@JLeslie I think you can find what you are looking for at the Congressional Budget Office.

The statistic you are talking about is usually called an “effective tax rate” (also sometimes called an “average tax rate”). It is defined as total taxes paid divided by total income. The effective tax rate is especially important in a system such as ours which is based on graduated marginal rates. The top marginal rate right now is 35 percent, but that only applies to income over about $370,000 (for a married couple). The income below that is taxed at lower rates. In other words, everyone in the country, regardless of total income, pays exactly the same income tax rate on their first dollar of earnings.

A simple example might also help here. Let’s imagine a hypothetical millionaire named Susie who lives in a country with just three tax brackets. The first bracket is 10 percent on income up to $100,000. The next bracket is 20 percent on income up to $500,000, and the final bracket is 30 percent on income over $500,000. Susie’s marginal tax rate is 30 percent because she makes more than half a million dollars. Every additional dollar she earns will be taxed at 30 percent. But…her effective tax rate is only 24 percent (math below).

Graduated marginal income tax rates are only one reason why effective rates are below marginal rates. Another reason is tax deductions and credits. Let’s use the same example, but this time let’s imagine that Susie can deduct $100,000 from her income. With the deduction, even though Susie makes a million dollars, her taxable income is only $900,000. She still makes more than half a million so her marginal rate is the same, but her effective rate is now down to 21 percent. (again, math below)

One more reason. In many systems, including ours, certain kinds of income get a preferential tax rate. To illustrate this, let’s imagine that one quarter of Susie’s income comes from capital gains (the sale of capital assets like stocks and real estate) and that in her country, capital gains are taxed at just 15 percent (just like here in the United States). Well, with her $100,000 deduction that we mentioned, and the fact that $250,000 of her income is taxed at a lower rate, she now pays the normal income tax on just $650,000. Her taxable income still puts her in the top bracket so she has the same marginal rate as before. Her effective rate, however, is now just over 17 percent.

Last point. Imagine now that there is another resident of this country named Bob, and Bob makes $500,000 but he does not qualify for the deduction that Susie has, nor does he have any income that merits a special rate. Bob simply pays the normal income tax on all of his income. His effective rate would be 18 percent, and higher than Susie’s even though he makes half as much.

**Math for part 1 of the example**

First $100,000 taxed at 10 percent = $10,000 in tax paid

Next $400,000 taxed at 20 percent = $80,000 in tax paid

Next $500,000 taxed at 30 percent = $150,000 in tax paid

Total tax = $240,000

$240,000 in taxes / $1,000,000 in total income = 24 percent effective rate

**Math for part 2**

$1,000,000 in total income – $100,000 deduction = $900,000 taxable income

First $100,000 taxed at 10 percent = $10,000 in tax paid

Next $400,000 taxed at 20 percent = $80,000 in tax paid

Next $400,000 taxed at 30 percent = $120,000 in tax paid

Total tax = $210,000

$210,000 in taxes / $1,000,000 in total income = 21 percent effective rate

**Math for part 3**

$1,000,000 in total income – $100,000 deduction – $250,000 capital gains = $650,000 normal taxable income

First $100,000 taxed at 10 percent = $10,000 in tax paid

Next $400,000 taxed at 20 percent = $80,000 in tax paid

Next $150,000 taxed at 30 percent = $45,000 in tax paid

$250,000 taxed at special 15 percent rate = $37,500 in tax paid

Total tax = $172,500

$172,500 in taxes / $1,000,000 in total income = 17.25 percent effective rate

**Math for part 4**

$500,000 in taxable income (no deductions, no special rates)

First $100,000 taxed at 10 percent = $10,000 in tax paid

Next $400,000 taxed at 20 percent = $80,000 in tax paid

Total tax = $90,000

$90,000 in taxes / $500,000 in total income = 18 percent effective rate