What's Your Marginal Tax Rate?

Contributed by mm | February 21, 2007 5:48 PM PST

Two Bosten University economists claimed that almost everyone in this country is having the same marginal tax rate of 40%. It is probably true: the poorer has to pay

My marginal tax rate? It is about 46%, including my PRC marginal income tax rate of 45% and the Medicare tax.

From MSN Money:

We have a national flat tax, albeit one with bumps and potholes.

...

In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.

...

Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.

As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.

The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.

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Comments

>>> jj Commented on February 22, 2007

This study fits my personal experience as my income has grown. I still think my marginal rate is a bit higher--high 40's (48% maybe..but within the statistical range of the study). But imagine the benefits of just converting from a hidden flat tax to a defacto flat tax. Hundreds of thousands of unemployed accountants and thousands of unemployed IRS auditors(none of which actually create wealth., but rather are a drag and tax on the wealth creators). Address progresivity through a large standard deduction, and we could have a better system for all.

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