How Much Does the Average American Worker Pay in Taxes?

By on July 23, 2015 in Pay & Benefits with 160 Comments

The average American worker faces a total tax burden of 31.5%, according to new report from the Tax Foundation.

There are two primary kinds of taxes American workers pay: income taxes (federal, state and local) and the payroll tax. The report notes that the latter is levied on both employee and employer, but the financial burden of the tax ultimately falls on the worker via lower take home pay. Payroll taxes are meant to fund programs such as Social Security, Medicare, and Unemployment Insurance funds.

The report is based on data from OECD countries, and there are 34 countries that make up the OECD (Organisation for Economic Co-operation and Development). The OECD surveys these nations regarding their labor tax burdens by adding together the income tax payment, employee payroll tax payment, and the employer-side payroll tax payment of a worker making the average wage in each country. The OECD then divides it by the total labor cost of this average worker, or what the worker would have earned in the absence of these three taxes. This is called the average tax wedge on labor income.

According to the Tax Foundation’s report, the OECD found that the average American worker faced a 31.5% tax wedge (this includes both income and payroll taxes). Additionally, the average worker paid an average effective income tax rate of 15.7% and an average effective payroll tax rate of 15.9%. The average worker in this scenario is a single worker without children who earned an annual income of $50,084.

The 31.5% tax wedge for a U.S. worker represents an $8,631 average individual income tax bill and an $8,741 average payroll tax bill for a total average tax bill of about $17,372. The result is an after tax income of $37,604.

Chart showing average American worker's total tax burden

But how does the United States fare with other OECD countries? As the chart below shows, the US average is slightly below the OECD average.

Chart showing where US ranks in average tax burden among OECD countries

Belgium had the highest tax wedge at 55.6% and Chile came in last at only 7%.

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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