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Average Marginal Income Tax Rates by Adjusted Gross Income and Filing Status, August 25, 2005 1 (August 25, 2005)

handle is hein.tera/crstax0275 and id is 1 raw text is: Order Code RS22229 August 25, 2005 CRS Report for Congress Received through the CRS Web Average Marginal Income Tax Rates by Adjusted Gross Income and Filing Status Steven Maguire Analyst in Public Finance Government and Finance Division Summary This report presents average marginal income tax rates by filing status and detailed adjusted gross income (AGI) class for the 2001 tax year, the most recent year for which data are available. The source of data is the 2001 Internal Revenue Service (IRS) public use micro-sample. A general finding is that the average marginal tax rates by filing status begin to converge with AGI above $75,000. Below that amount, married taxpayers filing joint returns had significantly lower average marginal tax rates. This report will be updated when new data are released. Overview This report provides a rough approximation of the marginal tax rate faced by taxpayers of different income levels by filing status, e.g., single, married filing joint, married filing separate, and head of household in 2001. Statutory rates (the rates in the income tax code) are often termed marginal tax rates because they represent the amount of tax due on the last dollar earned. For example, a single taxpayer with net taxable income of $60,000 would be in the 25% statutory tax bracket and would pay 25 cents in taxes for the next dollar earned above $60,000. Policymakers and researchers are interested in marginal tax rates because they are the rates that influence taxpayers decisions to work or invest. A higher marginal tax rate reduces the incentive to earn more through work or investments. The 2001 tax cuts contained in the Economic Growth and Tax Relief Reconciliation Act (P.L. 107-16, EGTRRA) reduced the higher marginal tax rates and expanded the taxable income brackets for married taxpayers filingjoint returns. Congress believed that these tax cuts were necessary because of (1) the projected federal budget surpluses; (2) high marginal rates that reduced the ...incentives for taxpayers to work, save, and to Congressional Research Service 4- The Library of Congress

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