On average, they pay 27.9 percent of their income to the federal government in combined income, corporate, payroll and excise taxes. These heavy taxes have an important impact of the distribution of after-tax income. Typically, when one sees figures on the distribution of income, showing a large and growing share going to the wealthy, it is before-tax income. One has to go to the Census Bureau's website to find after-tax data. Those in the top quintile saw a reduction in their share of total income from 49.4 percent to 44.1 percent.
Consumers buy less of taxed goods and more of untaxed goods.
People decide whether and how much to work on the basis of their after-tax wages and thus may choose to work less when income taxes are higher. And individuals make decisions about saving on the basis of after-tax returns. All of those responses distort the economy from the way it would be in the absence of taxes and could lead to slow economic growth and thus a lower level of national well-being. Typical estimates of the economic cost of a dollar of tax revenue range from 20 cents to 60 cents over and above the revenue raised. It means that when the government takes a dollar out of the economy, the economy loses more than a dollar.