Do you know what you pay in taxes? Here's who pays the most and least to the IRS

Research consistently shows that many Americans misunderstand how their income is taxed, which experts say could help explain why many people are disgruntled with the U.S. tax system. 

About 55% of taxpayers said they think their taxes are too high and that they are paying more than their fair share, according to a new survey by libertarian think tank Cato Institute and YouGov.

At the same time, most taxpayers don't grasp how taxes work, with widespread confusion over how tax brackets work and who pays the most in taxes in the U.S., according to other research. 

"While Democrats and Republicans disagree a lot, they tend to agree their own taxes are too high," wrote Emily Ekins and Hunter Johnson of the Cato Institute in an April 14 blog post about the survey. "Majorities of Republicans (59%), independents (56%), and Democrats (51%) all believe their personal tax bills were excessively high this year."

The tax system is designed to be progressive, meaning that lower-income Americans pay a smaller share of their income in federal taxes than do higher-income workers. 

Because of that structure, the highest earning households pay almost all federal income taxes. A November analysis of tax data by the Tax Foundation found that the top 10% of U.S. earners pay about 72% of the nation's taxes. 

The top-earning Americans pay an effective average tax rate of 26%, while the bottom 40% pay about 4% of their income to the IRS, according to the Tax Foundation's November analysis of 2022 tax data (based on the latest available figures from the IRS).

What's your tax bracket?

"All Americans are affected by the tax code —but do they understand the tax code?" the Tax Foundation, a nonpartisan group focused on tax policy, wrote in a blog post. 

The answer: No. 

Most Americans don't understand how tax brackets work, which is the basis for the amount that individuals fork over to the IRS each year, according to a 2024 Tax Foundation survey. A majority of those surveyed didn't understand that only a portion of a person's income is subject to their top marginal rate, the study found. About one-third believed that their top rate was applied to their entire annual earnings.

In fact, Americans are taxed according to seven tax brackets, which represent the percentage you'll pay in taxes on each portion of your income. As a result, people generally have a lower effective tax rate than their top marginal rate, which is only applied to income that falls into that band. (For instance, the top rate of 37% for single filers in 2024 is applied only to income above $609,351.)

"This survey reveals how, despite taxes playing a significant role in personal finances and being levied on a sizable portion of the U.S. population, most Americans are not just unhappy with the current tax code but also do not understand it," the Tax Foundation noted.