November 1, 1996

Economic Expansion Leads Higher Taxes on Median One- and Two-Earner American Families

Download Special Report No. 65

Special Report No. 65

Executive Summary As the U.S. economy continues to expand, albeit slowly, so does the tax burden on America’s median-income family. Taxes on the American family increased for the third straight year in 1996. This year, total taxes as a percent of income for a two-earner family are projected to increase to 38.4 percent, up from 38.1 percent in 1995; for a single-earner family, total taxes as a percent of income are projected to increase to 36.4 percent from 36.1 percent in 1995.

These tax-burden levels rival the highest ever. For a dual-income family, the only years in which total taxes as a percent of income were higher than 38.4 percent were in the years 1980-1982. In those years, respectively, the shares were 38.6 percent, 40.6 percent, and 39.6 percent. However, for a single earner family, several years registered a total tax burden equal to or greater than 36.4 percent of income. Those years were 1975, 1977-1982, 1984, and 1985. The period encompassing the late-1970s and early-1980s was difficult for taxpayers because of the high rates of inflation during the 1970s: Real income stagnated and simultaneously pushed taxpayers into ever-higher federal tax brackets. This situation was not reversed until the federal income tax reductions (and bracket indexation) of the 1980s took effect.