## Your real tax rate: 40%

Sunday, February 25th, 2007

You may be aware of your income-tax bracket, but your real tax rate is 40%, regardless of your income:

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.