Wealth Tax: Debating the Top Tax Bracket

Debate Over the Wealth Tax

Are the wealthy getting away with not paying their fair share of taxes, or are they carrying an unfair burden? The debate over the top tax bracket rages on as concerns about income inequality and the concentration of wealth at the top of the economic ladder continue to make headlines. Senators Bernie Sanders and Elizabeth Warren have both proposed a wealth tax on the ultra-rich, while even multi-billionaire Warren Buffett has vocally expressed support for the idea, suggesting that it is fair for wealthy Americans to be taxed at a higher rate.

Currently, the top federal income tax rate stands at 37%, applicable to incomes of $539,000 and higher for single taxpayers and $647,850 and higher for couples filing jointly. However, historical data reveals that the top marginal tax rate has been significantly higher in previous eras. In 1944 and 1945, it peaked at a staggering 94%, and in the late 1980s, it hit a low of 28% under former President Ronald Reagan.

Historical Context and Present Day

The taxation of the wealthy has fluctuated significantly throughout U.S. history, demonstrating both higher and lower levels of taxation than the current status. This historical perspective adds complexity to the ongoing debate regarding whether the rich are paying their fair share of taxes. Despite the disputes, recent data from the IRS sheds light on the current tax scenario.

Top 1% Tax Contributions

In 2020, the top 1% of taxpayers—those earning $561,351 or more—contributed a significant 42.3% of the total tax revenue collected. This translates to the top 1% paying more income taxes than the bottom 90% combined. Astonishingly, the top 1% paid a staggering $723 billion in income taxes, while the bottom 90% collectively contributed $450 billion.

State-Level Analysis

Examining the tax burden on the wealthiest individuals at the state level yields interesting findings:

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State
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By Ronald Tech


Connecticut

  • Minimum income to be considered 1%: $819,630
  • Average income of the 1%: $2,994,197
  • Average income tax paid by the 1%: $850,486
  • Average tax rate of the 1%: 28.40%

Delaware

  • Minimum income to be considered 1%: $455,813
  • Average income of the 1%: $1,130,051
  • Average income tax paid by the 1%: $286,738
  • Average tax rate of the 1%: 25.37%

Florida

  • Minimum income to be considered 1%: $597,787
  • Average income of the 1%: $2,610,168
  • Average income tax paid by the 1%: $673,926
  • Average tax rate of the 1%: 25.82%

Georgia

  • Minimum income to be considered 1%: $503,524
  • Average income of the 1%: $1,441,112
  • Average income tax paid by the 1%: $361,180
  • Average tax rate of the 1%: 25.06%

Hawaii

  • Minimum income to be considered 1%: $425,996
  • Average income of the 1%: $1,220,687
  • Average income tax paid by the 1%: $294,372
  • Average tax rate of the 1%: 24.12%

Idaho

  • Minimum income to be considered 1%: $481,713
  • Average income of the 1%: $1,554,757
  • Average income tax paid by the 1%: $360,217
  • Average tax rate of the 1%: 23.17%

Illinois

  • Minimum income to be considered 1%: $568,390
  • Average income of the 1%: $1,777,275
  • Average income tax paid by the 1%: $468,366
  • Average tax rate of the 1%: 26.35%

Indiana

  • Minimum income to be considered 1%: $407,436
  • Average income of the 1%: $1,067,785
  • Average income tax paid by the 1%: $262,169
  • Average tax rate of the 1%: 24.55%

Iowa

  • Minimum income to be considered 1%: $416,295
  • Average income of the 1%: $1,082,341
  • Average income tax paid by the 1%: $260,789
  • Average tax rate of the 1%: 24.09%

Kansas

  • Minimum income to be considered 1%: $477,303
  • Average income of the 1%: $1,433,811
  • Average income tax paid by the 1%: $358,847
  • Average tax rate of the 1%: 25.03%

Kentucky

  • Minimum income to be considered 1%: $383,016
  • Average income of the 1%: $946,997
  • Average income tax paid by the 1%: $228,605
  • Average tax rate of the 1%: 24.14%

Louisiana

  • Minimum income to be considered 1%: $394,176
  • Average income of the 1%: $1,000,664
  • Average income tax paid by the 1%: $248,166


State-by-State Breakdown of the 1% Income Tax Statistics

High Earnings, High Taxes

When it comes to the top 1% earners in the United States, their income taxes can vary significantly depending on the state they reside in. The income tax statistics for the 1% in several states paint a picture of high earnings, even higher taxes, and the complexities of state tax policies.

