Measuring the Average Marginal Tax Rate from the Individual Income Tax

50 Pages Posted: 18 Jun 2004 Last revised: 26 Nov 2022

See all articles by Robert J. Barro

Robert J. Barro

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Chaipat Sahasakul

Securities Analysts Association

Date Written: 1983

Abstract

The economic effects of taxation depend on the configuration of marginal tax rates. We consider here the appropriate measure of a marginal tax rate for the federal individual income tax, which has a graduated-rate structure and allows for numerous legal and illegal deductions from total income.Our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes.Hence, we construct approximately weighted averages of these marginal tax rates for 1916-80. When weighted by adjusted gross income, the arithmetic average of marginal tax rates is 5% in 1920, 2%in 1930, 6% in 1940, 20% in 1950, 23% in 1960, 24% in 1970, and 30% in 1980.We also discuss the dispersion of marginal tax rates, as well as the behavior of average tax rates and deductions from taxable income. One noteworthy result concerns the fraction of adjusted gross income that accrues to families that face a marginal tax rate of at least 35%. This fraction quadruples from 1964 to 1980.

Suggested Citation

Barro, Robert J. and Sahasakul, Chaipat, Measuring the Average Marginal Tax Rate from the Individual Income Tax (1983). NBER Working Paper No. w1060, Available at SSRN: https://ssrn.com/abstract=304790

Robert J. Barro (Contact Author)

Harvard University - Department of Economics ( email )

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Chaipat Sahasakul

Securities Analysts Association

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