Tax reality

I asked AI to calculate the federal income tax for a household with two young children earning the US median income.

Assuming:

• Married filing jointly
• Two children under age 15 who qualify for the full Child Tax Credit
• Taking the standard deduction
• Only wage income (no capital gains or other special income)
• No itemized deductions or other tax credits

The current U.S. median household income is about $82,000–$83,000. I’ll use $82,500 as an example. 

Here’s the calculation:

Taxable income after standard deduction $51,000. Income tax before credits $5,600 (6.8%) Child tax credit $4,400,.

Estimated federal income tax owed: $1,200 or effective tax rate of 1.454%

There would also be FICA taxes, state taxes and perhaps property taxes. FICA is a direct benefit to the individual and family. Property taxes fund local needs such as schools and public safety, another direct benefit. The average state income tax is 2.2% with nine states having no tax.

The reality is that most middle class families have a pretty modest tax burden, certainly lower than citizens in many, if not most, other developed countries. This is especially true for federal taxes.

Sales taxes are called regressive, but the reality is most states exempt goods and services from their sales tax to minimize the regressive nature of such tax.