Maine: A Taxpayer’s Paradise?

Maine has set a relatively modest bar for its top 1% earners, who must pull in at least $432,311. However, for those who meet this threshold, the average annual income reaches a commendable $1,065,770. The state then collects an average income tax of $256,178 from its elite earners, reflecting an average tax rate of 24.04%. The picturesque Portland Head Lighthouse may cast a beautiful light for tourists, but for Maine’s top earners, it’s the tax rates that are making the headlines.

Maryland: Taxing the Elite

In Maryland, the bar is raised with top 1% earners needing to command an income of at least $544,756 to make the cut. Those who reach this level boast an average income of $1,556,220, but the taxman comes knocking with an average bill of $403,660, resulting in an average tax rate of 25.94%. The charming view of downtown Baltimore at night might be a sight to behold, but it’s the state’s tax rates that are illuminating harsh realities for the affluent.

Massachusetts: Taxing with No Mercy

Massachusetts’ high bar requires top 1% earners to bring home at least $777,052. The average income of this select group soars to $2,616,125, making them some of the nation’s most well-heeled. However, the tax collector claims an average of $710,286 from these individuals, resulting in an average tax rate of 27.15%. The Cambridge, Massachusetts skyline at twilight might be a romantic vision, but for the top earners, the state’s tax rates paint a less serene picture.

Michigan: Striking a Balance

Michigan’s requirements for its top 1% earners are more moderate, with a minimum income of $434,088. These elite earners boast an average income of $1,272,669. The state manages to collect an average income tax of $318,257 from this group, resulting in an average tax rate of 25.01%. The Detroit skyline might tell a story of ambition and resilience, but for the state’s top earners, the story is about striking a balance between success and taxation.

Minnesota: Taxing the Elite

In Minnesota, the bar is set at a minimum income of $538,836 for top 1% earners. The average income for this group is $1,488,497, putting them in an enviable position. However, the state takes an average tax payment of $380,066 from these earners, resulting in an average tax rate of 25.53%. The skyline of St. Paul might exude a festive spirit, but for the state’s top earners, the tax rates are a sobering reminder of their financial obligations.

Mississippi: Taxing with a Gentle Touch

In Mississippi, the requirements for top 1% earners are more attainable, with a minimum income of $328,504. The average income of this select group is $805,583, with an average income tax of $185,595 and an average tax rate of 23.04%. The Biloxi Lighthouse might stand tall, but for the state’s top earners, the tax rates present a beacon of relatively lighter fiscal obligations.

Missouri: Finding Middle Ground

Missouri strikes for a balance, with a minimum income of $430,609 for its top 1% earners. These individuals boast an average income of $1,303,645, with an average tax payment of $324,992, resulting in an average tax rate of 24.93%. The St. Louis downtown skyline at twilight might tell a tale of the state’s history and progress, but for the top earners, it’s about finding middle ground between financial success and tax contributions.

Montana: Taxing with Tact

Montana requires its top 1% earners to command an income of at least $481,383. This select group boasts an average income of $1,383,928, with an average income tax bill of $338,480, resulting in an average tax rate of 24.46%. The image of luxury condo living on the lake in Bigfork might embody relaxation, but for the state’s top earners, the tax rates represent a balanced approach to taxation.

Nebraska: Taxing the Discerning Few

Nebraska sets the bar high, requiring top 1% earners to have a minimum income of $460,735. The average income for this group stands at $1,385,275, with the state collecting an average tax payment of $333,805, resulting in an average tax rate of 24.10%. The Omaha skyline might symbolize progress, but for the state’s top earners, the tax rates reflect a discerning approach to fiscal responsibility.

