What is your effective tax rate?

Alexander Fishkov, Ph.D. student Computer Science

The United States uses a progressive income tax structure, which means that the more you earn, the higher tax rate you pay. The tax system was designed this way following the assumption that wealthier people can afford to pay more, while those struggling to afford basic necessities should be relieved and given a lower tax rate. This scheme is pretty straightforward, however, the actual relationship between your income and effective tax rate is a bit more complicated.

The Internal Revenue Service releases tax information in the form of brackets. Taxable income is divided into multiple intervals, and you pay different rates on portions of your income falling into different intervals. Let’s illustrate. Below you can find estimated tax brackets for 2016 (tax on income that is due in 2017). Consider a person who is single and earns $15,000. He will have to pay 10 percent tax on his first $9,275 ($927.50) and 15 percent on the remaining amount ($5,725 * 0.15 = $858.75), equaling a total tax liability of $1,786.25. This equates to an effective tax rate of about 12 percent, falling between the two brackets. For larger sums, one has to perform similar calculations for multiple brackets, which gets progressively more complicated.

2016 Taxable Income Brackets and Rates (Estimate)
Rate Single Filers Married Joint Filers Head of Household Filers
10% $0 to $9,275 $0 to $18,550 $0 to $13,250
15% $9,275 to $37,650 $18,550 to $75,300 $13,250 to $50,400
25% $37,650 to $91,150 $75,300 to $151,900 $50,400 to $130,150
28% $91,150 to $190,150 $151,900 to $231,450 $130,150 to $210,800
33% $190,150 to $413,350 $231,450 to $413,350 $210,800 to $413,350
35% $413,350 to $415,050 $413,350 to $466,950 $413,350 to $441,000
39.6% $415,050+ $466,950+ $441,000+
Source: Tax Foundation


The IRS releases new tax brackets each year in a form similar to the table above, called a tax rate schedule. Our goal today is to look at historical movements in effective tax rates. The Tax Foundation has released tax brackets through 2013 — we added the remaining years and used CPI data from the Bureau of Labor Statistics to produce the following visualization.

This is a "Tax Surface," which illustrates effective tax rate based on year and income amount. Income is taken in 2016 dollars and is adjusted based on CPI to calculate tax for prior years. The Tax Surface is linked to the two charts above, allowing you to see slices of it for a given year or income value. Click on the surface to toggle this functionality and examine these charts further. If you click on a specific point on one of the two flat charts, the other will be updated with the corresponding slice: clicking on the left chart will set the year for the right chart, and clicking on the right chart will change the income value on the left. You can also change the right chart's income interval using the slider below it.

The highest tax rates were observed in the post-World War II era, reaching as high as 76 percent (for our range of incomes). The lowest rates (under 2 percent) were observed near the beginning of the 20th century.

This chart shows the historical effective tax rates for selected income amounts simultaneously. You can switch the filer's status using the list control above. As before, income values are measured in 2016 dollars.

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About Alexander Fishkov

Alexander Fishkov, Ph.D. student Computer Science

Alexander is a Ph.D. student in Computer Science. He currently holds B.S. and M.S. degrees in Applied Math. He has experience working for industry major companies performing research in the fields of machine learning, data mining and natural language processing. In his free time, Alexander enjoys hiking, Nordic skiing and traveling.

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2 thoughts on “What is your effective tax rate?”

  1. Does the effective tax rate in these graphs and charts include the effect of deductions and exemptions? I have heard that those high rates on high earners in the post WWII era were not really that high due to the huge effect of a larger array of exemptions available and used by those taxpayers.

    1. Hello Jacob,
      Deductions and exemptions are not taken into account here since it depends on the individual and his/her particular asset structure. It was out of scope for this post.

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