Average American Pays $525,000 In Taxes Over Lifetime

The average American will pay $525,037 in taxes over their lifetime, according to a new study by financial technology company Self. Taxes for the purpose of this study included income taxes, state and local taxes, property taxes, sales taxes, and taxes on automobiles.

The report says this amount represents an average of 34.3% of lifetime earnings. Nearly two-thirds of the total tax paid, or roughly $340,000, comes from taxes on earnings, with the rest made up of sales, property, and car taxes.

The study used data from the 2019 Consumer Expenditure Report from the Department of Labor and divided household spending by two to estimate spending per person. It then applied state and federal tax rates to those spending and earnings estimates based on a working life of 36 years and an average life expectancy of 79 years.

The tax paid on earnings was based on state-level tax and federal income taxes when applied to the average salaries in each state. Interestingly, the lifetime tax on earnings totaled almost 65% of all taxes paid as you can see in the chart above.

Inheritance tax was excluded from this study as it was deemed the average American would not have to pay this due to inheritance thresholds not being exceeded. Marriage and its effect on taxes was also not applied to this study as it did not significantly impact taxes in the vast majority of cases representing the average American taxpayer.

The lifetime total taxes paid varies greatly by state. Residents of New Jersey will pay an average of $931,698, the highest total and greatest percentage of estimated lifetime earnings, 49.51% (nearly half), of any state. You can see the rest of the top 10 in the chart below.

From the standpoint of total taxes paid, these are the most expensive states in which to live in the country. Before we move on to the least expensive states, taxwise, look at the chart above again. Does anything stick out to you?

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