February 7, 2010

Historic Tax Rate Gizmo

On USA Today they have this fancy web gizmo that lets you put in an income figure and a year and see what the tax rate would have been.   I found about about it from an article on Get Rich Slowly.   The tool calculates the federal income tax and the employment withholding for social security / medicare for a single person.   If you play with it a little bit you can use it to find out your effective federal tax rate given an income figure going back from 1940 to 2010.   I wrote about the history of taxes a couple times myself in my previous article History of Effective Tax rate for Median Income Families.   My analysis was a bit different since I looked at median income for a family.   But this tool is in the same basic category of data.

Playing with the tool is interesting.  Start by putting a salary figure into the calculator.  Say $50,000.   Next it will tell you that the tax bill in 2010 is $10,188 or 20% effective rate.   There is a graph in the main portion of the gizmo.  If you move your mouse across that graph it will show you the tax rate for each year.   It will inflation adjust the salary amount and calculate the tax rate for that year. Or you can hit the 'x' button next to the year and then enter a new year.

I checked the tax rates for a few different income levels and found out how the effective tax rates varied over history.

For someone making $50,000 in 2010 dollars the effective tax rate has varied from 14% in 1946 to 23% level by 1981.   $50,000 income is not far from the current median income level.  

Select years and tax rates:


1947 1978 1986 2010
Income $5,148 $15,052 $25,302 $50,000
Tax $793 $2,976 $5,310 $10,188
Effective rate 15% 20% 21% 20%

If you look at someone making $15,000 in 2010 dollars their effective tax rate has gone up more in recent years compared to similar inflation adjusted income levels in some earlier decades.    Back in the mid 40's the effective tax rate would be down in the 1% level and it rose as high as 14% in the 1990's.

1947 1978 1988 2010
Income $1,544 $4,516 $8,193 $15,000
Tax $24 $273 $1,102 $1,718
Effective rate 2% 6% 13% 11%

Now lets look at someone with a higher income level of $150,000 in 2010 dollars.  That person would have seen their effective tax rate bounce between 25% for 1946 and high of 41% in 1981.

1947 1978 1981 2010
Income $15,445 $45,157 $62,956 $150,000
Tax $4,266 $15,464 $25,701 $41,013
Effective rate 28% 34% 41% 28%

Anyway, its a neat gizmo and I like how it lets you quickly find the tax rates for previous years.    The only drawback that I think it has is that it is based on a single person with standard deduction.  It would be nice if they let you run the numbers for a married couple and for people with kids.

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