The Burden, by the Numbers

Your federal return doesn't show your whole tax bill. There's payroll tax on every paycheck. Sales tax at every register. Gas tax at the pump. Property tax on your home — or baked into your rent.

Add it all up, and the picture changes. The federal income tax is progressive — meaning higher earners pay a higher percentage. But state and local taxes run the other way. In most states, the poorest fifth of households pays a larger share of its income in state and local taxes than the richest one percent. When you spend everything you earn, everything you earn gets taxed.

Combine it all, and the total burden doesn't climb steadily as incomes rise. It looks less like a staircase and more like a hump — rising through the middle class, then bending down at the very top. The four hundred wealthiest Americans pay a lower overall rate than the average American.

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The taxes your 1040 doesn't show. Beyond the federal income tax: payroll taxes (15.3% combined, from the first dollar of wages), state and local sales taxes (levied in 45 states), excise taxes (18.4¢/gallon federal gas tax plus state gas taxes averaging ~33¢), and property taxes (paid directly by owners and passed through to renters in rent). For roughly two-thirds of households, payroll taxes alone exceed federal income taxes. (CRS R47062; Tax Foundation)

State and local taxes are upside-down. ITEP's Who Pays? (7th edition, 2024) — the only distributional analysis of tax systems in all 50 states — found the national average effective state and local rate is 11.4% for the lowest-income 20%, 10.5% for the middle 20%, and 7.2% for the top 1%. The poorest fifth pays a roughly 60% higher rate than the top 1%. In 41 states, the top 1% pays a lower rate than every other income group; in 42 states, lower than the bottom 20%; and 35+ states tax their poorest residents at a higher rate than anyone else. The most regressive states: Florida, Washington, Tennessee, Pennsylvania, Nevada, South Dakota, Texas, Illinois, Arkansas, Louisiana. The least: D.C., Minnesota, Vermont, New York, California. The main driver is overreliance on sales and excise taxes — households that spend all their income get taxed on all of it, while households that save and invest large shares do not. (ITEP, Who Pays? 7th ed.; ITEP summary)

Wisconsin, Michigan, Minnesota. Minnesota is one of only a handful of states whose tax system reduces inequality — ITEP ranks it among the least regressive in the nation (graduated income tax, refundable credits). Wisconsin and Michigan fall in the middle of the pack: both are less regressive than the national average but still tax their lowest-income residents at higher effective rates than their top 1%. (ITEP state profiles)

The combined picture: a hump, not a staircase. Stacking federal, state, and local taxes: the system rises through most of the income distribution — the progressive federal income tax outweighs regressive state/local taxes for middle and upper-middle earners — then flattens and bends down at the very top, where income shifts from wages (taxed up to 37% plus payroll) to capital gains and dividends (taxed at 20-23.8%, no payroll). ITEP's all-taxes analysis finds the overall system only barely progressive: in 2024, the richest 1% received 20.1% of all income and paid 23.9% of all taxes — shares that nearly match. (ITEP, Who Pays Taxes in America 2024)

The top 400. UC Berkeley economists Emmanuel Saez and Gabriel Zucman (The Triumph of Injustice, 2019) calculated that the 400 wealthiest Americans paid a total effective tax rate — all taxes, all levels of government — of about 23% in 2018, below the ~28% national average and, for the first time in U.S. history, below the rate paid by the working class. Methodology notes: These estimates are contested — economists Gerald Auten and David Splinter argue different income-allocation assumptions yield a more progressive picture. Meanwhile, the White House Council of Economic Advisers' 2021 analysis, which counts unrealized capital gains as income, found the top 400 paid just 8.2% — far lower than Saez-Zucman's figure. The script's claim uses the middle-ground mainstream estimate. Under any of the three methodologies, the rate at the very top falls below the rate on upper-middle wage earners. (Saez & Zucman; White House CEA)

Why the very top pays less. The composition effect from the rest of the Tax History arc: at the very top, income stops being wages (subject to income + payroll tax) and becomes capital gains, dividends, and untaxed appreciation. See Same Dollar Different Tax (the 37% vs. 20% gap), What We Tax (what escapes taxation entirely), and PM's Buy Borrow Die (how appreciation is monetized without ever becoming taxable income).

Related Civic Minute segments: What We Tax, Same Dollar Different Tax, One Direction, The Ledger, The Napkin. Related PM scripts: Who Actually Pays (the "ladder bends back down" — same finding, advocacy voice), You Already Pay a Wealth Tax.