1. Based on each year's income file
  2. Based on 1979 actual data in/deflated to the tabulation year.
  3. Using data from one year PRIOR to the law year.

    With wagelike incomes increased by 1% before calculation of marginal rates.

  4. Based on each year's income file
  5. Based on 1979 actual data in/deflated to the tabulation year.

These tables are revisions and extensions of tables prepared for the NBER Working Paper w15369 Macroeconomic Effects from Government Purchases and Taxes by Robert J. Barro and Charles J. Redlick. The original files are still available. In addition to the changes noted below there are a number of minor corrections to the tax calculator, and negative weights (from losses) are no longer allowed.

These tables shows the average marginal rate of income plus FICA tax, weighted by income by source, estimated from micro-data files provided by the Statistics of Income Division of the IRS. using the TAXSIM tax calculator. In columns 2 through 6, only 4 wage-like income sources are included in the average, in the remaining columns all income sources other than capital gains listed on the 1040 are included in the finite difference.

For example, the first table shows that in 2006, a uniform percentage increase in all 1040 income items (column 8) would be taxed by the federal government at a rate of 20.67 percent, averaged over all US taxpayers in that year.

Marginal rates are calculated on a finite difference of a 1% increase in incomes but no change to deductions or adjustments. Negative income items are not changed, but are included in the tax calculation (provided the taxpayer has positive total income). The marginal rate is just the ratio of the tax difference to the gross income difference expressed as a percent. Incomes are shown in billions of current dollars.

The first table shows the marginal rates using the public use file issued each year by the Internal Revenue Service Statistics of Income Division. The second table uses only the 1979 public use file, and inflates or deflates it to the tabulation year according to growth in per-capita AGI. This second table is for use when an instrument for the tax law is required that is insensitive to economic growth. In the series produced for Barro and Redlich the base year was 1985. I have moved to 1979 because it appears that 1979 produces series somewhat closer to actual. The third table uses the prior year data (inflated by the per capita change in GDP) and applies the law to that. Hence state results start in 1980 rather than 1979. This differs from the table done for Barro, which used uninflated data.

The last two tables are the same as the first two, but 4 income items are increased by 1% before any other calculation is done, which shows how an increase in income will affect the marginal rates.

We assume that the employer share of FICA is borne by the employee, therefore the denominator income is grossed up by the employer share of FICA and the FICA rate above includes both the employer and employee share. The denominator for the FICA rate is the change in income from the 4 (or all non-gain) sources, not just the change in wages, hence the rate is lower than might be expected from the statutory rate.

An additional table showing the share of wage-like income going to itemizers.

There are no public use files for 1961,1963 or 1965. Post 2008 data is an extrapolation of 2008 actual data. State tax calculators are available in TAXSIM for 1977 through 2015, but no state identifier is available in the data before 1979 or after 2008. Therefore state identifiers for taxpayers with AGI above $200,000 are imputed from aggregate counts. The income split between husbands and wives is also imputed.

Before using this data for publication or other serious purpose, please speak with me about llmitations.

Daniel Feenberg
feenberg at nber dotte org
617-863-0343 (voice)
Source: http://www.nber.org/taxsim/barro-redlick
Date: July 1, 2016