Which Generation Holds the Top Spot in Tax Payments: Gen X, Baby Boomers, Millennials, or Generation Z?

In a recent analysis, ProPublica revealed that some ultra-wealthy individuals managed to pay no federal income tax in certain years, despite substantial wealth gains. This was achieved through investment and corporate loopholes.

Meanwhile, a study by the Tax Foundation sheds light on the tax burdens faced by different age groups in the USA. The study indicates that individuals aged 45 to 55 pay the most in absolute terms and experience the highest effective tax rates. People in this age group are typically in their peak earning years, accounting for 26% of the nation's total adjusted gross income (AGI).

Households headed by individuals aged 45 to 54 face the highest average annual tax bill of $36,140. This age group also contributes the most to total income taxes, accounting for about 29% of the total income taxes paid to the federal government. The next highest tax-paying group after those aged 45 to 55 is the 55 to 65 age group, contributing about 23% of total income taxes.

The 35-44 age group follows closely, paying 21% of total income taxes and having an average tax rate of 16.8%. The 45-50 age group faces an average tax rate of 17.2%, and the 50-55 group faces a slightly higher rate of 17.6%. On the other end of the spectrum, the 65-75 age group pays 12% of total income taxes and has an average tax rate of 12.3%. The 75 age group pays 4% of total income taxes and has an average tax rate of 7.8%.

Interestingly, those under age 35 account for only 11% of total taxes paid and have an average tax rate of 14.5%. As individuals approach and enter retirement, data suggest the tax burden decreases. The Tax Foundation's study shows that for those older than 60, median total tax rates dropped below 5% by age 68 and below 2% by age 74.

Maximizing retirement contributions, such as 401(k) contributions, can help reduce taxable income. For 2025, individuals under 50 can contribute up to $23,500 to their 401(k), while those age 50-59 or 64+ can contribute an additional $7,500. A new "super catch-up" rule allows those 60-63 to contribute an additional $11,250.

A Gallup poll and a study by the Pew Charitable Trusts have also highlighted concerns about the fairness of income taxes. The poll revealed that 60% of U.S. taxpayers believe their federal income tax burden is too high, while a new survey indicates that just over 50% of respondents think income taxes are unfair. The Pew Charitable Trusts' study predicts that the aging population will likely shift tax burdens in the coming years, with an increase in the relative burden on younger workers.

In conclusion, the Tax Foundation's study paints a clear picture of the tax burden distribution across different age groups in the USA. The Baby Boomer generation currently bears the highest tax burden, with the tax burden decreasing as individuals approach and enter retirement. Strategies like maximizing retirement contributions can help individuals manage their tax burdens effectively. However, concerns about the fairness of the current tax system and its potential impact on future generations persist.

Which Generation Holds the Top Spot in Tax Payments: Gen X, Baby Boomers, Millennials, or Generation Z?