Expressed as a percentage, effective tax rates refer to amounts actually paid regardless of earned income. Effective tax rates differ from statutory rates, those mandated by laws that encompass the federal tax brackets. As data shows, effective and statutory rates can differ significantly because effective tax rates take into account adjustments to income and tax credits.
Clarification on Data
As of December 2014, the latest data available on effective tax rates from the Internal Revenue Service is based on 2011 tax returns. The data does not include state income tax liability as these vary by jurisdiction. The figures also don't take into account Social Security and Medicare taxes.
Incomes Less than $99,999
Effective tax rates for returns in all income brackets range from less than 5 percent to more than 80 percent. However, depending on tax credits and adjustments to income, the majority within different brackets fall within a particular range. For example, the majority of taxpayers reporting an adjusted gross income of less than $50,000 paid an average effective tax rate of less than 9 percent. For taxpayers with adjusted gross incomes of $50,000 to $99,999, the majority also pay an average effective tax rate of less than 9 percent.
$100,000 to $200,000
The average effective tax rates for the majority of taxpayers reporting an adjusted gross income of $100,000 to $200,000 was less than 20 percent. The highest percentile within this tax bracket paid an effective tax rate of 10 to 14 percent.
Incomes Above $200,000
The IRS reported 4,692,499 returns from taxpayers filing on an adjusted gross income of more than $200,000 in 2011. Of this group, only 27,722 paid less than a 5 percent effective tax rate. The two largest subgroupswere 1,756,246 taxpayers whose effective tax rate was 15 to 19 percent and 1,478,779 taxpayers whose effective tax rate was 20 to 24.99 percent.
The statutory corporate tax rate in the U.S. is 35 percent. However, due to a significant number of tax credits, corporations can end up with tax liabilities at a lower effective rate than some individual taxpayers. For example, in 2013, the U.S. Government Accountability Office released a study showing the average effective tax rate for corporations was 12.6 percent of pretax income. According to CNN Money, the same report showed U.S.- based corporations pay the highest statutory and effective tax rates in the world.
- Congressional Budget Office: The Distribution of Household Income and Federal Taxes, 2011
- CNN Money: GAO: U.S. Corporations Pay Average Effective Tax Rate of 12.6%
- Internal Revenue Service: 2011 Effective Tax Rate and Size of Income under Alternative Concepts
- U.S. Government Accountability Office: Effective Tax Rates Can Differ Significantly from the Statutory Rate
- TaxACT: Tax Bracket Calculator
- Tax Foundation: High Income Households Paid an Effective Tax Rate 16 times Higher than Low Income Households in 2010
- Tax Policy Center: Historical Average Federal Tax Rates for All Households