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The Distribution of Payroll and Income Tax Burdens, 1979-1999

  • Andrew Mitrusi
  • James Poterba

This paper presents new evidence on the level and distribution of income and payroll tax burdens for U.S. families over the 1979-1999 period. During this period, payroll taxes have become an increasingly important component of the tax burden for many low- and middle-income families. This paper uses a new and expanded version of the NBER TAXSIM program to analyze the impact of legislative changes in income and payroll taxes. Averaged over all families, the combined 1999 payroll and income tax burden was quite similar to what it would have been if the 1979 income and payroll tax laws had remained in force for the last two decades, with only inflation-based adjustments to tax brackets. The mix of income and payroll taxes has changed, however. As a result of the expansion of the Earned Income Tax Credit in the late 1980s and early 1990s, as well as other changes in the federal personal income tax, payroll tax liabilities now exceed income tax liabilities for nearly two thirds of families. In 1979, payroll taxes exceeded income taxes for 44 percent of families.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7707.

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Date of creation: May 2000
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Publication status: published as Mitrusi, Andrew and James Poterba. "The Distribution Of Payroll And Income Tax Burdens," National Tax Journal, 2000, v53(3,Sep), Part 2, 765-794.
Handle: RePEc:nbr:nberwo:7707
Note: PE
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  1. Martin Feldstein & Daniel Feenberg, 1995. "The Taxation of Two Earner Families," NBER Working Papers 5155, National Bureau of Economic Research, Inc.
  2. Stephenson, E. Frank, 1998. "Average marginal tax rates revisited," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 389-409, April.
  3. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-72, June.
  4. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association, vol. 45(1), pages 1-22, March.
  5. David Bradford, 1995. "The Distributional Analysis of Tax Policy," Books, American Enterprise Institute, number 52866, 4.
  6. Cronin, Julie-Anne, 1997. "The Economic Effects and Beneficiaries of the Administration's Proposed Higher Education Tax Subsidies," National Tax Journal, National Tax Association, vol. 50(3), pages 519-40, September.
  7. Daniel R. Feenberg & Andrew W. Mitrusi & James M. Poterba, 1997. "Distributional Effects of Adopting a National Retail Sales Tax," NBER Working Papers 5885, National Bureau of Economic Research, Inc.
  8. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  9. Joel Slemrod & Jon Bakija, 2000. "Does Growing Inequality Reduce Tax Progressivity? Should It?," NBER Working Papers 7576, National Bureau of Economic Research, Inc.
  10. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
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