If you’ve just filed your income taxes, it might interest you that the U.S. tax code is incredibly progressive. That’s meant in a mathematical sense. It’s progressive because it collects far more taxes from you when you make more income.
This isn’t the message we usually hear from today’s left. They claim “the rich” should pay “their fair share.” What we’ve never heard liberals do is define in numerical terms how much is “fair.”
How progressive is our tax code? According to the nonpartisan Congressional Budget Office, the average federal tax rate (all federal taxes of all kinds divided by income) for the top 0.01% of households — the 12,000 wealthiest families in America — was more than 30%. These households give the federal government 30 cents of every dollar they earn.
Given the rhetoric, that might be surprising. Let’s keep going down the income ladder. The highest “quintile” (one-fifth) of earners, those making $350,000 annually, paid 22% of their income in federal taxes. The middle quintile, those making $80,000 yearly, paid 13% of their income. And the lowest quintile, those making $20,000, paid 1% of their income in federal taxes.
Remember, this isn’t just the federal income tax — it’s also the Social Security and Medicare payroll tax, the corporate income tax, the inheritance tax, and all federal excise taxes. It shows a very steep and very progressive tax system. If you’re working a minimum wage job, you hardly pay anything. If you’re in the middle class, you’re paying a respectable but modest amount. And if you’re a millionaire, you’re paying more than twice what the middle class pays as a percentage of income.
Congress is scheduled to vote on making President Trump’s “Tax Cuts and Jobs Act” law, which is about to expire, permanent. This will ensure that taxes don’t increase in January 2026 on middle-class families and small businesses. Unless Congress acts, income tax rates will rise across the board. The child tax credit will be cut from $2,000 to $1,000 per child. The standard deduction and inheritance tax exemptions will be cut in half. The dreaded “alternative minimum tax” will return. The tax rate paid by most family-owned small businesses will rise 25% on top of the income tax rate hikes.
In a misguided attempt at frugality, Congress is considering “paying for” this avoidance of a tax hike with higher taxes, which only makes sense to some in Washington. The form of this tax hike is particularly painful given what Trump’s tariff experiment is putting Main Street employers through. Congress is considering removing the ability of businesses large and small to deduct their state and local income taxes paid on their profits. Doing so would increase businesses’ average federal tax rate from anywhere between 2 and 5 percentage points.
Congress should look to lower tax rates, not raise taxes by denying deductions for ordinary and necessary business expenses like state business taxes.
Our tax system is already plenty progressive and needs Congress to focus on growth, not liberal talking points.
Ryan Ellis is a conservative tax activist in Virginia/InsideSources