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Measuring the Average Marginal Tax Rate from the Individual Income Tax

Robert J. Barro and Chaipat Sahasakul
The Journal of Business
Vol. 56, No. 4 (Oct., 1983), pp. 419-452
Stable URL: http://www.jstor.org/stable/2352842
Page Count: 34
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Measuring the Average Marginal Tax Rate from the Individual Income Tax
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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 appropriately 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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