TAX POLICY CENTER | URBAN INSTITUTE & BROOKINGS INSTITUTION 24
Each quintile represents 20 percent of the US population, including people who do not file federal income tax returns,
ranked by income.
The Congressional Budget Office (2013, 2014) analyzes the progressivity of federal individual and corporate income,
payroll, and excise taxes. ITEP (2015) and Cooper, Lutz, and Palumbo (2015) analyze the progressivity of combined federal
and state taxes.
Although the tax saving from each dollar of an exemption or a deduction is higher for higher-income taxpayers (because
their marginal tax rate is higher), the saving as a percentage of income is higher for lower-income taxpayers.
The lower rates on dividend and capital gains reflect in part that income derived from corporations is taxed once at the
entity level by the corporate income tax and again at the personal level by the individual income tax. A complete
assessment of the effect on progressivity of the income tax treatment of capital gains and dividends would also account for
the effects of the corporate income tax.
Ranked in order, the sources of state general revenue in 2013 were: intergovernmental transfers (31 percent), sales taxes
(19 percent), charges and miscellaneous fees (19 percent), individual income taxes (18 percent), and other taxes (9
percent). “Tax Policy Center Briefing Book: What are the sources of revenue for state governments?” Urban-Brookings Tax
Policy Center, Washington D.C. Accessed May 20, 2016.
Local jurisdictions in 14 states levy their own income taxes. We do not include local income taxes in this analysis.
Households in states that do not have an individual income tax are included in the distribution.
“State and Local Finance Data Query System,” Urban-Brookings Tax Policy Center, Washington D.C. Accessed March 29,
2016.
The Gini coefficient is a widely used measure of income in equality. See Congressional Budget Office (2013), pp. 8-9 and
pp. 39-42 for a discussion of calculating and interpreting the Gini coefficient.
See Kakwani (1977) and Reynolds and Smolensky (1977).
The RS index and the K index are related. It is possible to derive the RS index from the K index by adjusting for the
average tax rate and the reranking of households when ranking by before- and after-tax income. See Creedy (1999).
See Mason (2013).
See Sammartino and Rueben (2016) for a discussion of the federal tax deduction and various options for reform.
The American Jobs Creation Act of 2004 partially reinstated the sales tax deduction, which the Tax Reform Act of 1986
had eliminated. Before the Tax Reform Act of 1986, taxpayers could deduct both income taxes and general sales taxes. The
2004 law allowed taxpayers to deduct either income taxes or sales taxes but not both. Subsequent legislation extended that
provision through 2014 and made it permanent in 2015.
Technically, the AMT is the difference between a taxpayer’s regular income tax liability and tax liability calculated
according to the rules for the AMT. If the difference is greater than zero, the taxpayer must pay the AMT in addition to his
or her regular income tax.
The tax price can be slightly lower than 60.4 percent in some cases because a portion of state and local taxes are
deductible from investment income subject to the 3.8 percent net investment income tax.
See NCSL 2011, 2012, and 2013 for details about the state income tax changes enacted over this period.
See “Brief Description of the Tax Model,” Urban-Brookings Tax Policy Center, Washington DC. Accessed March 29, 2016.
See “Documentation for a Comprehensive Historical U.S. Federal and State Income Tax Calculator Program,” Jon Bakija,
Department of Economics, Williams College, Williamstown, MA. Accessed April 20, 2016.
See “Generalized Gini and Concentration coefficients (with factor decomposition) in Stata,” Philippe Van Kerm
CEPS/INSTEAD, Luxembourg. Accessed April 20, 2016.
See “Income Measure Used in Distributional Analyses by the Tax Policy Center,” Urban-Brookings Tax Policy Center,
Washington DC. Accessed June 16, 2016.