EFFECTIVE MARGINAL TAX RATES UNDER THE FEDERAL INDIVIDUAL INCOME TAX: DEATH BY ONE THOUSAND PIN PRICKS?

Abstract

The federal personal income tax has six statutory marginal tax rates: zero, 15 percent, 28 percent, 31 percent, 36 percent, and 39.6 percent Because of the design of certain provisions of the Internal Revenue Code, an effective marginal tax rate may not always correspond to the statutory marginal tax rate. Recently, the staff of the Joint Committee on Taxation prepared a report identifying those provisions that cause a taxpayer's effective marginal tax rate to differ from his statutory marginal tax rate. This paper summarizes that study and discusses the consequences of these provisions on the efficiency, equity and complexity of the federal individual income tax.