Nevada: Taxing in Style

Nevada taxes its top 1% earners with a requirement of at least $519,311 in income. These elite earners boast an average income of $2,275,520, making them part of the nation’s financial elite. The state collects an average tax payment of $573,199 from this group, resulting in an average tax rate of 25.19%. The nightlife on the famous Fremont Street promenade in Las Vegas might exude glamor, but for the state’s top earners, the tax rates exude sophistication in financial responsibility.

New Hampshire: Taxing with Finesse

New Hampshire sets the bar high for its top 1% earners, requiring a minimum income of $566,865. The average income for this group is a impressive $1,720,454, with the state collecting an average tax payment of $451,691, resulting in an average tax rate of 26.25%. The town cityscape of Portsmouth might embody historic charm, but for the state’s top earners, the tax rates are a testament to the state’s ability to handle fiscal obligations with finesse.

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New Jersey: Taxing with Precision

New Jersey demands a substantial income of at least $703,033 from its top 1% earners. These individuals boast an average income of $1,906,729, making them part of the nation’s affluent class. However, the state claims an average tax payment from this group, reflecting a robust system designed to ensure precision in collecting its due share.



Income of the 1% Across US States

Income of the 1% Across US States

The income, and by extension the tax payments, of the top 1% income earners in the United States vary significantly by state. The top 1% in different states face different minimum income thresholds, average incomes, and average tax rates. Let’s take a closer look at this financial landscape.

New Mexico: Land of Enchantment

  • Minimum income to be considered 1%: $353,858
  • Average income of the 1%: $936,508
  • Average income tax paid by the 1%: $218,671
  • Average tax rate of the 1%: 23.35%

New Mexico boasts a relatively lower minimum income to qualify for the 1% status compared to other states. The average income of the top 1% in the state is also lower, leading to a more modest average tax rate compared to the national average.

New York: The Empire State

  • Minimum income to be considered 1%: $668,039
  • Average income of the 1%: $2,636,907
  • Average income tax paid by the 1%: $745,923
  • Average tax rate of the 1%: 28.29%

Conversely, New York sets a higher bar for its 1%, with a much larger average income and tax burden. The Big Apple’s top 1% face a significantly higher tax rate compared to the national average.

North Carolina: The Tar Heel State

  • Minimum income to be considered 1%: $481,474
  • Average income of the 1%: $1,266,561
  • Average income tax paid by the 1%: $320,556
  • Average tax rate of the 1%: 25.31%

In North Carolina, the 1% have a more moderate tax burden, with a balance of minimum income requirements, average incomes, and tax rates that sit closer to the national average.

Ohio: The Buckeye State

  • Minimum income to be considered 1%: $430,288
  • Average income of the 1%: $1,167,012
  • Average income tax paid by the 1%: $292,791
  • Average tax rate of the 1%: 25.09%

Ohio’s top 1% face a tax rate and income tax payment that are relatively in line with national averages. However, the state maintains a lower minimum income threshold compared to its higher-earning counterparts.

Oklahoma: The Sooner State

  • Minimum income to be considered 1%: $395,813
  • Average income of the 1%: $1,027,631
  • Average income tax paid by the 1%: $243,326
  • Average tax rate of the 1%: 23.68%

Oklahoma offers a lower minimum income threshold for the 1% and a corresponding lower tax rate, which follows the state’s overall more economically conservative nature.

Oregon: The Beaver State

  • Minimum income to be considered 1%: $491,840
  • Average income of the 1%: $1,290,794
  • Average income tax paid by the 1%: $318,327
  • Average tax rate of the 1%: 24.66%

Oregon’s top 1% face a relatively lower tax rate, aligning with the state’s reputation for a more progressive tax structure and policies.

Pennsylvania: The Keystone State

  • Minimum income to be considered 1%: $506,367
  • Average income of the 1%: $1,474,264
  • Average income tax paid by the 1%: $367,767
  • Average tax rate of the 1%: 24.95%

Pennsylvania’s 1% experience an average tax rate and income tax payment in line with national averages, maintaining a balance that reflects the state’s diverse economic landscape.

