percentage. A very well paid person can expect to max out at under 40%. This is a very small percentage of the population. Most of us pay less than 15%.

This is referring to federal income tax. Some states have state income taxes and a smaller sales tax. Other states have no state income tax with a higher sales tax. I live in Tennessee and we have no state income tax. The sales tax rate varies from county to county here, but is typically 9-10%.

States with a state income tax and sales taxes probably end up around the same net percentage.

Answer 3

Its a disturbing situation when someone has a cell phone, has their nails and hair done, has cable TV, a microwave, etc., and yet they still have the audacity to take welfare and other taxpayer money paid for by working families who may not have the budget to buy cable TV, cell phones, nails, etc., for their own family, let alone having enough money for education and other self-investments. This is immoral and clearly government welfare was not meant to be the way of life that it has become for many of the 47%. This another reason why major tax reform is direly needed in this country. The immoral IRS needs to be replaced with something like the "FAIR Tax", an idea that would solve this problem by replacing all income taxes and other taxes with a simple sales tax that everyone contributes too. Under the Fair Tax, those who are truly poor would receive prebates too offset the sales tax, thereby helping the poor but also ensuring that everyone pays their fair share.

Answer 4

it depends on how much you earn. some people who earn less money or have alot of dependents(children)actually are paid EXTRA money at tax time. For instance, a person who earned around $26,000 and had 3 dependents would get a refund of all taxes paid in addition to receiving a check for $4,000 to $6000. However, a single person making the same amount would have to PAY $4,000 to $6000. (these numbers are not exact) Also, the taxes are on a sliding scale. If you are taxed @15% for the first $30k, 20% for the next $25k, and 30% for the next $50k. THis is only income taxes. You also have social security tax (about 8%) and local taxes (5-8%) Property tax on homes, cars, and boats- (1to 3%) and sales tax on anything you purchase aside from food (6%)

Answer 5

Depends on income. The top marginal rate for federal taxes in the US is 35%, paid on taxable income over $336,500 (for single, head of household, and married filing jointly). Most Americans will pay much less than that, only owing 10% on the first 15K for a married couple, 15% on the next 46K, then 25% on the next 62K.

This does not include state and local taxes, which can vary greatly upon which city and/or state you live in.

Answer 6

americans pay income tax following the 16th amendment from 1916, but still less than europeans

which, incidentilly, is UNLAWFUL

if you hate UK taxes DO NOT MOVE TO HOLLAND

Holland sucks worst for taxes anywhere, odd for a country that started 80 year war over a 10% taxation by the spanish king

sic

Answer 7

American's are taxed based upon how much they make.
They always pay federal tax and most pay state tax.
You can view the tax rate information for federal taxes by downloading the 1040 instruction booklet on www.irs.gov

Answer 8

It averages about 30%. Some people pay no federal tax at all, for various reasons.

One reason your tax rate is so high is that you have guaranteed health coverage for all your citizens. We don't. So while we may have lower taxes, we have to pay for health insurance, which can be pretty pricey.

Answer 9

We pay Federal, State, Local, Medicare and Social Security

It all equals about 1/3 of gross income.

But we do not have the social services that you do.
Any medicine and medical care is up to each individual to pay for themselves....or one can purchase insurance (up to $1200 per month for a family of 4)....unless you're in poverty, which then you qualify for state care.

Answer 10

Well, most of us think we pay too much...many of us pay between 22-30 % of what we earn. Remember, this is the issue over which Americans fought for their independence from the British!