The Changing Importance of Income and Payroll Taxes on U.S. Families

30 Pages Posted: 22 Mar 2001

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: October 2000

Abstract

Nearly two thirds of U.S. families currently pay more in payroll taxes than they pay in federal personal income taxes. In the lower strata of the family income distribution, payroll taxes exceed income taxes for nearly ninety percent of all tax-paying families. This paper documents the relative magnitude of income and payroll tax burdens on families of different types. It considers the differential importance of these taxes for married couples, single individuals, and single-parent families. The paper considers total tax payments as well as the marginal payroll and personal income tax rates facing families, and presents an exploratory analysis of how accounting for ?tax benefit linkage? alters relative marginal payroll and income tax rates. The percentage of families for whom the marginal payroll tax rate exceeds the marginal personal income tax rate falls from 54 percent to 9 percent when the effective payroll tax rate is measured net of the present discounted value of future Social Security benefits.

Suggested Citation

Mitrusi, Andrew and Poterba, James M., The Changing Importance of Income and Payroll Taxes on U.S. Families (October 2000). Available at SSRN: https://ssrn.com/abstract=263957 or http://dx.doi.org/10.2139/ssrn.263957

Andrew Mitrusi (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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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