Marginal and Average Tax Rates and Elasticites for the US

Marginal and Average Tax Rates and Elasticities for the US 1960-2019

Using the SOI sample of taxpayers for each year.

1. National by year, (html)
2. By state and year, (csv)

   Using a fixed 1984 (but in/deflated) sample of taxpayers.

3. National by year (html)
4. By state and year (csv)

Note that year to year changes using the sample distribution of taxpayers may be largely sampling error, while year to year changes using the fixed 1984 sample reflect only changes in the tax laws, with no allowance for changes in the distribution of income.

The fixed sample of taxpayers is inflated or deflated to the match the year of the tax according to the ratio of GNP deflator plus 1.4% annual real growth. All dollar amounts (including deductions) are inflated by the same ratio. 1984 was choosen because it has state identifiers and showed a low RMSE across AGI, taxable income, average tax rate and marginal tax rate compared to other possible base years. Any year after 1986 was not a good choice, because of the reduction in data about itemized deductions. Note that the same data is used for every state. This means that even in 1984, only the federal tax values will match across the tables.

These are dollar weighted average and marginal income tax rates and elasticities for the US Individual Income Tax as calculated by the NBER TAXSIM model from micro data for a sample of US taxpayers. No allowance is made for tax deferred accounts or any other ownership not reported on an individual 1040 form.

The ratio of the initial liability to intial AGI is the average rate. Average marginal rates are generated by first calculating the tax liability of each eligible return, then increasing all income types by 1% and recalculating the tax liability. Note that a negative income item becomes more negative. Itemized deductions are unchanged. The difference in aggregate tax divided by the difference in aggregate income is the marginal tax rate on the average dollar of incomee. This is not the same as summing the average rates and dividing by the number of taxpayers. That would be the revenue share of equal changes in income, here we are calculating the average weighted by income to get the revenue share of equal percentage changes in income.

The elasticity is the percentage change in tax for the 1% change in income items, but no change in deductions (here for a table where all values are affected). For some individuals with low or negative AGI the measured marginal rate may be zero even for a large income on a particular item.

The rates take account of most features of the tax code including the maximum tax, minimum tax, alternative taxes, partial inclusion of social security, earned income credit, phaseouts of the standard deduction and lowest bracket rate, etc. If included, state tax liabilities are calculated to the best of our ability using the data from the federal return. The major missing items at the state level are municipal bond interest, federal interest, income splitting between husbands and wives, itemized deductions for taxpayers who itemize only on the state return etc. Because state of residence for taxpayers with AGI>200,000 is not given in the data, high income taxpayers are assigned randomly to states in proportion to the number of high income taxpayers listed in the SOI annual volumes.

Differences in marginal rates reflect both differences in the tax treatment of different types of income and differences in the functional distribution of income. These ``dollar weighted'' marginal rates are typically higher than ``person weighted'' tax rates would be, but are more appropriate for most analysis of changes in the tax structure.

The micro data are from the Individual Income Tax Models available from the Statistics of Income Division of the Internal Revenue Service. Sample sizes range from 80,000 to 200,000 actual tax returns, with weighted oversampling of high income returns. Our state tax calculator begins in 1977 but our state data begins in 1979. State ID is imputed for taxpayers with income above 200K. No SOI data is available after 2010, and no state identifier is available for any taxpayer after 2008.

Federal tax law includes EGGTRA, JGTRRA, TTRA, ARRA, ATRA and TCJA and is correct through August 2018, at least (to the best of our knowledge) and excepting the tax provisions of the ACA.

In the tables with individual state identifiers, "NA" or 0 stands for no state assigned, and "US" labels the national average.

For another perspective on calculations of marginal tax rates, you may wish to read the Congressional Budget Office report which, however, covers only 2005.

Please cite as Feenberg, Daniel, and Elizabeth Coutts,''An Introduction to the Taxsim Model'' Journal of Policy Analysis and Management Vol 12, Number 1, Winter 1993, and this web site (https://www.nber.org/taxsim).

Suggestions and comments are welcome. If you use these data in a paper please send me a copy.

Daniel Feenberg
National Bureau of Economic Research
1050 Mass Ave
Cambridge MA 02138
617-588-0343
feenberg@nber.org