US Federal Total Average Marginal Income Tax Rates in the NBER TAXSIM model for the Top 1 percent

Source: http://www.nber.org/taxsim/leigh1p
Data after 1999 simulated.

Notes:

These are dollar weighted average marginal income tax rates for the US (and State if the headline so indicates) Individual Income Tax as calculated by the NBER TAXSIM model from micro data. They include only taxpayers in the top 1 percent of the AGI distribution.

They are calculated by first calculating the tax liability of each eligible return, then increasing (in turn) each income type by 1% and recalculating the tax liability under the assumption that other incomes and expenses are constant. The difference in aggregate tax divided by the difference in aggregate income is the marginal tax rate on the average dollar of that income type. For some individuals with low or negative AGI the measured marginal rate may be zero even for a large income on a particular item.

The rates take account of most features of the tax code including the maximum tax, minimum tax, alternative taxes, partial inclusion of social security, earned income credit, phaseouts of the standard deduction and lowest bracket rate, etc. If included, state tax liabilities are calculated to the best of our ability using the data from the federal return. The major missing items at the state level are municipal bond interest, federal interest, income splitting between husbands and wives, itemized deductions for taxpayers who itemize only on the state return etc.

Only positive long term capital gains are used in the calculation of the tax rate on long term gains. For years when any income item is not broken out in the data the tax rate is shown as ``na''. The subsidy for mortgage interest deductions is shown as a negative tax.

Differences in marginal rates reflect both differences in the tax treatment of different types of income and differences in the functional distribution of income. These ``dollar weighted'' marginal rates are typically higher than ``person weighted'' tax rates would be, but are more appropriate for most analysis of changes in the tax structure.

The micro data are from the Individual Income Tax Models available from the Statistics of Income Division of the Internal Revenue Service. Sample sizes range from 80,000 to 200,000 actual tax returns, with weighted oversampling of high income returns. Our state tax calculator begins in 1977 and state ID is imputed for taxpayers with income above 200K.

Post 1999 data is aged aged from the 1999 Tax Model, as these years are not available from SOI as of this writing.

Please cite as Feenberg, Daniel, and Elizabeth Coutts,''An Introduction to the Taxsim Model'' Journal of Policy Analysis and Management Vol 12, Number 1, Winter 1993, and this web site (http://www.nber.org/taxsim).

Suggestions and comments are welcome. If you use these data in a paper please send me a copy.

Daniel Feenberg
National Bureau of Economic Research
1050 Mass Ave
Cambridge MA 02138
617-588-0343
feenberg@nber.org