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Measuring the Average Marginal Tax Rate from the Individual Income Tax

  • Barro, Robert J.
  • Sahasakul, Chaipat

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.

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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3451293.

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Date of creation: 1983
Date of revision:
Publication status: Published in Journal of Business -Chicago-
Handle: RePEc:hrv:faseco:3451293
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  1. Aris Protopapadakis, . "Some Indirect Evidence on Effective Capital Gains Tax Rates," Rodney L. White Center for Financial Research Working Papers 19-82, Wharton School Rodney L. White Center for Financial Research.
  2. Miller, Merton H. & Scholes, Myron S., 1978. "Dividends and taxes," Journal of Financial Economics, Elsevier, vol. 6(4), pages 333-364, December.
  3. Joines, Douglas H, 1981. "Estimates of Effective Marginal Tax Rates on Factor Incomes," The Journal of Business, University of Chicago Press, vol. 54(2), pages 191-226, April.
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