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Preliminary Estimates of Effective Tax Rates 1 (September 1999)

handle is hein.congrec/cbo06561 and id is 1 raw text is: Preliminary Estimates of Effective Tax Rates Preliminary Estimates of Effective Tax Rates September 7, 1999 The attached tables were prepared by the Congressional Budget Office (CBO) at the request of the House Committee on Ways and Means. The tables provide preliminary estimates for the 1977-1995 period and projections for 1999 of effective tax rates (Table 1), shares of family income and taxes paid by income category (Table 2), average pretax and post-tax adjusted family income by income category (Table 3), and the income cutoffs used to define income categories (Tables 4 and 5). The projections for 1999 are based on actual data for 1995. The estimates are based on data from the Internal Revenue Service, Census Bureau, and the Bureau of Labor Statistics. The estimates of effective tax rates shown in Table 1 have been published previously, but the methodology used to estimate them has changed over time. In particular, CBO has changed its method of allocating corporate taxes from one that splits the corporate income tax between workers and owners of capital to one that assigns the whole tax to owners of capital. As a result of the changed methodology, a table of effective tax rates derived from previously published numbers would be inconsistent. The values in the attached tables were all calculated using the newer methodology and thus provide comparable information across the period. Those numbers should be used in place of the previously published numbers, especially when making comparisons over time. The data in the tables are preliminary because CBO is still making adjustments to its databases and methodology. In particular, CBO is reviewing the measure of income it uses to classify families. As indicated in the table footnotes, families are classified by adjusted family income--which equals total cash income, the employer share of Social Security and federal unemployment insurance payroll taxes, and the corporate income tax--adjusted for differences in family size by the equivalence scale implicit in the official federal poverty thresholds. The income measure excludes all income received in kind. Any changes to CBO's measure of income, its basis for ranking families, or its calculation of effective tax rates would lead to values different from those shown in the tables. Anyone citing these numbers should therefore do so with caution. The preliminary tables are provided only to ensure the availability of comparable historical values in lieu of the inconsistent values published over the past 10 years. Taxes are defined and distributed as follows: Federal taxes include individual and corporate income taxes, payroll taxes, and excise taxes. Individual income taxes are distributed directly to families paying those taxes. Payroll taxes are distributed to families paying those taxes directly, or indirectly through their employers. Federal excise taxes are distributed to families according to their consumption of the taxed good or service. Corporate income taxes are distributed to families according to their share of capital income. Page I

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