Summary
A recent study conducted by the Institute on Taxation and Economic Policy found that low
and middle income families pay on average much higher tax rates compared to wealthy
families. The ITEP states that the poorest Americans pay around double the tax rate for
state and local taxes than the richest Americans do. Currently, the poorest twenty percent
has to pay an average of 10.9 percent, while the richest have to pay 5.4 percent. This tax
system is considered a regressive tax system. A regressive tax system consists of a tax rate
that decreases as the amount of taxable income increases. This study makes it clear that the
poor and middle class pay much more state and local taxes than the rich do. However, this
study didn’t include the federal tax.
Leaving out the federal tax while calculating the tax rate is a major problem. American’s
pay federal, state and local taxes. Federal taxes actually account for two thirds of the total
taxes paid. The federal taxes differ from state and local taxes due to their structure. The
federal taxes are structured as a progressive tax system. A progressive tax system increases
the tax rate while the amount of taxable income increases. According the Tax Policy
Center, the top one percent of America paid 33.4 percent, the middle twenty percent paid
13.7 percent, and the poorest paid 3.1 percent. This system shows that the rich pay over 10