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

49 Pages Posted: 12 Jun 2000 Last revised: 17 Oct 2010

See all articles by Andrew Mitrusi

Andrew Mitrusi

National Bureau of Economic Research (NBER)

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: May 2000

Abstract

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.

Suggested Citation

Mitrusi, Andrew and Poterba, James M., The Distribution of Payroll and Income Tax Burdens, 1979-1999 (May 2000). NBER Working Paper No. w7707. Available at SSRN: https://ssrn.com/abstract=232093

Andrew Mitrusi (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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James M. Poterba

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-350
Cambridge, MA 02142
United States
617-253-6673 (Phone)
617-253-1330 (Fax)

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