Marginal and Average Income Tax Rates By Age

Marginal and Average Income Tax Rates by Age

Age (lower bound)	Marginal Rate (All $ amounts)	Marginal Rate (Wages)	Marginal Rate (Int&Div)	Average Rate	Returns (thousands)	AGI (thousands)	Income Tax (thousands)
15	13.7	13.5	13.8	2.2	1455.	8642.	186.
20	18.5	18.3	20.4	7.1	7364.	111679.	7983.
25	22.3	22.0	25.6	11.6	11085.	309812.	35972.
30	24.7	24.5	27.2	13.7	12673.	480000.	65702.
35	26.1	25.8	30.1	15.2	13063.	596387.	90720.
40	26.8	26.6	29.5	16.0	12438.	614411.	98332.
45	27.5	27.3	30.2	17.2	11109.	598516.	103125.
50	27.4	27.2	29.4	17.6	7972.	409763.	71936.
55	27.1	27.0	29.2	17.6	6875.	323985.	57000.
60	26.5	26.7	27.1	17.1	5995.	227583.	38977.
65	26.3	27.4	26.3	16.1	6407.	155501.	25100.
70	23.7	26.3	23.7	13.6	5760.	96908.	13200.
75	21.7	25.4	21.9	11.9	4573.	55620.	6632.
80	21.2	22.2	21.0	12.3	3103.	28523.	3510.
85	21.0	26.6	19.9	12.3	1503.	13211.	1621.
90	18.2	13.5	17.9	11.2	595.	4041.	452.
Total:	25.5	25.4	26.5	15.2	124887.	4237026.	643432.

Notes:

These table is based on the Current Population Survey for March 1996, which gives income and age data for 1995. Tax calculations are based on the NBER's TAXSIM model.
The marginal rate shown for all dollar amounts is the average marginal rate calculated from a one percent change in all income items and personal itemized deductions.
The marginal rate for Wages is based on an additional percent of wage income.
The CPS is not an ideal source of property income data.
The average rate is just the ratio of tax liability to AGI.
Sample sizes at higher ages are small.
Many low income non-filers are included, usually with a zero tax rate, hence the excess number of returns. This doesn't much affect marginal tax rates, since the amount of income received and taxable by low income non-filers is small.
Negative rates may come from the Earned Income Credit and are included in the aggregate.
All taxpayers are given only the standard deduction. This is significant.
Without itemized deductions, tax is overstated.

For more information about TAXSIM, see "An Introduction to the TAXSIM Model", by Daniel Feenberg and Elisabeth Coutts. In the Journal of Policy Analysis and Management Vol. 12 No. 1 (Winter, 1993). A PDF version of that paper is available on the TAXSIM web site.

The most recent copy of this table is kept at http://www.nber.org/taxsim.

From Martin.Gervais@rich.frb.org Tue Feb 27 19:49:59 2001 Date: Tue, 06 Feb 2001 12:27:52 -0500 From: Martin Gervais <Martin.Gervais@rich.frb.org> To: feenberg@nber.org Subject: Life-cycle Tax Rates Hi Daniel; I have now finished a version of the paper on which your help was instrumental. The paper's title is "On the Optimality of Age-Dependent Taxes and the Progressive U.S. Tax System'' and will be published in the Economics Quarterly of the Federal Reserve Bank of Richmond. Again, I want to thank you very much for your help on the age-dependent tax rates implied by the data. Also, Please let me know if you feel I am not giving the proper references in the paper. Sincerely, Martin ------------------------------------------------ Martin Gervais Research Department Federal Reserve Bank of Richmond PO Box 27622 Richmond, VA 23261 e-mail: martin.gervais@rich.frb.org phone: 804-697-8264 fax: 804-697-8255 ------------------------------------------------ [ Part 2, Application/PDF 576KB. ]

Daniel Feenberg
25 November 2000.