Study: Average American Will Pay $525,000 in Taxes Over Lifetime; NY and NJ Residents Will Pay Much More

By:
Chris Gaetano
Published Date:
Feb 25, 2021
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An analysis performed by CPA Practice Advisor found that the average American will pay a total of about $525,000 in taxes over the course of a lifetime.

To reach this conclusion, researchers at the publication took the  Consumer Expenditure Report (2019) from the Bureau of Labor Statistics to understand the main average household spending habits, and divided it by two to get the stats down to a single person; they then took this spending data and applied state-specific taxes on each expenditure, including car property tax and sales data based on the average number of vehicles the average American will own over 60 years assuming a purchase cost of $25,000. They also factored in federal income taxes, applied to the average salaries of each state, and they assumed a working lifetime of 36 years. Inheritance taxes were excluded because few reach the threshold to have to pay them, as were marriage-related factors, as these were found not to impact taxes in the vast majority of cases representing the average American taxpayer.

The sum of $525,000, said CPA Practice Advisor, represents about 34.3 percent of lifetime earnings (which would mean, therefore, that the analysis assumes roughly a $1.53 million total over the course of one's life, which may be actually a little short of the average determined by a Georgetown report). The biggest portion of this comes from various taxes on earnings, followed by property taxes. It said owning a car alone means $29,521 in lifetime taxes.

New Jersey, according to this analysis, ranked number one in terms of lifetime taxes paid by residents (who, presumably, do not leave the Garden State for the entirety of their working lives). Residents will pay, on average, $931,968, an approximately 49.51 percent tax on $1.88 million in lifetime earnings. New York ranks number six, with an average lifetime tax of $734,563, a 43.8 percent tax on about $1.676 million in lifetime earnings.

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