Rhode Island: The Ocean State

  • Minimum income to be considered 1%: $471,814
  • Average income of the 1%: $1,289,506
  • Average income tax paid by the 1%: $325,743
  • Average tax rate of the 1%: 25.26%

Rhode Island’s top 1% face a tax rate and income tax payment that sits near the middle of the national range, reflecting the state’s positioning as a midpoint between higher and lower-income states.

South Carolina: The Palmetto State

  • Minimum income to be considered 1%: $437,319
  • Average income of the 1%: $1,198,225
  • Average income tax paid by the 1%: $292,382
  • Average tax rate of the 1%: 24.40%

The palmetto state maintains a more moderate tax rate for its top 1%, aligning with its historical balance of agriculture, trade, and industry.

South Dakota: The Mount Rushmore State

  • Minimum income to be considered 1%: $507,804
  • Average income of the 1%: $1,796,244
  • Average income tax paid by the 1%: $412,893
  • Average tax rate of the 1%: XX%

Conversely, South Dakota or other states typically known for economy-minded policies set a higher standard for the 1%, thus commanding a relatively lower average tax rate.







Analysis of State Taxes Paid by the Wealthiest 1%

State Taxes of the Wealthiest 1%

Tennessee Trends

  • Minimum income to attain 1% status: $471,640
  • Average income of the 1%: $1,437,792
  • Average tax contribution by the 1%: $361,203
  • Average tax rate of the 1%: 25.12%

Insights from Texas

  • Minimum income to attain 1% status: $543,479
  • Average income of the 1%: $1,756,269
  • Average tax contribution by the 1%: $453,694
  • Average tax rate of the 1%: 25.83%

High Earnings in Utah

  • Minimum income to attain 1% status: $542,357
  • Average income of the 1%: $1,916,721
  • Average tax contribution by the 1%: $455,616
  • Average tax rate of the 1%: 23.77%

Vermont Variances

  • Minimum income to attain 1% status: $445,587
  • Average income of the 1%: $1,082,248
  • Average tax contribution by the 1%: $255,752
  • Average tax rate of the 1%: 23.63%

Analysis of Virginia

  • Minimum income to attain 1% status: $553,800
  • Average income of the 1%: $1,548,397
  • Average tax contribution by the 1%: $404,290
  • Average tax rate of the 1%: 26.11%

Financial Realities in Washington

  • Minimum income to attain 1% status: $692,287
  • Average income of the 1%: $2,121,289
  • Average tax contribution by the 1%: $551,288
  • Average tax rate of the 1%: 25.99%

Wealth in West Virginia

  • Minimum income to attain 1% status: $316,172
  • Average income of the 1%: $678,094
  • Average tax contribution by the 1%: $157,734
  • Average tax rate of the 1%: 23.26%

Wisconsin Wealth Data

  • Minimum income to attain 1% status: $444,969
  • Average income of the 1%: $1,275,200
  • Average tax contribution by the 1%: $317,559
  • Average tax rate of the 1%: 24.90%

Exploring Wyoming

  • Minimum income to attain 1% status: $564,354
  • Average income of the 1%: $3,338,851 
  • Average tax contribution by the 1%: $827,796
  • Average tax rate of the 1%: 24.79%

Jordan Rosenfeld, Jami Farkas, and Cameron Huddleston contributed to the reporting for this article.

Methodology: In order to discover what the richest 1% pay in taxes in each state, GOBankingRates utilized the US Internal Revenue Service’s (IRS) Statistics of Income (SOI) division’s “Adjusted Gross Income (AGI) Percentile Data by State” dataset based on tax returns filed for 2020, the most recent data available. With this data, GOBankingRates was able to calculate the following factors for each state: (1) minimum income needed to be considered 1% in each state; (2) average income of the 1%; (3) average income tax paid by the 1%; (4) average tax rate of the 1%. All data was collected and up to date as of March 6, 2023.