Dinner at my house is, at times, a negotiation. With four kids ten and under, every meal is a miniature summit, complete with diplomatic stalling, coalition-building among siblings, and the occasional veto of anything green. The rules, however, are simple and non-negotiable because, unfortunately for them, they live in a two-person dictatorship, not a constitutional democracy where they can elect a more lenient leader. And before anyone gets to the promised land of dessert, they have to clear their plate: a protein, a carb (rice or pasta usually), and a vegetable. The vegetable, of course, is usually the sticking point. For discussion purposes, let’s say it’s broccoli.
After multiple complaints, the last broccoli floret eventually goes down, and the Oreos come out. But that is just the beginning of the next phase. “Alright,” I’ll say, counting out three cookies onto a napkin, “you earned three.” They’re obviously pumped, but the enthusiasm is short-lived, as I cue my homemade jingle, delivered with dad-rock enthusiasm and a complete disregard for whether my wife thinks it’s funny: “The tax man’s coming, the tax man’s coming…”
Then I reach over and take one of their Oreos. The howls of protest are predictable and, quite honestly, the point. Because buried inside the theatrics is the clearest explanation of federal income tax a seven-year-old is ever going to get. You did the work, you ate the broccoli you didn’t want, and you earned the reward. But a portion of that reward goes somewhere else, whether you like it or not. You don’t get to keep it all. Welcome to the real world, kids. Oh, and please pass the milk.
The Number Nobody Talks About
This past Wednesday was Tax Day, which means many Americans are still blinking at their filings and wondering whether the system is rigged, broken, or both. And yet, for all the dinner-party opinions flying around about taxes, remarkably few people know the actual scoreboard. The IRS recently released its official 2023 data (the most recent complete year, published last month), so let’s start with the raw arithmetic before we start arguing about what it means.
In the 2023 tax year, 153 million individual returns were filed. Those filers collectively reported $15.2 trillion in adjusted gross income and paid $2.14 trillion in federal income tax. The average effective tax rate, across every worker, retiree, and side-hustler in America, was 14.1%.
That $2.14 trillion is a staggering number. It’s roughly half of everything the federal government collects in a given fiscal year, making the individual income tax the single biggest line item in Uncle Sam’s budget. It’s larger than payroll taxes, corporate taxes, and bigger than everything else combined.
One more number worth highlighting: about 30.5% of filers owed zero federal income tax in 2023. That isn’t because 46 million Americans got away with something sneaky. It’s because the system, by design, uses deductions and credits to move lower-income households off the tax rolls entirely. Whether you think that’s a feature or a bug, it’s just how the math works.
The “F-Word”
Now, here’s where things get noisy. Say the word “taxes” at a dinner party or scroll through your feed for thirty seconds, and you’ll inevitably bump into the other F-word: fair. The rich need to pay their fair share. The middle class is getting squeezed. The system is broken. Everyone has an opinion, and most of those opinions are delivered with the confidence of a tourist giving directions.
The problem with “fair,” of course, is that it’s almost entirely subjective. Your sense of fairness depends on where you sit, what you earn, what you think government should do, and sometimes even just how your day is going. There is no equation for it, and you certainly can’t look up the answer in the back of the textbook.
What you can do is look up the facts. And the facts, it turns out, tell a story that doesn’t quite match most of the talking points you’ve heard at either end of the political spectrum. So let’s do the thing that can’t be done at the dinner party and actually check the IRS Excel file.
Who’s Losing their Oreo’s?
Let’s start with the top of the pile. In 2023, the top 1% of earners, or every household that reported more than $675,602 in adjusted gross income, paid 38.4% of all federal income tax collected in the United States. That’s $823 billion from one out of every hundred filers.
Broaden the lens and the picture sharpens. The top 5% (anyone earning over $272,000) paid 59% of all federal income tax. The top 10% (threshold: $188,000) paid roughly 71%. And if you look at the top half of all earners, anyone making more than $54,000 a year, they collectively footed 97% of the entire federal income tax bill.
Which means the bottom half of filers, representing about 76 million returns, paid just over 3% of the total.
Now, these numbers are usually where the argument begins, not ends. Depending on which cable news channel you prefer, either this is proof that the wealthy are heroically funding the republic, or proof that they should be paying more. And a sharp-eyed reader is already poised to object: “Well, sure, the top 1% pays 38% of the tax, but they probably earn 38% of the income. That’s not progressive, that’s just proportional.”
It’s a fair objection. It’s absolutely the right question to ask, and one that any astute analyst would raise.
It’s also wrong.
The View That May Settle It
This is where the narrative most people carry around in their heads tends to fall apart. If the top 1% were paying 38% of the tax on 38% of the income, yes, that would be proportional and could very easily be thought of as “fair.” But that’s not what’s happening. The top 1% earned 20.6% of all adjusted gross income in 2023, or about one-fifth of the pie. And they paid 38.4% of the tax.
That isn’t proportional. That’s a ratio of roughly 1.86 to one. For every dollar of income the top 1% pulls in, they’re paying nearly twice their proportional share of the tax bill. The same pattern holds at every level of the ladder. The top 10% earned 48% of the income and paid 71% of the tax (1.5x). The top 50% earned 88% of the income and paid 97% of the tax (1.1x). That is the progressive nature of the tax code baked right into the numbers.
Put differently, a filer in the top 1% faced an average effective federal income tax rate of 26.3%. A filer in the bottom half faced an average effective rate of around 3.5%. That isn’t an accident; it’s exactly what the system is engineered to do. Now, whether that gap is too small, too big, or just right is the part where “fairness” comes back into the room. We know that, even when presented with the facts, reasonable people are going to disagree forever. But that’s ok, as long as the conversation starts from the same scoreboard and the facts aren’t being twisted.
Dessert, Revisited
My kids will grow out of the tax-man jingle eventually. They’ll figure out that Dad is just stealing their cookies under the guise of financial education, and the game will be up. But I hope the lesson underneath it sticks, that the number you earn and the number you keep are not the same, and the gap between them matters more than most people realize.
The rest, whether that gap is too big, too small, or exactly right, is a conversation worth having. You can believe the wealthy should pay more. You can believe they already pay too much. Both are defensible positions, and I’m not here to tell you which one is right. But whichever side of the aisle you’re on, the argument gets a lot more honest when it starts with the actual data instead of a vibe from a podcast.
Fairness is a debate. Arithmetic isn’t. And dessert, it turns out, is never quite as generous as it looks on the plate.
Markets / Economy
- Markets continued to shrug off the lack of a deal between the U.S. and Iran, making all-time highs, after talks made little progress last weekend. The S&P finished the week up 4.5%, the Nasdaq up 6.8%, and the small-cap Russell 2000 up 5.6%.
- U.S. PPI increased by 0.5% MoM in March, matching the prior month and falling short of market expectations of 1.1%. Goods prices surged 1.6%, the largest increase since August 2023, fueled by an 8.5% jump in energy costs.
- U.S. gasoline stockpiles plunged by 6,328 thousand barrels in the week ended April 10th, 2026, following a 1,589 thousand barrels drop in the previous week. This marks the ninth consecutive weekly decline in gasoline inventories and the steepest since October 2024.
Stocks
- U.S. equities were in positive territory. Technology and Consumer Discretionary were the top performers, while Energy and Utilities lagged. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield decreased 7 basis points to 4.25% during the week.
- Global bond markets were in positive territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
