Direct tax burden.

Reading the chart. Despite the popular narrative that "Americans are taxed to death," the total direct tax burden on the hypothetical median family has actually fallen modestly over 45 years, from 22.7% in 1980 to 20.9% in 2024. The story underneath: federal income tax has been cut substantially (from 6.3% to 2.5%, driven primarily by the Bush 2001/2003 cuts and the TCJA 2018 doubling of the standard deduction). Payroll tax has crept up slightly (from 6.1% in 1980 to the steady 7.65% rate that took hold in 1990). State and local taxes have crept up too, especially since the pandemic. The methodology assumes a married couple filing jointly with two children, taking the standard deduction, with all income from wages, at the Census-reported median household income for each year. It does not include sales tax, property tax (already captured in the state/local figure), or excise taxes on specific goods. Real families' tax burdens vary widely by state, household composition, and itemizing decisions.

Why "direct" tax burden? The chart above tracks taxes families pay to the government in dollars and cents — what economists call direct taxation. But families experience a second, larger tax in the form of inflation itself, which erodes the purchasing power of every dollar they earn or save. This is sometimes called the inflation tax, and it operates as a transfer from holders of dollar-denominated assets to the issuer of the dollar. The rest of the Reality Index documents the size of this indirect tax: items where prices have grown 1.5x, 2x, or 3x faster than wages have, even as direct taxes have been cut.