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U.S. Tax Reforms and Their Effects on Average Tax Rates

Authors: John E. Anderson;

U.S. Tax Reforms and Their Effects on Average Tax Rates

Abstract

Tax reforms over the past twenty-five years in the United States have dramatically altered the income tax system with numerous changes in base definitions and tax rates. With all of the changes that have taken place, including the most recent tax cuts in 2001 and 2003, interest in the effect of tax reforms on the distribution of the tax burden is at an all time high. This paper addresses the question by examining average tax rates (ATRs) over time at various points of the income distribution to see how tax reforms have had an impact in this measure of tax burden. To do so meaningfully, however, requires ATRs computed using a consistent measure of income developed by the IRS - the retrospective income concept. In this paper I review the reform efforts starting with the Economic Recovery Act of 1981 (ERTA81), reaching a high water mark with the Tax Reform Act of 1986 (TRA86), and continuing through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA03). After review of these tax acts and their main features, simple time series models are estimated to examine the effects of the acts on average tax rates at various points of the income distribution. In each case, two models are estimated with a simple trend model and a model that includes a set of tax reform regime variables for the seven tax reforms since 1981. The paper concludes with a summary of the evidence on the effects of these tax reform acts on the distribution of ATRs across the income distribution.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
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