Within this framework, we find that marginal and average tax rates
have opposing effects on the supply of effort and evasion and thus on the choice between self-employment and paid employment.
Table 2 Effects of Government Ownership of Capital (all income is taxed) Fraction of capital owned 0 2.5 Average tax rate
0.0610 0.0606 Standard deviation of the tax rate 0.0042 0.0048 Average capital stock 0.1420 0.1421 Standard deviation of the capital stock 0.0163 0.0165 Fraction of capital owned 5 10 Average tax rate
0.0603 0.0596 Standard deviation of the tax rate 0.0053 0.0064 Average capital stock 0.1422 0.1425 Standard deviation of the capital stock 0.0166 0.0169
Suppose that we want to increase the marginal tax rate holding the average tax rate
As long as economic growth remains around 5 per cent and expenditure is restrained to a 2 per cent annual increase in real terms, a lower rate than any seen in the 1990s, this deficit target should be consistent with a fall in the average tax rate
Considering the extreme case in which the rate of return before tax (i) is 10% and the average tax rate
before and after retirement is 45%, the spendable dollars at retirement per $1 annual savings after 40 years according to Table 2 would be $243.4259 under TDS compared to only $75.1331 under ACI.
Thus, there are four progressivity measures, low and high progressivity based on average tax rates
(avtax_progresivty_low and avtax_progresivty_high), and low and high progressivity based on marginal tax rates (margtax_progresivty_low and margtax_progresivty_high).
In a progressive tax system, the average tax rate
rises with income.
When we examined competition among states that share common movements in economic activity, the elasticity of the average tax rate
of neighboring states was found to be as large as the elasticity of local economic variables such as real per capita income.
[k.sub.i] = average tax rate
(tax liability/adjusted gross income) for the ith income class(6)
Although tax reform resulted in higher average tax rates
, it reduced the marginal effective tax rate on commercial bank lending.
To complete the calculation of the marginal tax rate, we account for state and federal deductibility of federal and state income taxes, respectively.(9) While other researchers include state taxes in their marginal tax rate calculations, no one accounts for deductibility of federal income taxes from state income taxes and for the deductibility (and lack thereof post TRA86) of sales taxes in computing marginal and average tax rates
These changes are reflected in the calculations of the Gini coefficients, average tax rates